wef gac competitivenessofcities report 2014

8/10/2019 WEF GAC CompetitivenessOfCities Report 2014

1/60

A report of the Global Agenda Council on Competitiveness

The Competitivenessof Cities

August 2014


2/60

World Economic Forum2014 - All rights reserved.

No part of this publication may be reproduced ortransmitted in any form or by any means, includingphotocopying and recording, or by any informationstorage and retrieval system.

The views expressed are those of certain participants inthe discussion and do not necessarily reect the viewsof all participants or of the World Economic Forum.

REF 040814


3/60

3 The Competitiveness of Cities

Contents Preface

Espen Barth EideManaging DirectorCentre for GlobalStrategiesWorld EconomicForum

3 Preface

4 Acknowledgements

5 Executive Summary7 1. Introduction

8 2. City Competitiveness in theGlobal Economy: Megatrends

12 3. City Competitiveness: ADenition and Taxonomy

14 4. The Big Basket: Mini CaseStudies of City Competitivenessfrom Around the World

14 Case Studies from the United

States17 Case Studies from Latin

America: Colombia, Mexico,Brazil, Argentina and Chile

19 Case Studies from Europe:Germany, Poland and France

21 Case Studies from the MiddleEast and Africa: Turkey, Saudi

Arabia, Morocco and Nigeria

23 Case Studies from India

24 Case Studies from China26 Case Studies from East-Asia:

Malaysia, Philippines andRepublic of Korea

28 5. The Small Basket:Competitiveness in Seven Cities

28 Dubai

31 Singapore

34 Detroit

37 Bilbao and the BasqueCountry

40 Monterrey

43 Ningbo

44 Surat

49 6. Conclusion: A Checklist of Whatto Reform and How to Reform

56 Members of the Global AgendaCouncil on Competitiveness 2012-2014

As leaders look for ways to make their economies morecompetitive and to achieve higher levels of growth,prosperity and social progress, cities are typically identied

as playing a crucial role. Today, more than half of theworlds population lives in urban areas ranging from mid-size cities to mega-agglomerations, and the number of citydwellers worldwide keeps rising. Many factors that affectcompetitiveness, such as infrastructure, educational andresearch institutions, or the quality of public administration,are under the purview of cities, and many city-level initiativesto improve on different areas of competitiveness are underway. Yet while some cities are successful in attractinginvestment and talent, and ensuring prosperity and goodpublic services for their citizens, others are struggling tocope with challenges such as large-scale inux of people orthe inability to provide basic services, jobs or housing.

The World Economic Forum has been studyingcompetitiveness for over 30 years by focusing on theassessment of the productive potential of countriesin The Global Competitiveness Report series. Tocomplement this strand of work, the Forum created theGlobal Agenda Council on Competitiveness as part ofthe Network of Global Agenda Councils. The Councilsobjective is to deepen and broaden the understandingof competitiveness and equip global leaders with toolsto address competitiveness challenges. In 2012, CouncilMembers identied the leadership role that cities are takingin stimulating the competitiveness of countries and regionsas a key issue for further study.

This report presents a taxonomy of drivers of citycompetitiveness as well as a number of representative casestudies of cities. The case studies are drawn from differentgeographies and varying levels of development that facedifferent challenges and starting points. The objective ofthis work is to inspire and motivate city leaders, the privatesector and civil society to work together to address themost important competitiveness challenges of cities byshedding light on creative and innovative initiatives put into

place by cities around the world. This report would not have been possible withoutthe thought leadership and commitment of ProfessorRazeen Sally of the National University of Singapore, whochaired the Global Agenda Council on Competitivenessin 2013-2014; and of the two previous chairs of theCouncil, Deborah Wince-Smith, President, Council onCompetitiveness, USA, and Clment Gignac, ChiefEconomist and Senior Vice-President, Industrial AllianceInsurance and Financial Services, Canada. Special thanksgo to Margareta Drzeniek Hanouz, Head of the GlobalCompetitiveness team, and Martina Larkin, Head of theNetwork of Global Agenda Councils, as well as JenniferBlanke, Daniel Akinmade Emejulu, Gemma Corrigan andCecilia Serin, all at the World Economic Forum, for theirsupport in the process.


4/60

4 A Report of the Global Agenda Council on Competitiveness

Acknowledgements

This report, the result of a genuinely collective effort, is theculmination of almost two years of discussion, includingintensive days in Dubai and Abu Dhabi, United Arab

Emirates.

My predecessors as Chairs of the World Economic ForumGlobal Agenda Council on Competitiveness DeborahWince-Smith, President, Council on Competitiveness,USA, and Clment Gignac, Senior Vice-President andChief Economist, Industrial Alliance Insurance andFinancial Services, Canada as well as Council MemberOrlando Ayala, Chairman of Emerging Markets, MicrosoftCorporation, USA, sparked the idea of working on citycompetitiveness. Clment initiated the project during hisperiod serving as Chair. Most Council Members contributedcase studies; some contributed two or more. I thank allof them for their sterling work. But I will single out KevinMurphy, President, Partners for Sustainable Developmentand President and Chief Executive Ofcer, J.E. Austin

Associates, USA, not only for writing several case studies,but also for helping me put together the sizeable generalbits of the report and editing all of it. The nal sprint thetwo weeks before our deadline placed particular demandson his time. My thanks also go to Margareta DrzeniekHanouz for her excellent work as World Economic Forumcoordinator of our Council. She guided us efciently andwas a keen promoter of the project throughout. Not least,she contributed a mini case study on Wroclaw.

I would like to thank those outside the Council whocontributed case studies: Sandy Baruah and his colleaguesat the Detroit Regional Chamber; Reuben Abraham, ChiefExecutive Ofcer and Senior Fellow at IDFC Institute,Mumbai; Rogelio Cortes, Jorge Tadeo Lozano, LeonardoPineda, Marcia Campos, Elvira Naranjo, Armando Villarealand Marcia Villasana, who collaborated with CouncilMember Jose Torre on three Latin American mini casestudies; Stephanie Heier, Director of Emerging Markets,Microsoft Corporation, USA and her colleagues, whocollaborated with Orlando Ayala on mini case studies from

Latin America, Africa and China; the Economic Policy andResearch Foundation of Turkey (TEPAV) for the Manisa minicase study; and Amit Kapoor, President and Chief ExecutiveOfcer, India Council on Competitiveness, as well as KevinStolarick at the Rotman School of Management, Universityof Toronto, Canada, for the three Indian mini case studies.I am very grateful to them for material that has added somuch to the nal product.

I would like to thank Jeffrey Finkle, President of theInternational Economic Development Council (IEDC), forarranging a presentation by Kevin Murphy of our draft work

to city leaders attending the IEDCs international conferencein Philadelphia in 2014; this resulted in useful feedback. Also, a group of informal advisers provided commentsto help us structure the work appropriately. They are toonumerous to mention here, but I would like to thank all ofthem.

Razeen Sally

Chair, Global Agenda Council on Competitiveness Visiting Associate Professor, Lee Kuan Yew School ofPublic Policy, National University of Singapore, and Director,European Centre for International Political Economy,Brussels


5/60


Executive Summary

Cities have been the engines of productivity and growththroughout history, and will be essential to the futuregrowth and competitiveness of nations and regions. This is

especially true at a time of massive and rapid urbanization inemerging markets; hence, the focus on the competitivenessof cities.

In this report, six global megatrends especially relevant tocities are identied: (1) urbanization, demographics and theemerging middle class; (2) rising inequality; (3) sustainability;(4) technological change; (5) industrial clusters and globalvalue chains; and (6) governance. Led by urbanization, theycondition the greater operating environment for cities aroundthe world. It is up to cities to take advantage of thesemegatrends, as well as to mitigate negative forces suchas rising inequality, pressure on natural resources and theenvironment, and a diminution of trust in public authorities.

This raises the question of the competitiveness agenda forcities. City competitiveness is dened here as the set offactors policies, institutions, strategies and processes that determines the level of a citys sustainable productivity .Sustainability encompasses economic, environmentaland social issues. Productivity is about the efcient useof available resources that drives economic growth. Butproductivity has to be sustainable maintained beyondthe short term, and in a way that reconciles economic,environmental and social goals.

A four-part taxonomy of city competitiveness wasdeveloped, including (1) institutions, (2) policies andregulation of the business environment, (3) hardconnectivity, and (4) soft connectivity. This has beenapplied to a big basket of 26 cities, with a mini case studyon each; and to a small basket of seven cities, each ofthose with a full case study. These 33 cities are locatedon all major continents, and have different endowments,starting conditions and levels of development.

General lessons on city competitiveness, elicited from the

case studies, are presented in the following checklist thatincludes how-to-reform and what-to-reform elements:

1. Institutions (how to reform) governance or decision-making framework

Leadership and vision A clear, far-sighted viewof where cities should head, and a single-minded,practical will to ensure they get there are key showing the power of mayors as chief executiveofcers (Singapore; Dubai, United Arab Emirates;Bilbao, Spain; Medellin, Colombia; and Surat, Indiaare stellar examples). But negative examples of poorleadership, for example Detroit, USA, show what toavoid.

Institutional strength Singapore highlights theimportance of gradually building up strength ofinstitutions through successive development phases.

However, Monterrey, Mexico and Cebu, Philippines,point to fragile institutions that can endanger existinggains as well as future competitiveness.

Decentralization, coordination and collaboration Cities should take maximum advantage ofdecentralizing power (successful examples areBilbao; Ningbo, China; Dubai; Penang, Malaysia;Busan, Republic of Korea), coordinating across

jurisdictions where necessary (as in the city-regionof Bilbao-Basque Country), and promoting public-private collaboration (as in Bilbao; Guadalajara,Mexico; Medellin; Wroclaw, Poland).

Windows of opportunity Cities should look out foropportunities, often during a political or economiccrisis, to push through the required number ofdecisive reforms (as Singapore and Surat haveshown, and as Detroit has the chance to do atpresent).

2. Policies and regulation of the business environment (what to reform)

Getting the basics right Stable and prudentmacroeconomic policies, efcient and simple taxation,a exible labour market, openness to trade andforeign direct investment, simple and transparentdomestic business regulation, a safety net thatprotects the most vulnerable these are the primarylessons for good public policy. One of the importanttakeaways from the Singapore case study is to keeppolicy simple for producers, consumers and citizens.While the case studies have several other examplesof getting the basics right, plenty examples exist ofgetting them wrong.

Developing own foreign economic policies Citiesshould create their own policies on trade, foreigndirect investment, tourism and attracting foreigntalent, and advance these globally as far as possible(as in Singapore; Dubai; Manisa, Turkey; Hyderabadand Ahmedabad, India; and Ningbo).


6/60


3. Hard connectivity (core physical infrastructure)

A mix of planning and organic growth is needed Theseare complements, not substitutes. The borough ofManhattan in New York City is an excellent examplewith its street grid and room for expansion. Bothoverplanned (e.g. Brasilia, Brazil; Chandigarh, India;many cities in China) and underplanned cities should be

avoided. Big hard-connectivity gaps should be plugged Most

emerging-market cities still have such gaps; closingthem will require massive investments to avoid barriers toproductivity and growth.

Urban density is preferable to urban sprawl This

includes building tall in city centres, which is goodfor business, innovation, the arts and culture, and theenvironment. Hong Kong SAR and Singapore are greatexamples of urban density, as is Chicago, USA in recentyears. Mumbai, India is a glaring counter-example of verypoor urban planning. Chinese cities could also do withmore density and less sprawl.

Intelligent choices in infrastructure Examples include Ahmedabads public transport system, Singaporeselectronic road pricing and water treatment systems,Busans port and port logistics, and Hong Kong SARsmass transit system.

4. Soft connectivity

Soft connectivity, the citys social capital, is as important

as hard connectivity in the 21st centurys knowledgeeconomy While soft and hard connectivity are mutuallyreinforcing, soft connectivity is also about supportingan open society in the city, which spurs ideas,entrepreneurship, innovation and growth.

Education is the ultimate soft connectivity US citiessuch as Boston, Pittsburgh and St Louis have escapedpost-industrial decline and specialized in knowledge-intensive niches by capitalizing on their strengthsin education. In Asia, Singapore has become thecontinents education hub.

Cities need to facilitate digital infrastructure This willsupport human-computer interfaces that empowerindividuals and take full advantage of hard connectivity.It has the power to signicantly increase personal andorganizational productivity.

Making cities more liveable must be a higher priority This means improving the quality of urban life, especiallyfor upper-middle- and high-income cities. Goodexamples are Wroclaw; Leipzig, Germany; Busan; andCuritiba, Brazil. Singapore and Dubai, as global cities,appreciate that they have to expand and diversify theireducational, cultural and recreational facilities to attracttop global talent.

Soft connectivity failures can also be instructive Examples include Chandigarh; Lagos; and evenChicago, USAs metropolitan area (Chicagoland).

In conclusion, four observations can be made:

Successful cities are exible and adapt quickly tochanging conditions.

The taxonomy is one of interactive parts, not of elements

in isolation. The important factor is the interaction of allfour parts, with the use of new technology as only oneexample.

The right mix of priorities must be tailored to specicconditions and stages of city development. Obviously,priorities for a Western city with a stable populationand facing sluggish growth, unemployment and ageingdemographics will be quite different to those of anemerging-market city with lower income levels, highgrowth potential and a rapidly-expanding population.Cities have big differences in their natural and policyendowments, and hence in their conditions for reform.

Reforms at the municipal level are usually more feasiblethan at the national level, even when they seemimpossible in national capitals. Urbanization trendsenlarge these possibilities. Cities should grasp thisopportunity, experiment with new rules and put reformson a fast track.


7/60


1. Introduction

Background on City Competitiveness

Since 1979, the World Economic Forum has broughtcompetitiveness to the attention of global leaders bydening the term, showing its importance, seeking tomeasure it through the Global Competitiveness Index, andpublishing The Global Competitiveness Report annually.Several years ago, the Forum created the Global AgendaCouncil on Competitiveness, whose mission is to deepenand broaden the understanding of competitiveness; to

further equip global leaders with competitiveness tools;and to provide a network for global leaders, whose aimis to further the competitiveness of their companies,industries, cities, regions and nations. In 2011, the Councilproduced Best Practices and Lessons Learned for NationalCompetitiveness Councils , which was posted on theForums website and disseminated. It also produced theBest Practices for National Competitiveness Reports ,drawing from practical examples worldwide.

In 2012, Council Members identied the leadership role thatcities are taking in stimulating the competitiveness of nationsand regions. Literally hundreds of city competitivenessinitiatives are being implemented today. The comingdecades will see the next wave of mass migration to cities,especially in Asia and Africa. Megacities are sprouting,while entirely new cities are being created. Cities, withtheir economies of scale, scope and connectedness, bringpeople and markets together in a single dense space.

They will be one of the driving engines of growth, povertyreduction and prosperity over the course of this century.

Yet, many cities are struggling to add on services andinfrastructure amid chaotic growth, from the favelas of Brazilto the tugurios of Colombia and the shanty towns of Africa.In developed countries, many cities, such as Detroit, are

struggling with ageing populations, nancial sustainabilityand the loss of industrial bases, as manufacturing hasmoved to other venues and automation has dispensed withunskilled and semi-skilled jobs. Hence, city competitivenessis a timely and important topic.

Objectives

The objectives of this work are to encourage city leaders,policy-makers at local, regional, national and internationallevels, and academic and other experts to focus oncompetitiveness at the city level; and, to encourage a richglobal dialogue on this issue and shine a light on creativeand path-breaking initiatives that address the multiplicityof challenges facing todays cities. The Forums globalnetwork is in a unique position to contribute to this dialogue

through the inputs of its many contributors from publicpolicy, business, non-governmental organizations (NGOs),academia and think tanks.

Methodology

The approach is qualitative and descriptive, based on casestudies of individual cities around the world. The intent is notto try constructing another index of city competitiveness.Several are already available, such as the Global CityCompetitiveness Index of the Economist IntelligenceUnit, A.T. Kearneys Global Cities Index, CityLabs GlobalEconomic Power Index and the Mori Memorial FoundationsGlobal Power City Index. With focused case studies fordrawing useful comparisons and lessons, this reportcomplements rather than replicates quantitative-basedstudies

First, global megatrends are reviewed, startingwith urbanization, and their relevance today to citycompetitiveness is highlighted. The report then providesa denition of city competitiveness, and creates a simpletaxonomy of four drivers of city competitiveness. This isapplied to a big basket of cities from the United States,Latin America, Europe, Africa, the Middle East and Asia.

The taxonomy is also applied but in a more detailed,systematic way to a small basket of seven cities, chosenfrom different countries and regions and at different levelsof economic development (low-, middle- and high-incomecities). Lessons distilled from these big and small basketsare collated into a how to reform, what to reform checklistfor city competitiveness. Each city studied, whether as amini or full case study, has one or several important lessonsthat are highlighted and can be useful to city leaderselsewhere.


8/60


2. City Competitiveness in theGlobal Economy: Megatrends

Cities and the Wealth of Nations

It is quite usual to think of the wealth of nations , as AdamSmith did. David Ricardo, in a letter to his fellow economist

Thomas Robert Malthus, spoke of the wealth and povertyof nations the grandest of all questions in politicaleconomy. Two centuries later, national competitivenessis seen as driving wealth creation for nations, regions andlocalities. The Global Competitiveness Report , publishedannually by the Forum, identies the policies and institutions

that boost national productivity, which determinescompetitiveness and growth.

Today, focus should also be given to cities and the wealthof nations the title of a book by the renowned urbanist,Jane Jacobs. More than ever, cities are the lifeblood ofthe global economy. Their competitiveness increasinglydetermines the wealth and poverty of nations, regions andthe world. Hence, what makes cities successful must beone of the most important questions of 21st-century politicaleconomy.

For most people, the map of the global economy thatcomes to mind is of nation states interconnected throughows of trade, capital, people and technology. However,before the ascendancy of the Westphalian nation state in1648, the primary political, economic and cultural unit wasthe city. An alternative map of the global economy comesto mind: one of cities connected across land borders, seasand 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-bordereconomic transactions have been between cities mostlythose located on coastlines. Phoenician, Venetian, Genoese,Baltic and Arab merchants linked port cities within andacross continents through sea- and ocean-going trade.

Today, the bulk of international trade by volume stillpasses over the oceans between coastal cities, only nowtransported by huge container ships.

What does this mean for the competitiveness of cities andthe wealth of nations? Two contemporaneous historicalexamples provide some clues.

The development of cities drove the early economic

advance of Europe a veritable European miracle.Competition among cities in late medieval and early modernEurope enabled many European regions to catch up withand overtake other parts of the world as commercialcentres well before the Industrial Revolution. Starting with

Venice and Genoa in Italy, and moving on to north-westEurope and the Hanseatic League, cities vied with eachother for commercial advantage. They eased restrictions onmerchants and opened doors to skilled artisans, many ofthem dissidents eeing religious persecution.

Cities were magnets for the freethinking, the creative andthe entrepreneurial, who brought their talents to these openurban areas to escape repressive hinterlands. Hence, thepopular German saying Stadtluft macht frei city air makes

you free. Such decentralized political competition spawneda commercial revolution and paved the way for subsequentscientic, agricultural and industrial revolutions.

Early Asian prosperity was also driven by cities a pre-modern Asian miracle. Cities dotted around the IndianOcean enjoyed a golden age of trade in the two centuriesbefore the Portuguese and Dutch moved in with extremeviolence and imposed very restrictive commercial practices.Before they did, Arab and other trading diasporas roamedthe seas freely, stopping off in city states along IndiasMalabar and Coromandel coastlines and across South-East

Asia. Port-polities such as Cambay and Calicut of India,and Malacca (of modern-day Malaysia) and Macassar (oftodays Indonesia), were cosmopolitan, lightly governed andtolerant of religion. They attracted traders from all over theworld with low taxes and free trade policies. This enabledcommerce to ourish from the Chinese coastline all the wayto the Middle East.

Fast-forward to 2014: Most productive policy innovation ishappening in cities and subnational regions, not at the levelof national governments, let alone in international forumssuch as the United Nations (UN), the European Union (EU)and the Group of Twenty (G20). Policy-making is moreexible and practical the closer it is to the citizen, and is thusmore conducive to policy experimentation, all-round learningand adaptation. Cities emulate each other and often adoptbest international practice better than nations do. Policiesare initiated from below and diffused by example, as thehistorian David Landes puts it.

This has certainly been true in the United States and the EUin recent years, as the US government experiences partisangridlock and EU institutions and national governments ndit difcult to implement needed reforms. American citiesare hotbeds of policy innovation. Some European cities arerediscovering the ingredients of the European miracle of afew centuries ago. However, this centurys story of cities andthe wealth of nations will be scripted mainly in the emergingworld outside the West. The world economy, spurred byurbanization trends, is shifting south and east, particularly to

Asia. And Asian cities will be among the main players in citycompetitiveness.


9/60


Global Megatrends

In turning to global megatrends big, long-term trends thatdirectly bear on city competitiveness six are identiedfor consideration: (1) urbanization, demographics and theemerging middle class, (2) rising inequality, (3) sustainability,(4) technological change, (5) industrial clusters and globalvalue chains; and (6) governance.

Megatrend 1: Urbanization, Demographics and theEmerging Middle Class

People have moved from the countryside to cities formillennia, but never before has the world urbanized atsuch speed and scale as it has today. As of 2010, for therst time in history, over half the worlds population lives incities. Cities account for over 80% of global gross domesticproduct (GDP). By 2011, over half of the population of thePeoples Republic of China was living in urban areas whileonly 20% was in cities as recently as 1980. By 2020, about60% of the countrys population will live in cities. Indiasurbanization is relatively low at just under one-third of thepopulation, but over 200 million people one-sixth of thepopulation have urbanized since market reforms wereintroduced in 1991. According to the UN, an additional 2.4billion people globally will urbanize by 2050, bringing thetotal number of city dwellers to 6.3 billion, or 67% of theworlds population. Moreover, another 2 billion people couldurbanize by the early 22nd century.

According to the McKinsey Global Institute (MGI), the top100 cities, measured by expected contribution to globalGDP growth by 2025, accounted for 38% of global GDP

($21 trillion) in 2007. In 2025, MGI reckons that the top 600cities will have nearly 60% of global GDP and 25% of theworlds population. These same 600 cities already have 1.5billion people who produce well over half of global GDP. Thisratio of population to GDP underlines the vital role of citiesas the engines of productivity or output per capita.

For the foreseeable future, rapid urbanization will be analmost exclusively non-Western affair: about 94% of thosewho will move to cities in the next few decades will comefrom the developing world. MGIs list of top 600 citiescontained 220 from developing countries, which accountedfor 10% of global GDP in 2007. But it estimates that, by2025, the number will double to 443. They will account forclose to half of global GDP growth and 18% of global GDP.China will have 242 cities in the top 600, and Latin Americaand South Asia 57 and 36, respectively. All new megacitieswith a population of at least 10 million will come fromoutside the West (with one exception: Chicago, USA). Sevenof these megacities (over one-half) will be in China. Butthe 577 middleweight cities in the top 600 those with apopulation of between 150,000 and 10 million, and the vastmajority of them in the developing world will account forabout half of global growth through 2025. The top 600 willalso add over 300 million people to the global workforce,almost all from cities in developing countries and two-thirdsfrom Chinese and Indian cities.

The emerging-market middle class those households witha daily expenditure of $10-100 per person at purchasingpower parity (PPP) will double its share of globalconsumption from one-third to two-thirds by 2050. Thisclass will be concentrated in existing and new cities. MGIestimates 1 billion new members of the global consumingclass (those earning more than $10 per day at PPP) willbe added by 2025, with income sufcient to consume

goods and services going beyond daily necessities. Ofthese members, 600 million will live in the top 440 citiesin the developing world; they will drive consumption andinvestment that could add $30 trillion annually to the worldeconomy. By 2025, these cities will be home to 235 millionupper-middle-class households with an annual income ofmore than $20,000 (at PPP) more such households thanwill be found in the developed worlds top cities.

Ageing will also be an important trend in globaldemographics. By 2050, one in every ve people will be atleast 60 years old. The overall ratio of old to young is set toalmost double from current levels. Ageing is most prevalentin Europe and Japan, but is also seen in developingcountries in the middle-income bracket most noticeablyin China, and in smaller countries such as Sri Lanka. Asiancountries with rather low average income such as India,Pakistan and Indonesia can count on younger, growingpopulations for at least another two decades, and most

African countries well beyond that time frame.

Ageing is very much related to cities and urbanization, inboth developed and developing countries. MGI estimatesthat 423 cities from developing countries will contributealmost 80% of growth in the 65-plus age group in its top

600 cities by 2025. The top 216 cities in China will have 80million new older citizens.

Megatrend 2: Rising Inequality

Market reforms and global economic integration, whichaccelerated from the 1980s through 2007, delivered thebiggest boost to prosperity and the most impressivereduction in poverty ever seen. But, within countries,inequality is on the rise.

Global inequality, when comparing individuals rather thancountries, has fallen, especially due to the dramatic declinein poverty in China and India, which together account forclose to 40% of the worlds population. But in-country inequality, as measured by the Gini coefcient, for example,has increased in many countries. This is true for membernations of the Organisation for Economic Co-operation andDevelopment (OECD), and the developing countries China,India, Russia and South Africa. The causes are complex,with economic globalization just one of several factors,and the trend is not necessarily secular (it could changein the future). But it seems that, for now, a combination ofeconomic globalization and technological change rewardsthose who have capital, advanced education and high-level

skills much more than those in the middle and lower levelsof society.


10/60


Cities are affected by rising inequality and, in someinstances, may help cause it. Rapid urbanization in thedeveloping world inevitably increases the development gapbetween cities on the one hand, and small towns and ruralareas on the other. Cities often boost standards of living byproviding job opportunities and access to services. The factthat people keep arriving to the slums of very poor citiesindicates that life is perceived to be even worse in rural

areas. Will a city-based global economy pull up non-urbanhinterlands, or will cities become rich enclaves surroundedby marginalized rural areas?

Growing income gaps are evident among cities, as seen insuccessful and unsuccessful, and ascending and decliningcities within countries. A yawning gap exists between New

York and Detroit in the United States, for example, andbetween Bilbao, Spain and Liege, Belgium. Dubai of theUnited Arab Emirates (UAE) has pulled far ahead of Cairo,Egypt. Surat and Chandigarh are contrasting examplesfrom India. Many cities have seen big increases in inequalitywithin their municipal limits; this is especially true of theconspicuously successful global cities of London, New York,Hong Kong SAR and Singapore, where premium rewardsgo to the owners of capital and to global talent highlyeducated and skilled professionals.

Megatrend 3: Sustainability

Sustainability can be dened as long-term economicdevelopment compatible with available natural resourcesand the preservation of the natural environment. Aspopulation and incomes grow, pressures grow on resourcesand the environment. Per-capita energy consumption

worldwide has more than doubled since 1950. Globaldemand for energy could increase by up to 50% by 2030. According to the International Energy Agency, energydemand is projected to double in developing Asia by thattime, fuelled by industrial revolutions in China and otherparts of the developing world. Despite efforts to developrenewable energy, this will lead to a large rise in fossil-fuelconsumption, which increases carbon emissions. At thesame time, growing demand for food collides with the lackof new land for agriculture. And, energy and food productionare water-intensive, thus putting growing pressure on waterresources.

Cities are especially intensive users of energy, food andwater, given their concentrations of people and economicactivity, and are responsible for over half of globalgreenhouse gas emissions. Their challenge, particularly inthe developing world, is to fuse technology and markets tobecome much more efcient in using available resources.

Megatrend 4: Technological Change

Technological advance has always spurred urbanization.It has dramatically reduced transport and communicationcosts. Coupled with policies to open markets, it hasdispersed economic activity around the world, allowingcomparative advantage to help generate positive outcomes;but, at the same time, it has concentrated economic activityin particular locations. Cities have been the big beneciaries:they enable rms to reap economies of scale and scope,

and bring talented people together not least entrepreneurs to share ideas and innovate. The citys agglomerationadvantages, or clustering effects, have played a historicalrole, from ancient and medieval times to during and after theIndustrial Revolution, and to todays world of satellites, evermore powerful computers, mobile communications and theinternet enabling the city to make better use of technologythan any other location. The difference today is the

phenomenal increase in the speed of communications, witha fourfold growth in total international bandwidth between2007 and 2011. Moreover, the internet now has 2.5 billionusers; 6 billion people have access to mobile phones; anddeveloping countries accounted for 80% of new mobilephone subscriptions in 2011.

Technological change is disruptive. Automation andglobalization have shifted much manufacturing, and the jobsrelated to it, to developing countries. This is now happeningwith clerical jobs in many service industries. Some cities,typically over-reliant on one industry, and with ossiedpolicies and institutions, were hollowed out and became rustbelts Detroit being a glaring example. Others, more exibleand adaptive, have reinvented themselves and ourished,reaping the advantages of Schumpeterian gales of creativedestruction. London, New York, Singapore, Hong KongSAR and Dubai have done this impressively by becomingworld-class locations for an array of service sectors. Plentyof other successful examples are documented in the casestudies. Hence, cities remain best placed to take advantageof technological change, whether incremental or disruptive from access to global markets, new opportunities ineducation and training, improving healthcare, storing andusing Big Data, and much more.

Megatrend 5: Industrial Clusters and Global ValueChains

Global value chains (GVCs) are the dening feature ofearly 21st-century international trade. The informationand communication technologies (ICT) revolution andthe opening of new markets have allowed fragmentingproduction across borders, with different parts of the valuechain located in different countries. Simultaneously, tradein parts and components, and complex logistics systems,knit production networks together to serve global markets.GVCs are most visible in manufacturing, especially in ICT

products, but they are enabled by supporting services,notably nancial, telecommunications, transport, logisticsand other business services. Trade in GVCs is the fastest-growing part of international trade, and a critical driver ofproductivity, growth and employment in both developedand developing countries. GVCs unite exports, imports,foreign direct investment, critical technology and intellectualproperty in a seamless whole.

For rms, the challenge is not to produce everything relatedto a nal product, but to specialize in a value-adding task orset of tasks along a multi-country value chain. For countries,the same applies. The challenge for national governmentsis to ensure a smooth ow along the value chain by keepingborders open; having non-discriminatory policies for tradeand foreign direct investment; protecting private propertyrights, including intellectual property; and maintaining anefcient environment for doing business.


11/60


The same applies to cities. They are already the hubs andnodal points in GVCs, with clusters of manufacturing andservice activities. But they stand to gain disproportionatelyas GVCs expand, both sectorally from ICT products toother parts of manufacturing, into services, and even intoagriculture and resources and geographically, from North

America, Europe and East Asia to other parts of the world.

Multinational companies can be seen as the GVC systemintegrators. Cities compete to host multinationals for globalor regional headquarter (HQ) operations and as foreignsubsidiaries. MGI estimates that 20 cities are home to theglobal HQs of one-third of all large companies (denedas those with at least $1 billion in annual revenue), whichaccount for 40% of the revenue of all large companies. True,it is difcult for a city to attract global HQ operations fromother cities, where such operations already exist and wherelarge companies are committed for historical and otherreasons. But cities can and do compete vigorously to hostregional HQ operations and subsidiaries a game that HongKong SAR and Singapore excel at in Asia, as does Dubai inthe Middle East. Moreover, a big expansion is foreseen ofnext-generation large companies in the market for locatingHQ and subsidiary operations. Many of these companies willcome from China and other emerging countries. These areall opportunities for cities to become more deeply involved inGVCs.

Megatrend 6: Governance

Markets are globalizing, and societies are being transformedas a result. Technological advances can spur concentrationof economic activity, but they also impel decentralization

of choices and decision-making. The internet, mobilecommunications and social media have empowered vastnumbers of individuals across the globe to work, play, thinkand pray as they see t. At the same time, a handful of largecompanies sit at the apex of new technology markets.

In stark contrast to these dynamic economic, social andtechnological forces, the world of politics and governanceseems much more static. The Westphalian system of nationstates still predominates almost four centuries after it began;above it are intergovernmental organizations and assortedmechanisms of international cooperation. However, globalgovernance remains weak, as does supranational regionalgovernance, with the possible exception of the EU. Belownation states are subnational governments, at provincial andmunicipal levels, which vary enormously across countriesand regions.

Decentralizing forces economic, social and technological play in favour of subnational governance. The availabilityof much more information, and rising expectations ontransparency, accountability and good governance, aremaking people more distrustful of national governmentsand national political elites. Intergovernmental organizationsand supranational regional institutions not least the EU

seem remote and bureaucratic. This creates a window of

opportunity for provincial and city governments to reactivatethemselves. Decentralized political systems, such asthat of the United States, may be best positioned to takeadvantage of the situation. In sum, very strong reasons existto radically decentralize authority and decision-making downto the cities.

Conclusion

These six megatrends, led by urbanization, conditionthe environment facing cities around the world. Somemegatrends, notably urbanization and its clustering effects,are centripetal, or concentrating, in nature. Others may bemore centrifugal or dispersing, such as recent technologicaladvances and trends in governance. How can cities takeadvantage of these megatrends? How can they bestbalance centripetal and centrifugal forces? How can theymitigate negative forces such as rising inequality, pressureon natural resources and the environment, and a diminutionof trust in public authorities? What are the choice sets fordifferent cities, in different countries and regions? Thesequestions lead to the competitiveness agenda for cities.


12/60


3. City Competitiveness: ADenition and Taxonomy

Dening City CompetitivenessMGI denes cities as metropolitan areas with populationsof over 150,000; these can be grouped to include smallmiddleweight cities of up to 5 million, large middleweightcities of up to 10 million and megacities with populationsof over 10 million. Many cities are, of course, embedded inelongated multi-city corridors, as with Chicagoland; othersare rooted in wider subnational regions, such as Bilbao in theBasque Country of Spain, while yet others have importantcross-border characteristics. However, the focus of thisreport is on the city as a metropolitan area.

City competitiveness can be dened as the set of factors

policies, institutions, strategies and processes -- thatdetermines the level of sustainable productivity of a city.Sustainability encompasses economic, environmental andsocial issues.

By focusing on productivity, this denition resembles thatof national competitiveness used in the World EconomicForums annual Global Competitiveness Report . Productivityis the efciency with which an economy uses availableinputs to produce outputs; it determines the rate of return oninvestments, which fundamentally drives economic growth.In other words, a more competitive economy is likely to growfaster over time, and productivity-based competitivenesssets an economys level of prosperity. Productivity has to besustainable that is, maintained beyond the short term andin a way that reconciles economic, environmental and socialgoals.

Analysing City Competitiveness: A Four-PartTaxonomy

At rst glance, it seems difcult to develop a framework forcompetitiveness that can be relevant to a breathtakinglybroad array of conditions. Cities vary by level of developmentin low-, middle- and high-income countries. The challengesfor a countrys capital or leading commercial city may be quitedifferent from those for its secondary and tertiary cities. Some

cities, such as second-tier industrializing cities in China andIndia, are growing by leaps and bounds while other cities,such as Detroit, are losing their populations. Cities havedifferent demographics, with some skewing young and othersold. Some cities have been newly created, while others haveexisted for centuries; some are on coastlines and have longtrading histories, and others are landlocked and more insular.While some have been planned and others have grownorganically, most have varying mixes of planning and organicgrowth. Therefore, it is important not to apply the policy andinstitutional takeaways from one city to all others, regardlessof context, nuance and, indeed, stark differences. This reportis not about universal, one-size-ts-all solutions. However,careful analysis and reection can elicit lessons from bestpractices that can be applied contingently , i.e. to cities thatface a particular set of conditions at any one time.

In this spirit, the report presents an analytical frameworkfor looking at city competitiveness. While used as the

common template for the case studies herein, it can equallybe applied to cities in general, around the world. A simplefour-part taxonomy of the important factors determining citycompetitiveness is proposed. The following guidelines wereused to develop the taxonomy:

Keep it simple: The content is in four parts what isconsidered to be absolutely necessary, rather than ashopping list.

Focus on core competitiveness: The central drivers ofproductivity feed into sustainable economic growth.

Align the criteria with those of the Forums Global

Competitiveness Report: Vital lessons from national-level core competitiveness are adapted for citycompetitiveness, and vice versa. Thus, several of thereports 12 pillars of competitiveness are drawn upon.

City Competitiveness Taxonomy

The taxonomys four parts are: (1) institutions, (2) policies andregulation, (3) hard connectivity and (4) soft connectivity.

1. Institutions (how to reform)

This is the governance or decision-making framework forcompetitiveness; it concerns how important decisions aremade and vital reforms created. When studying the economichistories of cities and nations, it becomes clear that policypriorities or what to reform may be the easiest part ofthe challenge. While many of these priorities are well known,it is more difcult to understand why some cities manageto implement initiatives that set their economic lives on anew trajectory, while others struggle to do so. Ascribingthis difference to leadership is easier because leadershipis always important yet, it is often difcult to emulate.While leadership is part of the equation, understandinghow institutions emerge, how social capital is built and howcooperation is encouraged provides a much more nuancedchallenge for those wishing to understand how to drivechange.

The following factors of how to reform are highlighted:

The political and legal systems of city government Relations with national and state/provincial levels of

government Relations with organized interests, especially business Public-private collaboration Individuals and leadership The role of ideas (vision) and the city brand The timing of major reforms, including taking advantage of

crises and critical turning points

2. Policies and regulation of the business environment(what to reform)

The framework of public policies and regulation shapingcompetitiveness indicates what to reform critical policyreforms already done, and those needed for unnishedbusiness.

3. City Competitiveness: ADenition and Taxonomy


13/60


The main factors of what to reform are:

Macroeconomic policies related to the citys scal policies(revenue and expenditure)

Business-environment policies and regulations relatedto markets for goods, services, capital and labour, manyof which are well captured in the World Banks DoingBusiness Index.

Foreign economic policies that position a city in the global

economy through international trade, nance, foreigndirect investment (FDI), foreign workers and tourism, all aspart of clusters of economic activity linked to global valuechains

3. Hard connectivity

Infrastructure has been an important factor in citycompetitiveness, from ancient times through the Middle

Ages, to modernity and the present. Today, the discourse isin broader terms of connectivity. But connectivity has twotypes of components: hard and soft. Hard connectivity is thecore physical infrastructure connecting people to energy,water and other services.

The main elements highlighted in this report are:

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 importantduring the industrial age. Examples abound of cities thatcapitalized on their rivers, canals, lakes, maritime ports,railroads, roads and airports.

4. Soft connectivity

Soft connectivity is the social capital that makes investmentsin hard infrastructure and new technology (e.g. broadbandaccess) more productive, and is now considered as important

as hard connectivity. In fact, the two are mutually reinforcing it is not just about technological innovation, but innovationin the broad sense. And, it concerns an atmosphereof tolerance, free expression and cosmopolitanism, allcharacteristics of what the philosopher Sir Karl Poppercalled the open society. Today, they are highly conduciveto the generation and dissemination of ideas, and toentrepreneurship, innovation and economic growth, just asthey were in cities at the heart of the pre-modern European

and Asian miracles. The following soft-connectivity elements are highlighted:

Technological innovation and diffusion (in government andbusiness, and through public-private linkages)

Education and training systems Innovative ecosystems involving small and medium-sized

enterprises (SMEs) Entrepreneurial culture Hubs for intellectual property, including data storage Liveability, or quality-of-life factors, to attract and retain

talent Relationships that promote trust and afnity, leading to

commercial and nancial interactions An open society

The taxonomys four parts are, of course, highly interactive. Technology and other soft-connectivity factors, for example,feed into the other three components. And, the setting ofdecision-making in cities shapes the quality of policies andregulatory implementation, both of which bear directly onhard and soft connectivity.

The city competitiveness map (Figure 1) visually demonstratesthe links between megatrends and the taxonomy, and howthey apply to the cities covered in the reports big andsmall baskets.

Figure 1: City Competitiveness Map

Source: Authors

Big Basket

Mini case studies from:United StatesLatin AmericaEuropeMiddle East

Africa Asia

Megatrends CompetitivenessCompetitiveness

Taxonomy

Urbanization,demographics and theemerging middle classRising intra-country

inequality and amongcitiesSustainabilityTechnological changeClusters and globalvalue chainsGovernance

City competitiveness can bedefined as the set of factors policies, institutions,strategies and processes that determines the level ofsustainable productivity of acity. Sustainabilityencompasses economic,environmental and socialissues.

1. Institutions (How)2. Policies (What)3. Hard Connectivity4. Soft Connectivity

Small Basket

Full case studies for:Dubai (UAE)

SingaporeDetroit (USA)Bilbao (Spain)Monterrey (Mexico)Ningbo (China)Surat (India)

A City's Strategy


14/60


4. The Big Basket: Mini CaseStudies of City Competitivenessfrom Around the World

The city competitiveness taxonomy is now applied to 26cities drawn from ve continents and representing virtuallyall demographics, income levels and other conditions.

Together, these mini case studies constitute a relativelyrepresentative sample illustrating how city competitivenessworks in different situations and contexts. These have beenprepared by a wide set of authors from different nationalbackgrounds who have been encouraged to identify lessonslearned.

This part of the report covers ve US cities, ve in Latin America, three in Europe, two in the Middle East, two in Africa and nine in Asia (India: 3, China: 3, and East Asiaexcluding China: 3). The focus is mostly on second-tiercities generally middle and large, or middleweight, interms of population rather than on megacities and nationalcapitals. The exceptions are Buenos Aires, Argentina andSantiago, Chile (the former a megacity, and both nationalcapitals); Lagos (Nigerias megacity/commercial capital);and Chicago, with a population of just under 10 million butprojected to become a megacity in the next decade. Ashort, precise mini case study is done for each city in thischapter, given the large size of this basket. (The followingchapter the small basket contains detailed casestudies for seven cities.)

Case Studies from the United States 2

Chattanooga, Tennessee: Smart Targeting of ForeignDirect Investment and the Gig

Chattanooga, Tennessee offers a strong example of howa city can leverage a customized innovation and pro-business strategy to rebound from economic decline.Heavily dependent on manufacturing, Chattanooga founditself facing massive job losses and economic decline.

Yet in recent years, the city attracted $4 billion in newforeign investment, revitalized its downtown, increasedwages and enhanced the overall quality of life. While manychallenges still exist, such as a higher-than-national-averageunemployment rate, progress in a number of areas has beensubstantial.

Chattanoogas renewal is often attributed in part to theGig. Created by the public Electric Power Board (EPB), thisstate-of-the-art, gigabyte-per-second bre optics networkhas provided Chattanooga with one of the fastest internetspeeds in the United States, and attracted numerous

start-ups and businesses looking to take advantage of thisrevolutionary technology (nearly 1,000 new jobs drawnin by the Gig alone). The inux of computer technologyentrepreneurs has helped to offset some of the citys recent

job losses from more traditional sectors, the biggest in

recent years being government, construction and nance. To fully capitalize on the new infrastructure, Chattanooga willneed a new generation of highly educated labour. Governorof Tennessee Bill Haslam has recently announced a planto make two years at Tennessee community colleges andtechnical schools tuition-free for residents. A large steptowards preparing Chattanoogas workforce of tomorrow,this policy promotes both competitiveness (productivity) aswell as inclusiveness.

The Chattanooga Regional Growth Initiative (CRGI),supported by a wide range of local leaders, identies anumber of industry clusters that should be fostered in orderto best translate Chattanoogas strengths into economicgains. Many of the clusters, such as hospitality and tourism,already had a healthy base in the city and were easilyreinforced. Other selected clusters focused on industriesthat would be relatively new for the area. For example,vehicle manufacturing was targeted by the CRGI in the early2000s as a frontier innovation cluster that Chattanoogacould capture. Due to concerted actions by city leaders,

Volkswagen chose the city as the location for its rst USautomotive factory in 2008. Volkswagen representativesdirectly attribute their decision to the high quality oflife and strong manufacturing background present inChattanooga. Adding to the citys attractiveness, state andlocal governments approved $577.4 million in tax breaksand assistance for the project over the next 30 years. Cityand state ofcials hailed this development as a benet forthe area and a result of Chattanoogas work in improvingits business incentives, environmental sustainability andworkforce capabilities. Over the next 30 years, the projectis predicted to bring in roughly 11,000 jobs, $11.8 billion inpersonal income growth and $1.4 billion in new tax revenue.

Certainly Chattanoogas path cannot be directly replicatedby all other cities. For example, the Gig technology is nolonger unique, as when it was rst introduced (Google hasbegun introducing similar networks in multiple cities). Thiscitys success story still gives clear insight into how otherscan turn around their fortunes by establishing a vision,engaging leaders from all sectors and enacting pro-businesspolicies. Chattanoogas innovation strategy couplesinvestment in cutting-edge technology, workforce skills andforging next-generation public-private partnerships.

Pittsburgh, Pennsylvania: From Steel City to

Roboburgh

Nearly 30 years ago, Pittsburgh had an unemployment rateof over 17% and was losing thousands of jobs monthly, asthe steel industry on which it depended was devastated


15/60


in the late 20th century by slowing demand, higher costsand intense competition. Now, the city boasts lower-than-national-average unemployment. While still employing100,000 people as Americas second largest market forindustrial metal employment, Pittsburgh successfullyreinvented itself by attracting and creating new industries,even earning a new moniker, Roboburgh, for its successin robotics and advanced manufacturing. Can its story be

a map for other cities, especially those in Americas RustBelt, to overcome industrial decline?

The challenge of Pittsburghs transformation was presentedin the 2002 report Clusters of Innovation Initiative: Pittsburgh by the Council on Competitiveness. The report citedobstacles hindering the citys economic performance,including poor workforce retention, low levels of innovation,a challenging start-up environment and weak coordinationamong different levels of leadership. Over the next decade,Pittsburgh took steps to address each of these challenges.

To keep talented graduates from leaving the city andattract others from around the globe, attention was puton changing the culture of the city. Funds, incentivesand appropriations were invested in new revitalizationprogrammes. Results were seen quickly when Pittsburghwas named the most liveable city in the United States bythe Economist Intelligence Unit. In an effort to boost start-upcreation and growth, a number of innovation programmeswere initiated. Innovation Works, a state-run programme,promoted and supported entrepreneurship. Private-publicpartnerships like Innovation Works have become a powerfultool not only for directing nance to deserving start-upsand growing companies, but also in providing channels

of communication and cooperation between variouseconomic stakeholders. This sort of effort was combinedwith the already existing foundations of a skilled workforceand strong research community to make Pittsburghstransformation possible.

Pittsburghs success was recognized in 2009 when itwas chosen as host city for the prestigious and inuentialG20 summit. Organizers pointed to its diverse, balancedand resilient economy, making Pittsburgh a model foreconomic, environmental and quality-of-life transformation.Beyond the previously mentioned success in advancedmanufacturing, the city has witnessed great performancein nancial and business services (hosting two of the 15largest US law rms); global business (home to 100 ormore billion-dollar-plus businesses); healthcare and lifesciences (providing over 100,000 jobs); education andresearch (Carnegie Mellon University and University ofPittsburgh ranking high in research, and over 70,000 jobsprovided by research and development [R&D] as a whole);and information and communications technology (roughly1,600 technology rms). US President Obama recentlycommented on Pittsburgh, highlighting how it transformeditself from the city of steel to a center for high-techinnovation including green technology, education and

training, and research and development.

Pittsburghs recovery demonstrates the vast potential fortransformation in cities dependent on declining industries.It can be looked to as an example of how it is possible formanufacturing cities to nd a second life through innovationand new technology. Today, Pittsburghs unemploymentrate is lower than the national average. In a 2014 NationalBureau of Economic Research report, Pittsburgh wasnamed the second-best city for being able to achieve the

American dream, recognizing its newfound prosperity andthe economic mobility that it offers its citizens.

Oklahoma City, Oklahoma: Diversifying BeyondResources

Forbes recently named Oklahoma City a recession proofcity, surpassing the national average in employment and

job growth and providing lessons on how to be moreeconomically competitive.

Oklahoma Citys prospects have not always been so bright.Due to uctuations in the energy industry, the city has faceda boom and bust cycle. Energy has long been an importantpart of the citys economy, but that may be becoming lesstrue. Only 15 years ago, oil and gas made up 25% of thestates revenue; today that gure has been roughly halvedeven during the current energy boom. This change has lessto do with the impact of shrinking oil and gas revenue, andmore to do with a concerted effort to diversify its economy.

A number of actions can be credited with causing thecitys strong performance. Incentives aimed at attractingbusinesses (such as a low 5.5% state income tax) play animportant role in job growth, along with leading Oklahoma

to be ranked among the top 10 states in the nation fordoing business. One of the most impressive features is thecitys focus on manufacturing and innovation. OklahomaCity is not just satised with extraction with regard to thelarge natural gas deposits it is sitting on; it is quickly movinginto related engineering elds. The region is nding itselfin a leadership position in the research, engineering andproduction of new technology. The city frequently ranks highin manufacturing job growth, and was recently named thenumber three city in the nation for engineers.

The symbiotic relationship that exists between innovation,manufacturing and business has had an important rolein Oklahoma Citys economic progress. Success in onearea causes positive ripples across the entire economiclandscape. Sectors that did not exist a few decades agoare now present and thriving. Aviation and aerospace,bioscience as well as hospitality add to the long-standingsuccess of the citys traditional, recession-resistant sectorsof government (Oklahoma City is the state capital), medicaland research, and energy. Oklahoma City has built onnatural resources through innovation and manufacturing.

The city has been able to best translate its wealth of energyinto new jobs, stronger economic performance and abetter standard of living for its residents. Cities taking part

in the new American energy renaissance can look towardsOklahoma City as a model of how best to reap long-termbenets from this boom.


16/60


St Louis, Missouri: Global Biotech and TechPowerhouse

Like many similar cities, St Louis faced hard economictimes when the Great Recession hit in 2008. But St Louisdifferentiated itself by pursuing the tech industry, especiallybiotech. Its strategy has been rewarded; it currently ranks asthe fastest-growing city in the United States for technology

jobs.Due to its central location and prominence as a railroad huband inland port, St Louis has a long history of economicimportance to the country at large. Ranking 21st in grossmetropolitan product, St Louis still plays an important roleas Americas second largest inland port, through whichover 50% of all grain exports pass. The city faced a loss ofprominence as population and economic activities shiftedwestward. But St Louis now nds itself in a very differentposition than similar cities in the American Midwest throughits newfound success as a global biotech hub and topdestination for tech start-ups.

Arch Grants have been one tool used to create a techhotbed in St Louis. Started in 2012, Arch Grants are a non-prot way to provide start-ups with no-strings-attached,non-equity awards of $50,000. The only condition is that thestart-up must locate itself in St Louis. A number of the citysother enticing features are further attracting businesses.Low utility and building costs, state tax incentives andpartnerships with local universities all contribute to the cityssuccess. Already this year, companies from 28 states and20 countries have applied for the competitive grants. Somepredict that the number of applications could reach 1,000

for 2014.

Biotech is a specic technology sector where St Louis isthriving. Numerous global companies call the city home andare making large investments into the area (last year, DonaldDanforth Plant Science Center and Monsanto announcedinvestments of nearly $500 million to their existing facilities).

The St Louis Economic Development Partnership hasfounded the Helix Biotech Incubator as a way to furtherstrengthen the biotech community. Through offeringaffordable lab and ofce space as well as shared equipment,the Incubator will make St Louis an even more attractivelocation to base a biotech start-up. With the industryoffering higher-than-average salaries and drawing youngtalent from around the globe, biotech has the potential tocause positive ripples across the citys economy.

St Louis new competitiveness has not gone unnoticed.In 2013, Boeing chose to relocate nearly 400 R&D jobsfrom Seattle to St Louis. This decision could be attributedto both the strong tech community existing in the city andsmart tax incentives aimed at attracting investment (Boeingwould be eligible for a $16.8 million incentive from thestate of Missouri). St Louis demonstrates the economicbenet of getting high-tech industries to establish roots in

an area, with potentially exponential effects. Thanks to the Arch Grants and other pro-tech incentives, St Louis hasestablished a diversied and forward-looking economyagainst which other cities can benchmark themselves.

Chicagoland: Institutional Coordination forCompetitiveness 3

With 9.5 million people, Chicago is the eighth largest cityin the world with a GDP of over $500 billion. However, themetropolitan region encompasses many jurisdictions,including 14 counties and parts of three states (Wisconsin,Indiana and Illinois). This makes coordination of a coherent

competitiveness strategy challenging. There havebeen transportation bottlenecks because of the lack ofcoordination among jurisdictions. Chicagos productivity andGDP growth has lagged the US average in recent years.

Hard connectivity was Chicagos historical strength . The windy city has been the hub between the GreatLakes and the great inland valleys of North America. Amagnicent railway network built upon its impressive watertransport hub saw over half of all rail transportation passingthrough the Chicago metropolitan area. The interstatehighway system adds to these major corridors. ChicagoOHare International Airport further demonstrates the hardconnectivity of the city, as it is the second largest US airportby volume. This hard connectivity lowered the cost of inputsand distribution, and drove Chicagos competitiveness in theindustrial age.

Soft connectivity has not kept up. There has been a soft-connectivity disconnect among the regional governancebodies, which failed to coordinate among themselves andeven competed with each other for attracting talent andinvestment. Despite world-class universities and researchlabs, there is a shortage of highly skilled workers and a skillsmismatch with the evolving needs of the private sector. The

founders of NetScape, PayPal and YouTube, who studied atthe University of Illinois, all left for California.

How to reform new strategy calls for new institutionalarrangements. The Chicagoland Chamber of Commercehas begun to implement a new strategy, but with a new setof jurisdictional actors. The regional governance disconnectled the Chicagoland Chamber of Commerce to form a newapproach to governance by convening the major state, cityand local bodies regardless of jurisdictional state or county.Involving 14 counties, three states and many agencies, thiscoordination is seen as long overdue.What to reform. Informed by an OECD study, Chicagolandis focusing on workforce development, logisticsdevelopment and economic development. The rstaddresses the skills gap by attracting talent, as well asbuilding skills responsive to the private sectors competitiveneeds. The logistics focus addresses multimodaltransportation to overcome bottlenecks under multipleauthorities and jurisdictions, in order to build a seamlesslyefcient, traceable transport and logistics network includingair, rail, maritime and ground transportation. The third focusis on building green clusters, including the retrotting ofChicagos buildings with energy-efcient materials andsystems, and helping to place rms in the region on the

forefront of clean, green and energy-saving technology. The Illinois Science and Technology Coalition focuses onsupporting these rms by bringing venture capital to theregion. Chicagoland is implementing a cluster developmentstrategy. Initial coordination of technical agencies in different


17/60


jurisdictions bodes well for the future. Local universities arebenchmarking and monitoring progress. Different regionsare cooperating instead of competing for investment andtalent. Creating one connected regional labour market linkedto a multimodal transportation network should give a boostto the regions ability to attract investors.

Case Studies from Latin America: Colombia,

Mexico, Brazil, Argentina and Chile

Medellin, Colombia: From Most Dangerous to MostInnovative City 4

Once called the worlds most dangerous city, Medellin waschosen by voters of The Wall Street Journal as InnovativeCity of the Year in 2013, and has recently won awardsas an attractive investment destination, as well as forimaginative urban planning. With 2.4 million people, Medellincontributes 11% of Colombias GDP and hosted UNHabitats Seventh Session of the World Urban Forum.

This process has been driven by a strong relationshipbetween universities, industry and government. In 2004,Sergio Fajardo became mayor of the city and broughtchange through the strategy Medelln, la ms educada (Medellin, the most educated), devoting 40% of themunicipal public spending to education. Empresas Pblicasde Medelln, a public service company, assigned 7.5%of its total annual earnings to research, development andinnovation, closing the virtuous circle with universities, whichfocus their research on industry needs. Proantioquia, agroup of leading businessmen, initiated a corporate socialresponsibility strategy.

Medellin has been able to implement strategies thatcombine educational venues with social interaction.Biblioteca Espaa and Parque Explora are two suchprojects. The Library Network brings education tomarginalized communities. Urban mobility in Medellin, acity between two mountain ranges, was addressed withthe construction of Metrocable, a cableway system thatconnects comunas in the mountains to the main metrostations in the city. The combination of the metro andcableway represents hard connectivity infrastructure thatfosters soft connectivity inclusiveness and involvement,

building social capital and trust among low-incomecommunities.

Medellin is the only city in Colombia that has a science,technology and innovation plan. The plan has identiedstrong foundations to develop health, energy, andinformation and communication technology clusters.

The Medellin Innovation District master plan has beendeveloped, with Ruta N (the N Route), a compoundfocused on business and innovation development, as theheart of an innovation ecosystem in the city. The area (114hectares) connects several barrios as well as the Universityof Antioquia; it encompasses Parque Explora, Planetario,Jardn Botnico and the Innovation and Business Center ,which together create an urban centre that supports thedrive towards a knowledge-based society and economy.

The Triple Helix organization, Corporacin Ruta N, reects

the way in which the city has worked to achieve itssustainable development. Medellin has seen private, publicand civil society leaders come together for the last 10 yearsto implement tangible projects designed to foster inclusiveeconomic and social interaction.

Guadalajara, Mexico: Creative City Poised for High-TechFuture 5

Guadalajara, located in the state of Jalisco, is one of themost important metropolitan areas and economic nodes inMexico. While the overall economic performance of the cityhas yet to reach its full potential, Guadalajara scores amongthe top 10 cities in the CIDE 5 and IMCO6 indexes. Theappeal of Guadalajara is attributed to its cultural, economicand urban conditions. The city embraces creativity asone of the main drivers for development. Famous for itsmariachi and tequila, Guadalajara hosts two of the mostimportant cultural events in Latin America: an internationalbook fair and international lm festival. It is home to over 40universities, including some of the most important in Mexico.In 2011, it hosted the Pan American Games, which led tothe construction of world-class infrastructure.

Economically, the electronic manufacturing and ITC clustershave become the main driving forces of the city. By 2010,12 original equipment manufacturers, more than 700electronic manufacturing companies and several designcentres were established in Guadalajara. This processbegan in 1968 with the establishment of several leadinginternational companies and, by 2010, these industriesexported over $17 billion worth of goods, the highest gurein this sector of the country, led by companies such as LG,

Samsung, Sony and Siemens. The state of Jalisco holds24% of the software development market, 34% of the hightech industry and 56% of the electronic industry in Mexico.

Institutionally, Jalisco is the only state in Mexico with aMetropolitan Coordination Law, which aims to improveharmonization throughout the urban area and fosterdevelopment. Additionally, the Urban Planning Commission,working closely with the private sector and universities, hasbeen key to the development of urban projects seeking toenrich the experience of the city.

In 2012, Guadalajara was selected as the site of CiudadCreativa Digital, a project that aims to become the largesthub for the digital media industry in Latin America. Theinitiative seeks to transform the citys historic downtownand is supported by the federal, state and municipalgovernments, as well as by universities and businessorganizations. Guadalajara Ciudad Creativa Digital A.C., apublic-private organization, was founded to guide, manageand allow for the long-term continuity of the project.

Guadalajara has built on its strengths to become the mainhub for high-tech industries in Mexico. The integration offocused economic development, proper urban conditions

and creativity, based on both education and history, mightbe the corner stone of the citys future. Nevertheless,Guadalajara still needs to work on improving socialfactors: 30% of the population falls below the povertyline, and it needs to control urban sprawl. Guadalajaras


18/60


19/60


Santiago, Chile: Innovation and Urban Revitalization 11

Santiago de Chile is one of the fastest-growing cities inLatin America, and is among the most competitive inthe region. Beginning in 2012, Chile renewed its focuson competitiveness and innovation, and has earmarkedmore than 50% of the spending on national innovationand 54.9% of the spending on R&D for the metropolitan

region of Santiago. Santiago has developed a regionalinnovation strategy, formalized in December 2012, whichaims to promote knowledge, generate talent and encourageinnovative and entrepreneurial dynamism among businesseswithin the framework of sustainable development.

But there are a number of challenges that Santiago mustovercome in order to successfully build an innovation-drivenmetropolitan area that results in better quality of life for itscitizens. One of these is addressing the ongoing protestsamong students and others in the country regarding thehigh cost of, and inequality in access to, education. Whilethis is reportedly an area that Chiles new president, MichelleBachelet, has high on her agenda, there continues tobe a strong sentiment in Santiago and across Chile thateducation is not truly available for all. Clearly, lack of accessto affordable education is an impediment to competitivenessby inhibiting the type of soft connectivity needed in thrivingmetropolises.

There are challenges in hard connectivity too. Take, forexample, the lack of effective transportation systems in theregion. In 2006, Santiago implemented public transportreform to integrate the city bus system with the metrosystem. The initial outcome of this Transantiago effortwas universally perceived as negative, resulting in system

overcrowding and protests. These ills eased by 2010, butthere were still issues of poor reliability.

In a new effort to x congestion on its streets, Santiagois implementing a complete streets programme thatbrings in urban planning experts to oversee new designconcepts and encourage participatory planning. Themetropolitan region hopes that the programme will be acornerstone of urban redevelopment and revitalization.

The complete streets approach is currently focused on theprincipal boulevard in Santiago the Alameda and willaddress, in an integrated fashion, transportation, accessfor pedestrians and cyclists, rejuvenation of the central parkand preservation of historic buildings. This concept of acomplete Alameda is expected to become reality by 2016,and will depend upon strong political leadership in Santiagoto usher the programme to a successful conclusion.

Case Studies from Europe: Germany, Polandand France

From Leipzig to Hypezig: Boomtown of EasternGermany 11

Although it has a population of only 530,000, Leipzig hasleapt from stagnation to the forefront of European cities. Thecity sparked the largest public demonstration in Germanyin 1989, leading directly to the fall of the Berlin Wall, butsuffered terribly in the transition from communism. Some

96% of jobs in the uncompetitive industrial sector aresaid to have disappeared within six months after Germanreunication. While the city of Jena had an optics industryand Dresden a microelectronics industry that survived,Leipzig had to begin again to create a modern industrialbase. Leipzig has been able to attract automobile plantsfrom what was formerly West Germany, and today bothBMW and Porsche have large plants just north of the city.

In 2011, DHL transferred operations from Brussels Airportto Leipzig/Halle Airport. The city is an important producer ofconstruction cranes, and hosts the leading energy exchangeof Central Europe.

Located at the juncture of key highways dating back to theHoly Roman Empire, Leipzig has always been a centre oftrade. It boasts fairs at its excellent exposition centre, withits trade fair going back nearly 1,000 years, which today ishosted at the Leipzig fairgrounds. Beyond manufacturing,the city has attracted many software companies whichcluster around its world-class schools and universities, withthe University of Leipzig about ready to celebrate its 600thanniversary. And tourism also fares well, with an articlein The New York Times referring to Leipzig as one of thetop 10 places to visit. Beneting from massive economictransfers from western Germany and investments in new

roads, railroads and an upgraded airport, Leipzig used thesedevelopments to help position itself for the future. Much ofLeipzigs success has been attributed to two very strongmayors, Hinrich Lehmann-Grube (in ofce 1990-1998)and Wolfgang Tiefensee (in ofce 1998-2005), who areassociated with the Leipzig Model of city governance thatemphasizes cooperation among political parties, avoidingunnecessary political conict, citizen involvement andcooperation with the private sector.

Leipzig has been ranked among Germanys most liveablecities, and indeed among European cities with the higheststandard of living, such as Groningen and Krakow. It doeswell on rankings of innovation. Unemployment declined fromover 18% in 2003 to under 10.8% in 2012.

Leipzig is known for style and pushing the edge on culture,and is sometimes referred to as Hypezig. Bach andMendelssohn compositions, created in Leipzig, are stillheard in the opera house which hosts one of Europesrst conservatoires (1843), but the University of Music and

Theatre now produces heavy metal and many independentpopular music creations.

Situated towards the eastern edge of Germany, Leipzighas shown what even modestly sized cities from formercentrally planned areas can do with good leadership todevelop new manufacturing, trade, software, culture andtourism industries, while fostering citizen participation andpartnership with the private sector.


20/60


Wroclaw: From the Command Economy to Knowledge-Intensiveness and Cultural Flair 13

Located in the south-western corner of Poland, Wroclawis ranked 30th among cities in the EU for number ofinhabitants. Over the past decade, the city registered oneof the highest growth rates in Poland; its budget doubledbetween 2002 and 2012; and unemployment dropped from

10.9% in 2005 to 5% in 2010.Since the Polish regional governance system was reformedin the 1990s, decision-making and the provision of publicservices were gradually decentralized to municipalities.With Polands accession to the EU, the proximity to large,quickly developing German cities (Dresden or Berlin) andthe availability of EU structural funds have helped Wroclawboost its economic development and nd a place in thenew European context. The key to Wroclaws success wascertainly visionary leadership, which ensured a strong andwidely supported strategic direction and a high degree ofalignment of interests regarding the citys future. Today,Wroclaw is considered a success story among Polish cities,and the example is widely emulated.

Taking advantage of the strong and diversied industrialbase of the city and the surrounding region, Wroclaw basedits economic strategy on its main asset the young andhighly skilled population. The city is home to 31 tertiaryinstitutions and 140,000 students, many of whom areenrolled in science, mathematics, information technology (IT)and technology. About 20% of Wroclaws inhabitants holda tertiary degree, and its educational system is consideredone of the best in Poland.

As a result, a number of multinational companies, mainlyfrom the IT sector, established branches in Wroclaw, but thecity also attracted knowledge-services outsourcing, back-ofce operations and manufacturing. Investors appreciatedthe presence of a skilled population, favourable conditionssuch as assistance with administrative procedures,availability of land for development and good connectivityto European cities. Wroclaw also successfully attracted EUfunds for investment and the development of the privatesector, and to strengthen the link between business andR&D. A signicant part of the citys attractiveness is dueto cultural tradition and its being a vibrant, increasinglyinternational city. Concerts, music festivals, art galleriesand museums are omnipresent, as Wroclaw devotes asignicantly higher share of its budget to culture comparedto other Polish cities. Culture will continue to play asignicant role in the future development strategy, withWroclaw being named the 2016 European Capital ofCulture.

Investments in transport infrastructure undertaken aheadof the UEFA European Football Championship 2012 helpedaddress one of the citys main challenges. Wroclaw is fairlywell connected with Europe by air, road and rail, compared

to other Polish cities. However, faster transport connectionsto other Polish cities are needed.

In the future, Wroclaw must better connect educational andresearch institutions to local and multinational businesses.

Entrepreneurship also needs to be encouraged to ensurethat R&D efforts continue to be translated into economicgrowth. This would enable the city to become one ofEastern Europes innovation hubs and to move into higher-value-added products. Nantes: From Industrial Decline to a New Cultural andGreen Identity 14

With 600,000 inhabitants, Nantes is the sixth largest cityin France, located in the north-west on the banks of theLoire River, 55 kilometres (km) from the Atlantic Ocean.

Traditionally a city of trade and merchants, Nantes saw amajor decline at the end of the 20th century with the crisis inits shipbuilding industry, particularly in and around Saint-Nazaire.

The city has since reinvented itself by focusing on cultureand investing in a greener economy. Unlike other majorcities that chose iconic cultural attractions (Bilbao and theGuggenheim Museum; Metz and the Centre Pompidou), inNantes, arts and culture are spread throughout the entirecity. The old harbour infrastructures have been transformedinto art and leisure centres, creating a metropolitan,creative space. Culture has been used as an engine foreconomic diversication through building festivals andother happenings around the city, coupled with a biannualcontemporary art fair called Estuaire.

A project launched in 2011 under the name Le Voyage Nantes crystallizes this cultural offer in a yearly event (frommid-June to mid-August), combining architectural heritage,contemporary architecture, installations in public spacesand exhibitions in artistic venues. This has given Nantes anew identity, and tourists attracted by this cultural offer have

increased from 486,000 in 2011 to 650,000 in 2013. The city has also reinvented itself around the preservation ofthe environment, and received the European Green Capital

Award in 2013 for combating climate change, preservingnature, and for biodiversity, air quality, noise reductionand waste management. Nantes transport policy andclimate plans were especially strong. In the last 10 years,Nantes has developed a sustainable transport policy basedon public transport, car sharing, bicycle rental and thereintroduction of the electric tramway. The city centre isplanned so as to minimize the use of private vehicles andfacilitate pedestrian transit. Moreover, 95% of in

wef gac competitivenessofcities report 2014

Documents