The competitive edge

Mar 12 2012 by Brian Amble Print This Article

So-called 'emerging economies' might be closing the gap on Europe and the United States, but it when it comes to attracting capital, businesses, talent and tourists, global cities in the United States and Western Europe are still ahead of the competition.

The Global City Competitiveness Index, a new report from the Economist Intelligence Unit (EIU), says that while there has been much concern in the West about the impact of the financial crisis, it has not significantly reduced their overall competitiveness. And while cities in emerging economies such as China may rank highly in terms of the speed of their economic growth, they lack the ability to attract talent.

New York (1st) and London (2nd) remain the world's two most competitive cities, the report found, while Singapore (3rd), Paris and Hong Kong (joint 4th) round off the top five. In total, cities from the United States and Western Europe account for 24 of the top 30 cities.

While economic size and growth are important and necessary, several other factors help determine a city's competitiveness, including its business and regulatory environment, the quality of human capital and cultural aspects. These factors not only help a city sustain high economic growth rates, but also create a stable and harmonious business and social environment. All these cities perform relatively well across all eight categories of competitiveness measured in the index, making them good all-round performers.

"Economic dynamism is definitely rising elsewhere, especially in Asian cities, but US and European cities have legacy advantages that give them a strong competitive edge," said Leo Abruzzese, the EIU's global forecasting director.

"In particular, these developed cities are better at attracting top talent from across the world."

European and American cities dominate the human capital category of the index. This stems primarily from the quality of their educational systems and the entrepreneurial mindset of their citizens. But other factors bolster their performance too, such as cultural activities and a generally good quality of life. As New York Mayor, Michael Bloomberg, puts it: "I've always believed that talent attracts capital more effectively and consistently than capital attracts talent."

Nevertheless, Asian cities dominate the "economic strength" category of the competitiveness Index, with all but five of the top 20 cities being Asian. Tianjin, Shenzhen and Dalian top the list, while nine other Chinese cities rank in the top 20.

The top 32 Asian cities are all forecast to grow by at least 5% annually between now and 2016, the EIU predicts, while 12 will grow by at least 10%. This is in stark contrast to the low single-digit growth of most developed market cities in Europe and the United States.

But economic growth isn't everything, the report points out. One of the most pressing challenges for emerging market cities in the decades ahead will be whether they can focus their development not just on skyscrapers, rail links and other infrastructure, but also on the softer aspects that will be crucial to their ability to attract and develop tomorrow's talent, including education, quality of life, reducing pollution and personal freedoms.