The Evolving Creative Class in Emerging Markets

Transcription

The Evolving Creative Class in
Emerging Markets
Applying Richard Florida’s “Creative Capital Theory” to countries
and cities around the world
Client: Peter Marber, HSBC Global Asset Management
Advisor: Dr. Paola Valenti, Columbia University
Authors: Eli Ackerman, Amit Chand, Alex Coppock, Justin Jimenez, Erica
Merber, Melissa Ong, Fang Wu
Submitted: April 26, 2012
Table of Contents
I. INTRODUCTION
3
RICHARD FLORIDA AND THE CREATIVE CAPITAL THEORY
APPLYING CREATIVE CAPITAL THEORY INTERNATIONALLY
OUR ANALYSIS: APPLYING THE “THREE TS” AND “TWO IS”
COUNTRY SELECTION FOR OUR ANALYSIS
3
4
5
5
II. CREATIVE CAPITAL (3T2I) INDEX
7
METHODOLOGY
DATA SOURCES
VARIABLES
SELECTING TIME CROSS-SECTION
NORMALIZATION OF VARIABLES
RESULTS
CONCLUSION NO. 1: THE DATA ARE CONSISTENT WITH THE CREATIVE CAPITAL THEORY.
CONCLUSION NO. 2: THE ADDITION OF INSTITUTIONS AND INFRASTRUCTURE IS MORE APPROPRIATE TO THE
EMERGING MARKET CONTEXT.
3T2I AND FLORIDA INDEX RANKINGS
7
7
7
8
8
9
9
10
10
III. TIME SERIES ANALYSIS
14
GRANGER CAUSALITY BACKGROUND
METHODOLOGY
DATA PREPARATION
DETERMINING THE OPTIMAL NUMBER OF LAGS FOR THE VAR MODEL
RUNNING THE VAR MODEL WITH OPTIMAL NUMBER OF LAGS
RUNNING THE GRANGER CAUSALITY TEST
RESULTS
CONCLUSION NO. 1: NO GENERAL PATTERN EXISTS ACROSS ALL COUNTRIES.
CONCLUSION NO. 2: REGIONAL AND COUNTRY-SPECIFIC PATTERNS CAN BE OBSERVED.
CONCLUSION NO. 3: INCOME PATTERNS CAN BE OBSERVED.
IMPLICATIONS FOR FUTURE RESEARCH
14
15
15
15
16
17
18
19
19
20
20
IV. IN CONSIDERATION OF CITIES
21
V. CITY-LEVEL ANALYSIS: AMERICAS
22
ARGENTINA
BUENOS AIRES
BRAZIL
SÃO PAULO
MEXICO
MEXICO CITY
22
22
27
27
33
33
1
VI. CITY-LEVEL ANALYSIS: ASIA
38
CHINA
SHANGHAI
INDIA
MUMBAI
INDONESIA
JAKARTA
MALAYSIA
KUALA LUMPUR
38
38
44
44
49
49
53
53
VII. CITY-LEVEL ANALYSIS: MIDDLE EAST
58
EGYPT
CAIRO
ISRAEL
TEL-AVIV
TURKEY
ISTANBUL
58
58
62
62
68
68
VIII. CITY-LEVEL ANALYSIS: AFRICA
72
SOUTH AFRICA
JOHANNESBURG
72
72
IX. CITY-LEVEL ANALYSIS: EUROPE
77
RUSSIA
MOSCOW
77
77
APPENDIX A: 3T2I INDEX VARIABLES
82
CALCULATION OF THE FLORIDA INDEX AND 3T2I INDEX
DESCRIPTION OF VARIABLES
NORMALIZATION OF VARIABLES
82
83
87
APPENDIX B: TIME SERIES VARIABLES
89
APPENDIX C: ENDNOTES
90
2
I. Introduction
Richard Florida’s book, The Rise of the Creative Class, posits that the economic success
of some US cities over others in successfully transitioning to a service and knowledge
economy is predicated on the extent to which it has fostered the development of three
factors: talent, technology, and tolerance.
With the growing economic success of various emerging markets, our client, HSBC
Global Asset Management, was interested in testing whether a global application of this
theory was possible. In particular, we were asked to answer the following questions:


To what extent can applying Florida’s theory help identify the economic growth
prospects of emerging market nations?
What other kinds of non-traditional indicators might be appropriate for
evaluating emerging markets?
Richard Florida and the Creative Capital Theory
At a time when many urban thinkers were still grappling with the loss of manufacturing,
Florida examined cities that were successfully sustaining prosperity in the new global
economy. Florida found that these cities shared an important distinction: they were
cities with large numbers of people working in creative industries. In addition to artists,
musicians, actors, and designers, he also included white-collar professions such as
lawyers, doctors, scientists, and financial specialists, as well as blue-collar specialties like
carpenters, landscapers, and stylists. Florida boiled down his theory of “creative capital”
into an index based on the “three Ts”: Talent, Technology, and Tolerance.
Talent
Cities that are good at producing or aggregating large numbers of talented people are
better situated in the new global economy because success in the service and
knowledge industries requires workers who not only have hard skills, but also the ability
to think creatively.
Technology
Cities with active technology sectors and strong technological infrastructure not only
have done better because tech companies have done better, but because collective
technological infrastructure and expertise help meet the needs of entrepreneurs and
small-businesses.
Tolerance
Cities featuring more tolerant laws and cultural openness not only attract talented and
creative people that feel less welcome elsewhere – like immigrants and gays, for
3
instance – but also help foster the open-minded thinking and idea sharing that leads to
innovation.
Applying Creative Capital Theory Internationally
While we sought to apply Florida’s city-level analysis on a global basis, simply recreating
Florida’s index at the international level poses three key challenges:
Inconsistent definitions of the city at the international level
In his analysis, Florida saw cities as the primary engines driving the United States’
economic growth. However, focusing on cities as the primary economic engines of
emerging markets, while conceptually optimal, is practically impossible. For one,
Florida’s comparison of US cities had the benefit of the US Census and the Bureau of
Economic Analysis’ uniform definition of the boundaries of US metropolitan areas. No
such international body exists to provide a consistent definition of international cities’
economic borders. Nor is there an international organization that measures consistent
and reliable population and economic data at the urban level. Even within countries
own statistical bureaus, reliable data is inconsistent or incomplete. As a result,
approximating Florida’s factors of creative capital requires the use of country-level data.
Emerging markets face different challenges
The application of creative capital theory to emerging markets illustrates an additional
challenge. To begin with, Florida does not make the claim that his index of creative
capital is the appropriate measure for international comparisons. Emerging markets
face vastly different challenges from US cities transitioning from manufacturing to
knowledge economies. Simply applying Florida’s “three Ts” is not a conceptually
appropriate way to examine an emerging market’s economic capacity. To more
comprehensively capture the differing economic structures and challenges of emerging
markets, we added two new metrics, Infrastructure and Institutions, the “two Is”, to
help measure these critical components of emerging market growth.
Lack of reliable city level data for emerging markets
Armed now with the “three Ts” (Talent, Technology, and Tolerance) and “two Is”
(Infrastructure and Institutions), evaluating emerging markets using country-level data
still poses an additional conceptual shortcoming. Florida’s argument for cities as the
appropriate level of analysis is compelling, but without reliable and comparable data for
international cities, we cannot faithfully evaluate the metrics that we have identified as
illustrative of growth potential. For one, progress at the city level may not be captured
in national data. Take, for instance, measures of tolerance. With country-level data,
rural attitudes are lumped in with more progressive urban ones. By looking at this data
alone, we lose the ability to more granularly parse the ability of big metropolises, as the
primary economic engines of emerging market economies, to drive their nations’
competitiveness in the new global economy. By taking a qualitative magnifying glass to
4
emerging market cities, we recover some of the critical details of urban progress that
are lost to national data aggregation.
Our Analysis: Applying the “Three Ts” and “Two Is”
We realize that a quantitative analysis at the international level using the “three Ts” and
“two Is” is not a faithful reproduction of Florida’s analysis of US cities. As data
availability remains an issue, the variables used in our analysis differ from those in
Florida’s. For instance, while Florida’s tolerance metric includes the acceptance of gays,
reliable international comparisons of views on homosexuality are not available. As a
result, our tolerance metric substitutes data that measures gender equality. Even still,
data availability remains problematic, making our ideal situation of using a panel
regression model infeasible. To provide both depth and breadth to our examination of
the creative economies of emerging markets, we employed the “three Ts” and “two Is”
in a three-fold analysis:
3T2I Index
To see how emerging market countries fared according to the “three Ts” and “two Is”,
we constructed a 3T2I Index to rank 118 emerging market economies based on these
five factors. We also ranked these same countries on a “Florida Index” that measured
their performance based on the “three Ts” alone. By comparing these two indices, we
were able to see the impact of infrastructure and institutions in these countries.
Time Series Analysis
We selected twelve emerging market countries for which we could provide a deeper
analysis. For these countries, we conducted a time series analysis to determine whether
certain variables underlying our framework of the “three Ts” and “two Is” can be helpful
in predicting GDP growth across countries.
Qualitative City-Level Analysis
Lastly, we placed a qualitative lens over the main metropolises of these twelve countries
to examine the specific advantages they possess and challenges they face. Analyzing
their attributes using the “three Ts” and “two Is”, we sought to provide insight into how
cities can help an emerging market country realize its economic potential.
Country Selection for our Analysis
From the onset, our client requested the examination of emerging market nations.
While our 3T2I Index allowed us to look at a broader range of countries, more thorough
analyses required that we narrow the scope of our study. The selection process was
guided by four major principles. The first was that these countries be broadly classified
as emerging markets. The second was that the countries be geographically diverse and
representative of emerging markets at-large – as such, our pool includes large
5
economies like China and India, but also small economies like Israel. The third criterion
was that these countries feature large and interesting metropolises as economic engines
worthy of qualitative examination. Lastly, we required that the countries had enough
data that would allow us to sufficiently conduct our analyses.
Americas
Argentina – Buenos Aires
Brazil – São Paulo
Mexico – Mexico City
Middle East
Egypt – Cairo
Israel – Tel Aviv
Turkey – Istanbul
Asia
China – Shanghai
India – Mumbai
Indonesia – Jakarta
Malaysia – Kuala Lumpur
Africa
South Africa – Johannesburg
Europe
Russia – Moscow
6
II. Creative Capital (3T2I) Index
Richard Florida’s theory of Creative Capital was developed in the context of US metropolitan
regions. At its core, the Creative Capital Theory posits that when cities, regions, or countries
improve on the “three Ts” of Talent, Technology, and Tolerance, they will improve
economically. National level emerging market data would be consistent with this theory if,
indeed, there is a high correlation between these underlying factors and GDP.
We created two indices that allow us to verify if the theory is consistent with the data. The
first, which we will refer to as the Florida Index, comprises 14 variables that measure the three
underlying factors central to the Florida theory: Talent, Technology, and Tolerance. The second
index, which we will refer to as the 3T2I Index, represents an expansion of the Florida theory to
include factors that we think are appropriate to the emerging market context. Whereas in the
US the quality of institutions and infrastructure do not vary dramatically from place to place, we
believe that these factors vary significantly in emerging markets. The 3T2I Index is so named
because it includes all three factors from the Florida Index and adds “two Is”: Institutions and
Infrastructure. This index comprises 23 variables, measuring these five underlying factors.
Appendix A provides the details of the calculation of both indices.
To explore the applicability of Florida’s ideas to emerging market countries, we analyzed the
relationship between each of the two indices and GDP. It should be noted that this analysis
does not make any causal claims. While Florida’s theory posits a causal connection between
the “three Ts” and GDP, the correlations between each index and the GDP do not provide any
evidence for or against this causal connection. Instead, this analysis tests for consistency. If the
theory were true, we would expect to find strong correlations between these factors and GDP.
Methodology
Data Sources
To construct our Florida and 3T2I Indices, we used variables from the 2011-2012 World
Economic Forum Global Competitiveness Report, the World Bank World Development
Indicators, the 2011 Freedom House Report on Global Political Rights and Civil Liberties, and
the 2011 Freedom House Report on Freedom of the Press.
Variables
The variables in the 3T2I Index are listed below. Please refer to Appendix A for a full description
of the source, data type, and coding of each variable.
Talent
Tertiary Education Enrollment Rate
Local Availability of Specialized Research and Training Services
Quality of Education System
Capacity for Innovation
7
Brain Drain
Technology
Company Spending on Research and Development
Mobile Phone Subscriptions
Availability of Latest Technologies
Foreign Direct Investment and Technology Transfer
Internet Users
Tolerance
Female Labor Participation ratio
Press Freedom
International Migrant Stock (percent of population)
Political Rights
Institutions
Property Rights
Intellectual Property Rights
Judicial Independence
Strength of Investor Protection
Days Required to Start a Business
Infrastructure
Quality of Port Infrastructure
Quality of Air Transport Infrastructure
Quality of Electrical Supply
Quality of Roads
Selecting time cross-section
As the data included in this report were collected from many different countries by different
organizations, not all variables were measured at the exact point in time. The data included in
this report reflect a state of the world that can be generally referred to as “the present” – 2009
to 2011. We felt that this choice was justified because in the few cases where comparisons
across time could be made, the variables in our study are quite stable.
Normalization of variables
In order to make these disparate variables comparable, we needed to normalize each variable
to a range between 0 and 1, where values closer to 1 are better. This meant that for some
variables, we needed to both rescale and invert, whereas for others we only had to perform
one or the other of the two operations. Please refer to Appendix A for a complete discussion of
this process.
8
Results
Conclusion No. 1: The data are consistent with the Creative Capital Theory.
The correlation between the Florida Index and 2010 GDP/Capita (2005, PPP) is 0.836. This is an
extremely high correlation and lends substantial support to the conclusion that the observed
country-level data is consistent with Florida’s Creative Capital Theory.
The principal theoretical contribution of this report is the addition of the “two Is”, institutions
and infrastructure. The 3T2I Index’s correlation with 2010 GDP/Capita (2005, PPP) improves to
0.857.
This correlation, while suggestive, cannot shed light on questions of causality. In the next
section of this report, the time series analysis will be able to answer one further question, that
of which variables move before GDP, and which variable move after GDP. This analysis still
cannot make causal claims, but it can at least indicate which variables precede others.
This strong correlation can be seen in the graph below, which plots countries’ ranks on the 3T2I
Index versus their 2010 GDP/Capita ranks.
9
Conclusion No. 2: The addition of Institutions and Infrastructure is more appropriate
to the emerging market context.
The addition of institutions and infrastructure to our 3T2I Index improved the correlation with
GDP. We attribute this finding to our theoretical position that in emerging market countries,
institutions and infrastructure are especially important. The variation in institutions and
infrastructure can be seen in the graph below, which compares countries’ ranks on both the
3T2I Index and the Florida Index.
The difference in ranking on the two indices is a measure of the impact of the addition of the
“two Is”. This difference is reflected in the right-most column in the table below. Countries for
whom the difference is positive did better on the 3T2I Index than on the Florida Index. The
reverse is true for countries whose difference is negative. Put simply, if a country’s relative
performance on the “two Is” is better than its relative performance on the “three Ts”, its
ranking on the 3T2I Index will be better than on the Florida Index.
3T2I and Florida Index Rankings
Below are the full rankings on 3T2I Index, the Florida Index, and the difference in rank between
the two indices.
10
Country
Singapore
Finland
Sweden
Switzerland
Denmark
United Kingdom
Netherlands
Canada
United States
Belgium
Israel
Norway
Iceland
France
Austria
Japan
Ireland
Luxembourg
Australia
Malaysia
Korea, Rep
United Arab Emirates
Saudi Arabia
Spain
Estonia
Portugal
Chile
Slovenia
Cyprus
Czech Republic
Uruguay
Panama
Lithuania
South Africa
Italy
Hungary
Thailand
Latvia
Croatia
Poland
3T2I
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Florida
4
2
3
1
5
9
8
14
7
13
6
10
12
17
11
16
20
18
15
24
19
22
29
27
21
28
35
25
37
23
39
30
26
54
33
31
53
36
34
32
Difference
3
0
0
-3
0
3
1
6
-2
3
-5
-2
-1
3
-4
0
3
0
-4
4
-2
0
6
3
-4
2
8
-3
8
-7
8
-2
-7
20
-2
-5
16
-2
-5
-8
11
Country
Namibia
Mauritius
Brazil
Trinidad and Tobago
China
Jordan
Slovak Republic
Tunisia
Greece
Costa Rica
Sri Lanka
Albania
Botswana
Indonesia
Jamaica
Colombia
Azerbaijan
Rwanda
Peru
Turkey
Mexico
India
Russian Federation
Argentina
Kenya
Guatemala
Bulgaria
Ghana
Ukraine
EI Salvador
Macedonia, FYR
Romania
Morocco
Georgia
Dominican Republic
Kazakhstan
Armenia
Cambodia
Ecuador
Zambia
3T2I
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
Florida
89
60
40
50
51
57
38
61
45
43
76
47
74
46
75
55
62
79
49
73
59
67
42
41
58
78
48
70
44
83
66
52
86
95
69
56
64
98
81
88
Difference
48
18
-3
6
6
11
-9
13
-4
-7
25
-5
21
-8
20
-1
5
21
-10
13
-2
5
-21
-23
-7
12
-19
2
-25
13
-5
-20
13
21
-6
-20
-13
20
2
8
12
Country
Honduras
Malawi
Guyana
Vietnam
Egypt
Philippines
Senegal
Benin
Cape Verde
Lebanon
Serbia
Tajikistan
Moldova
Pakistan
Bolivia
Tanzania
Bosnia and Herzegovina
Uganda
Mongolia
Ethiopia
Mozambique
Venezuela
Swaziland
Bangladesh
Paraguay
Cote d'Ivoire
Syria
Nicaragua
Mali
Lesotho
Algeria
Cameroon
Kyrgyz Republic
Nepal
Madagascar
Burkina Faso
Angola
Mauritania
3T2I
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
Florida
90
91
93
68
105
71
63
77
85
87
72
96
65
103
92
94
84
99
82
113
100
80
117
102
97
104
114
110
109
107
115
106
101
108
111
112
116
118
Difference
9
9
10
-16
20
-15
-24
-11
-4
-3
-19
4
-28
9
-3
-2
-13
1
-17
13
-1
-22
14
-2
-8
-2
7
2
0
-3
4
-6
-12
-6
-4
-4
-1
0
13
III. Time Series Analysis
We conducted a time series analysis to determine if certain variables are helpful in predicting
GDP across countries. A time series analysis examines samples of data observed at different
points in time. Time series analyses are used to discern if there are patterns in the data
collected, and are generally used to test theories and/or make predictions about the future.
By doing so, we provide a more in-depth analysis that complements the findings from our
preceding cross-sectional discussion. The high correlations that we observed in our preceding
analysis indicate that there is a strong relationship between GDP and the indices considered.
These high (positive) correlations indicate that countries with higher GDP generally also have
higher ranks on the indices. These correlations, however, cannot be used to infer a causal
relationship between GDP and the variables included in the indices. In particular, they cannot
be used to predict a change in GDP from changes in the variables that compose the indices
under scrutiny.
Granger Causality Background
The Granger causality test is a statistical tool that is used to test if one time series is helpful in
the forecasting of another. A variable, X, is said to “Granger-cause” another variable, Y, if past
values of X contain information that helps predict Y above and beyond the information
contained in past values of Y alone. Put simply, Granger causality helps us understand if
changes in one variable consistently and predictably precede changes in another variable. 1
In a Granger causality test, the null hypothesis is that X does not Granger-cause Y. We use a
Vector Autoregressive (VAR) Model and consider the following regression equation:2
Where Y is the output variable (e.g., GDP), Yt-n is the lagged output variable (with n being the
number of lags), X is the variable that we are testing for Granger causality, Xt-n is the lagged
value of X (with n being the number of lags). Note that m is the optimal number of lags in the
VAR Model, which we determine according to the Akaike Information Criterion (AIC).3
The Granger causality test is a test that the variables Xt-n do not jointly add explanatory power
according to an F-test (that is, that the coefficients on Xt-n are jointly equal to zero). If we reject
the null hypothesis, we can then claim that variable X Granger-causes variable Y.
1
It is important to note that Granger causality does not imply causality in the traditional sense of the word.
“Causality” is a misnomer because we are only able to see if one variable moves before another variable. This does
not rule out, for example, the fact that a third variable may be causing both variables to move. Therefore, we
cannot establish true causality; we can only claim Granger causality.
2
In a VAR Model, a variable is explained by its own lags and the lags of the other variables in the model.
3
The Akaike Information Criterion (AIC) is a measure of a statistical model’s relative goodness of fit. For the
purposes of our analysis, we employed AIC as it is the most widely used technique to find the optimal number of
lags.
14
Methodology
This section describes the details of the methodology that we used in our time series analysis.
Data preparation
We used all available time series data for our twelve selected countries. The data was sourced
from The World Bank, Economist Intelligence Unit, Freedom House, and Organization of
Economic Co-operation and Development (OECD). We focused on the time period 1990-2009,
as it allowed us to use the maximum amount of variables for our analysis. On average, we used
approximately 25 variables per country. However, depending on data availability, there is some
heterogeneity in the variables used across countries. For lack of available data, we could not
include any variable belonging to the Institutions factor. Refer to Appendix B for more
information on the variables used.
While data were mostly available for all years during this time period, we used linear
interpolations to fill in missing data points, and compounded annual growth rates (CAGR) to
extrapolate values. To control for serial correlation, we used difference models to eliminate
trends from the data.
Determining the optimal number of lags for the VAR Model
Before running the VAR Model, we determined the optimal number of lags to include in the
model. While there are a number of criteria that are used for this purpose, we used the Akaike
Information Criterion (AIC), as it is the most commonly used technique to determine optimal
number of lags. We implemented the AIC with Stata, a widely used data analysis and statistical
software.
Stata determines the optimal number of lags for each variable by running many iterations of
the model and identifying the best fit. Given the number of observations in our data set, the
optimal number of lags in our models ranged from zero to five.4 Below is an example of the
Stata output to find the optimal number of lags for patent applications in China. An asterisk in
the AIC column indicates the optimal number of lags.
4
When the optimal lag was zero, we determined that there was no significant relationship.
15
Running the VAR Model with optimal number of lags
After determining the optimal number of lags for each variable that we wanted to test, we ran
a VAR model for each of these variables. Below is an example of the Stata output for the
regression of patent applications on GDP in China, using the optimal number of lags found in
the previous stage (five lags).
16
Running the Granger causality test
Using the output of the VAR Model, we ran a Granger causality test. In particular, we
conducted an F-test for joint significance of the coefficients on lags of X. We used a p-value of
0.05 as the minimum threshold for significance. That is, if the p-value is less than 0.05, we reject
the null hypothesis that X does not Granger-cause Y. If the p-value is greater than 0.05, we fail
to reject the null hypothesis.
Below is an example of the Stata output for the Granger causality test for patent applications in
China.
Because the p-value for patent applications is 0.00<0.05, we reject the null hypothesis and thus
claim that patent applications Granger-cause GDP. In the other direction, because the p-value
for GDP is 0.095>0.05, we fail to reject the null hypothesis, and thus cannot claim that GDP
Granger-causes patent applications.
Depending on the results of the Granger causality tests, we have four potential outcomes: (1) X
Granger-causes Y, (2) Y Granger-causes X, (3) both directions are significant and we cannot
determine which variable moves first, or (4) there is no significant relationship between the two
variables.
17
Results
The figures below provide the results of our time series analysis for all variables included in the
12 countries analyzed. To summarize our results, we color-coded them according to the
following criteria:




Blue: X Granger-causes Y; i.e. one of the 3T2I variables precedes GDP growth
Red: Y Granger-causes X; i.e. GDP growth forecasts a change in one of the 3T2I variables
Grey: both directions are significant and we cannot determine which variable moves first, or
there is no significant relationship between the two variables;
White: there is insufficient data to run the analysis or the optimal lag is zero.
The first chart groups our countries based on geography:
Technology
Tolerance
Infrastructure
Institutions
i ca
Ru
ssi
a
Af r
u th
So
ey
Tu
rk
Isr
ae
l
pt
Egy
lay
sia
Ma
es i
a
on
Ind
ia
Ind
Ch
ina
o
il
Me
xic
Variables
Literacy rate
Tertiary enrollment rate
Labor productivity
Working age population
Unemployment rate
PCs
TVs
Internet
Mobile subscribers
Journal articles
Patent applications
Trademark applications
High tech exports
Freedom of the press
International migrants
Political rights
Civil liberties
Female labor participation
Gov. seats held by women
Air Transport-passengers
Air Transport-freight
Petroleum consumption
Passenger cars
Telco. investment
Hospitals
-
Bra
z
Factor
Talent
Ar g
en
tin
a
Granger Causality – Grouping by Geography
18
The second chart groups our countries based on GDP per capita (PPP, 2005):
Granger Causality – Grouping by GDP per Capita
Infrastructure
Institutions
l
ae
Isr
Arg
ssi
a
Ru
en
tin
a
>$15,000
ia
y
lay
s
Ma
r ke
o
xic
Me
zi l
Bra
u th
So
i na
Ch
pt
Egy
on
es i
a
Tolerance
I nd
ia
Technology
Variables
Literacy rate
Labor productivity
Unemployment rate
PCs
TVs
Internet
Mobile subscribers
Journal articles
Patent applications
High tech exports
Political rights
Civil liberties
Female labor participation
Gov. seats held by women
Air Transport-passengers
Passenger cars
Telco. investment
Hospitals
-
I nd
Factor
Talent
$10,000-15,000
Tu
$5,000-10,000
A fr
i ca
<$5,000
Conclusion No. 1: No general pattern exists across all countries.
Given the unique political and economic climates of each country, we did not expect to see
broad, conclusive trends. In fact, the table above shows that no single variable yields the same
Granger-causality result for all countries. Another result worth noting is that the direction of
Granger causality often changes from one country to the next. As a data mining exercise, no
requirement for a pre-existing theory explaining the relationships between the independent
variables and GDP was required. Additionally, 39 percent of our results (122 out of 312 cells
from output table) were significant in both directions or had no significant relationship, and 41
percent of data points (128 of 312 cells from output table) lacked sufficient data to run the
analysis. These data limitations significantly constrain our analysis.
Conclusion No. 2: Regional and country-specific patterns can be observed.
However, some regional and country specific patterns can be observed. For example, in Middle
Eastern countries such as Israel, Turkey, and Egypt, female labor participation consistently
precedes increases in GDP. This suggests that countries with limited female labor participation
rates could increase productivity by investing in equal-opportunity policies to incentivize
19
women to enter the work force. In our Middle Eastern sample of countries, we also observed
that GDP precedes increases in air freight transport. As mainly oil exporting countries, it is
unclear why air freight transport precedes GDP growth.
In Asian countries such as China, India, Indonesia, and Malaysia, patent applications tend to
precede increases in GDP. This suggests that countries in this region, or with similar
characteristics, may benefit from investments in R&D as this may have a subsequent impact on
GDP. In South American countries such as Argentina, Brazil, and Mexico, while we see several
independent variables preceding growth in GDP, no conclusive patterns emerge.
Results specific to the economic and political circumstances of each country can also be found.
For example, in resource rich countries such as Russia, Indonesia, and Malaysia, we see that
growth in GDP tends to precede increases in independent variables. This suggests that, due to
their economies’ reliance on commodities, the variables included in the 3T2I Index do not have
a large impact on GDP. Rather, when GDP increases, we see a subsequent increase in certain
independent variables such as literacy rate, mobile subscribers, and Internet users. This is
understandable, as increases in GDP allow for increased investment in these variables.
Conclusion No. 3: Income patterns can be observed.
We also can observe patterns based on countries’ income levels, suggesting that the
independent variables we measured have different impacts at different levels of GDP per
capita. Countries with income levels below USD 5,000 per capita, such as India and Indonesia,
show a tendency for GDP growth to precede our independent variables. However, countries
with income levels between USD 5,000-10,000 per capita see a tendency for independent
variables to precede GDP growth. At higher levels of GDP per capita, the results display much
more heterogeneity.
Implications for Future Research
This analysis could be expanded in the future using additional years and additional variables. A
major constraint that we faced was the lack of time series data spanning back for more than 20
years. For organizations interested in this type of analysis, investment in the collection of
emerging market, country-level data for these non-traditional variables would allow for a more
extensive analysis. Given more time, we would also expand the number of countries in our
analysis to draw broader regional conclusions.
20
IV. In Consideration of Cities
Richard Florida’s Creative Capital Theory is structured to explain the economic development of
US cities transitioning into a service and knowledge-based economy. When looking globally,
however, varying census measures and inconsistent definitions of metropolitan boundaries
make replicating Florida’s analysis at the international level nearly impossible. Examining
country-level data in emerging markets masks some of the phenomena that characterize the
role that cities play as economic engines and centers of creativity. Carefully analyzing the
strengths, challenges, and trends that characterize a nation’s critical metropolis can provide
critical insight into an emerging market’s ability to reach its economic potential.
Examining how an emerging market’s principal metropolitan areas are performing according to
Florida’s metrics (the “three Ts”) plus our own (the “two Is”) is possible through qualitative
analysis. While there is no reliable international measurement that suggests the relative
strength of a city’s institutions, a magnifying glass can substantively evaluate a metropolitan
area’s governance structure and its prospects for implementing long-term plans. There is no
consistent measure of the strength of a city’s infrastructure, but one can evaluate whether
current development initiatives reflect an urban agenda sensitive to the prerequisites of a
knowledge-economy. The same is true for national measures of talent, technology, and
tolerance: what is captured by statistics at the national level is not the whole story. At the city
level, this granular scrutiny won’t result in a predictive model, but will help fill the gaps that
even the most comprehensive international comparisons inevitably leave behind. As such, it
can lead us to a far more valuable assessment of the role Florida’s “three Ts” might play in
emerging market metropolises.
Each of the following twelve reports will examine the economic engines at the heart of the
twelve emerging markets we examined in our previous analysis. Each will focus on the unique
features of that city and evaluate how its economy is evolving to meet modern challenges.
The research contained in each report is classified among the features of talent, technology,
tolerance, institutions, and infrastructure. This information would otherwise be blurred or lost
at the national level or from the compromises of data availability. Read these as a complement
to the quantitative reports in Sections II and III.
21
V. City-Level Analysis: Americas
Argentina
3T2I Index Rank: 64th out of 118
Florida Index Rank: 41st out of 118
GDP per Capita Rank: 37th out of 118
Among developing countries, Argentina is a relatively prosperous nation that is currently
headed in a positive direction after decades of instability. Its rank on the 3T2I Index is lower
than its GDP/Capita rank, and our analysis concludes that it is institutional concerns such as
corruption, governance, and a weak legal system that are holding Argentina back. Meanwhile,
our time series analysis indicates that increases in PC and television penetration, high tech
exports, and air freight transportation have preceded the country’s GDP growth. This is not
surprising given the country’s substantial public R&D expenditure and the proliferation of
technology start-ups in the nation’s capital.
Buenos Aires
Greater Buenos Aires is an urban agglomeration that includes the Autonomous City of Buenos
Aires and 24 surrounding municipalities. As of the 2010 census, Greater Buenos Aires had a
population of 15.5 million, which accounts for 39 percent of the total population of Argentina. i
With nearly two out of every five Argentines living within its borders, there is no question that
Buenos Aires is the major economic, political, and culture engine of the country. A 2008
estimate by PricewaterhouseCoopers UK found that Buenos Aires was the 13 th largest world
city by GDP, at USD 362 billion (2008, PPP).ii This tremendous level of output accounts for
nearly two-thirds of total economic activity in Argentina.5
Institutions
In 1996, the city of Buenos Aires became an autonomous governmental unit, and was no longer
a part of the Province of Buenos Aires. This was part of a larger push to devolve power to local
municipalities. This decentralization led to a rapid suburbanization of Greater Buenos Aires.
Poorer municipalities gained the power to sign contracts with private developers, allowing
gated communities to rise among former industrial and slum areas, as indicated in the map
below.iii
5
This is calculated using the 2008 estimate of Argentine GDP in PPP as USD 572.641 billion.
22
Buenos Aires’ institutional challenges are found at the boundaries of national, provincial, and
municipal jurisdictions. It is not always clear which governmental unit has responsibility for a
particular policy area. For instance, both the municipal and federal governments arrange public
safety in the capital. Land use policy, on the other hand, is handled by a patchwork of suburban
jurisdictions that end up competing with one another to their mutual detriment.
Other measures of institutional strength (or weakness) are best analyzed at a national level, as
in many respects, Buenos Aires is the national level. Argentina scored a 3.0 on Transparency
International’s 0-10 Corruption Perceptions Index, ranking 100th out of 182 total countries.iv It
ranked 80th out of 123 countries examined by the World Bank on time required to start a
business. A cable leaked by the United States State Department suggested that due to
corruption and the absence of enforcement, Argentina was “ripe for exploitation” by organized
crime.v
Of the five pillars considered in this report, the largest challenge facing Buenos Aires is
institutional reform, with a special emphasis required on improving governance and
transparency.
23
Infrastructure
The most visible features of Buenos Aires’ infrastructure are its extensive railroads and massive
ports. Taken together, they explain a large part of Buenos Aires dominant position in the
Argentine economy.
Buenos Aires currently has six operational metro lines, with three more lines planned, one of
which is due to begin construction in 2012.vi Its rail system is a vast network that moves a
staggering 445 million people on commuter trainsvii and 409 million on the metro each year –
though not without its share of problems.viii Focus on Buenos Aires’ under-maintained metro
and rail system was renewed in February of 2012, when a commuter train crash at a downtown
metro stop killed 49 passengers and wounded hundreds more.
There are three major ports within Greater Buenos Aires: the Port of Buenos Aires, the Port of
Dock Sud, and the Port of La Plata, which collectively handle 35 million tons of cargo annuallyix.
24
The Port of Buenos Aires is the largest in South America, with river connections to Brazil,
Paraguay, and Uruguay making it a major distribution hub for goods coming from abroad.
A potential point of concern for Buenos Aires’ infrastructure is the extent of privatization –
ports, railways, and airports are all managed by private companies. The efficiency gains from
private provision of public services in some cases may be outweighed by the lack of
accountability and transparency regarding their management. For instance, many public
services – including public transit – were privatized in the 1990s, but contracts were not written
in a way that obliged private operators to invest in maintenance.
Talent
Education in Buenos Aires is publicly funded at all levels, so all citizens should theoretically have
access to higher education. The gross tertiary enrollment rate is 67.7 percent, meaning that
two-thirds of college-aged Argentines attend some sort of post-secondary educational
institution.x Literacy is almost universal, at 97 percent. xi Despite these successes, a 2008 report
by the Inter-American Development Bank highlights concerns over the quality of Argentine
education. When compared with other Latin American countries, Argentina has done poorer
than expected.xii
Brain drain is a major issue for the most talented in Buenos Aires. A 2005 report by the United
Nations Economic Commission for Latin America and the Caribbean (ECLAC) found that for
every 1,000 Argentines that immigrate to the United States, 191 are professionals, scientists, or
technicians.xiii This is the highest proportion among all Latin American countries in the study.
With strong fundamentals in the education sector, Buenos Aires would seem to be poised to
develop a robust knowledge economy. However, this potential is tempered by the difficulty in
retaining top talent. This dilemma might be mitigated by a renewed focus on providing such
individuals with opportunities that are at least as appealing as those that they are seeking
abroad.
Technology
Buenos Aires experienced a technology start up boom in recent years, with companies such as
Globant, Core Security, Popego, and Fuego achieving significant market success. xiv Entities such
as the Business Angels IAE (IAE is the business school associated with Austral University) are
evidence of a nascent venture capital community in Buenos Aires that is committed to
investment in Argentina rather than abroad. Private initiatives of this sort may be part of a
solution to the brain drain problem discussed in the previous section.
On the public sector side, the National Agency for Scientific and Technological Promotion has
set up two funds to directly stimulate research and development in Argentina. One company is
located in Buenos Aires and is active in the nuclear and satellite fields, winning contracts with
NASA, among others.
25
Technology is clearly a part of daily life in Buenos Aires. About 36 percent of Argentines use the
Internet, which constitutes a relatively high penetration for the region. Though precise data are
not available, this figure is doubtlessly much higher in Buenos Aires. Insofar as it is a major
ingredient in the creative capital economy, Buenos Aires will not be held back by technology.
Tolerance
One high profile indicator of tolerance towards women in Argentina is its female head of state.
Despite this, a 2012 report by the International Trade Union Conference found that Argentina
has one of the largest unexplained gender wage gaps in the world, suggesting workplace
discrimination towards women.xv
Tolerance towards homosexuals is relatively high in Argentina, with 51 percent of respondents
in a 2007 Gallup poll saying that it is a good place for homosexuals to live, and 32 percent
saying that it is not. This finding squares with a 2007 Pew Research survey, which found that 72
percent of respondents said that homosexuality was a way of life that society should accept,
and only 21 percent said that it is not. The two questions are slightly different, but both seem
to indicate that attitudes towards gays and lesbians are generally positive. While these are
national statistics, we might expect that tolerance towards homosexuality would be even
greater in the nation’s cities.
Outlook
As noted earlier, the main challenges facing Buenos Aires are institutional. Issues relating to
public transit infrastructure or the quality or quantity of education stem from similar
institutional failings. The gap between Argentina’s Florida Rank and its 3T2I rank is the fourth
largest in our dataset, suggesting that Argentina does far better on Talent, Technology, and
Tolerance, than it does on Infrastructure and Institutions. As this analysis has shown, it is
corruption, rule of law, and business climate that are of most concern for Buenos Aires in the
future.
26
Brazil
3T2I Index Rank: 43rd out of 118
Florida Index Rank: 40th out of 118
The largest and most populous country in South America, Brazil has a strong domestic market
that has afforded it a position among the world’s leading economies. With a GDP of over USD 2
trillion in 2010, Brazil is the world’s sixth largest economy. A robust internal market has allowed
Brazil to emerge from the global financial crisis relatively unscathed. The country’s pursuit of
industrial and agricultural policies to develop its interior, as well as the national Growth
Acceleration Program, which aims at increasing infrastructure investment and providing tax
incentives for economic development, have both contributed to robust economic growth –
peaking at 7.5 percent in 2010 and 2.7 percent in 2011 during the global economic slowdown.
However, Brazil’s income inequality, strained infrastructure, and unwelcoming business
environment have the potential to hamper further progress. While Brazil performs slightly
better on the 3T2I Index compared to the Florida Index, reflecting the relative strength of its
institutions and infrastructure in relation to the other 118 countries included, the country still
has much room for improvement. From our time series analysis, we see that factors such as
tertiary enrollment rates and PC penetration have preceded the country’s GDP growth.
São Paulo
Brazil’s rapid urbanization is most evident in São Paulo. With a population of over 11 million in
São Paulo municipality and nearly 20 million in the greater metropolitan area, São Paulo is the
largest city in Brazil, the largest in South America, and the sixth largest in the world. With
Brazil’s urban population that makes up for 87 percent of the total population, megacities such
as São Paulo are keys to the country’s economic growth and global influence.1
São Paulo holds significant economic clout both domestically and internationally. According to
the Brazilian Institute of Geography and Statistics, São Paulo’s 2006 GDP stood at R$ 282.9
billion (USD 150.6 billion), or 12.3 percent of Brazil’s GDP.xvi This makes it the 10th largest city in
the world by GDP. With an annual economic growth rate of 4.2 percent, São Paulo is expected
to rise to the sixth largest city by 2025 with a predicted population of 21.4 million.xvii São Paulo
is also home to Latin America’s largest stock exchange, the São Paulo Stock Exchange, where
roughly R$ 6 billion (USD 3.5 billion) is traded each day. Marked as an “Alpha World City” by
Globalization and World Cities Research Network, the city exerts much international influence.
Despite its economic prowess, however, it ranked 33rd of 66 major metropolitan areas in the
2012 A.T. Kearney Global Cities Index. This was primarily due to shortcomings in factors
measured by the index including human capital, information exchange, and global political
influence.
Institutions
São Paulo is the capital of the state of São Paulo, the most populous state in Brazil. Under the
municipality, 31 subprefeituras manage local public services and are the main point of contact
27
for most citizens. Municipal elections are held every four years in democratically run elections.
Due to the incongruity between the borders of the municipality and the actual size of the city,
the mayor of São Paulo and the governor of São Paulo state must often work closely together.
For instance, when it comes to transportation – a perennial headache for São Paulo officials –
city officials are responsible for part of the urban transport system, while the state takes care of
integrated planning across the larger metropolitan area. Similar shared governance structures
are held in the areas of housing, education, security, and health. São Paulo’s unclear boundaries
also pose coordination dilemmas with its neighboring municipalities – for instance, upstream
pollution of the Tiete and Pinheiros Rivers from its neighboring municipalities.
São Paulo Governance Structures; Source: Urban Age
Given the layers of bureaucracy at even the municipal level, it is not surprising that governance
in Brazil as a whole is plagued by corruption. The country ranked 73 rd out of 182 countries in
Transparency International’s 2011 Corruption Perceptions Index.xviii Corruption in Brazil makes
it unattractive to international business. In 2012, the World Bank ranked Brazil 126 th out of 183
economies in their “Ease of Doing Business” index. According to this survey, starting a business
in Brazil takes an average of 13 procedures and 119 days, compared to 9 and 54, respectively, in
the rest of Latin America and the Caribbean. Enforcing contracts and paying taxes are among
the other main difficulties in establishing a business in the country.
Despite these difficulties, Brazilians welcome the prospects of globalization and international
clientele – many of which based their Latin American operations in Brazilian cities such as São
Paulo. The country ranks 53rd out of 142 countries in the World Economic Forum’s 2011-2012
Global Competitiveness Report. In a 2006 Pew Global Attitudes survey of 1,000 Brazilian
respondents, 72 percent supported trade, 70 percent supported foreign companies, and 65
percent supported free markets. Currently, the largest concentration of German and Swedish
businesses can be found in São Paulo. According to Mercer’s 2011 cost of living rankings, São
28
Paulo is the 10th most expensive city in the world for expatriate employees, up from its 21 st
position in 2011.
Infrastructure
A sprawling metropolis with a total urban area of 1,968 square kilometers (760 square miles),
São Paulo faces major challenges in providing adequate infrastructure for its populace. Lacking
a master plan from the onset, São Paulo’s urban development has been irregular and has
resulted in urban sprawl. As with major developing cities, this led to the development of slums
in the outskirts of the city, known in Brazil as favelas. Over 15 percent of São Paulo’s population
lives in favelas. One of the largest of these, Paraisópolis, has over 60,000 residents. On the
other end of the spectrum, São Paulo’s rapid development has also led to the construction of
high-end office space, much of which remains largely unoccupied due to issues with the city’s
transportation infrastructure.
São Paulo’s Paraisópolis favela, one of the city’s largest.
With over seven million vehicles on the city road and a public bus fleet of only 17,000 units, São
Paulo is plagued by debilitating traffic. Car ownership has increased rapidly in São Paulo, with
the greater metropolitan region seeing one million cars added to its streets over the past five
years. The city currently has a car density of 2,486 per square kilometer – one of the highest in
South America. With an average of six million daily passengers riding its three railway systems –
CPTM, São Paulo Metro, and the EMTU-SP – the city’s public transportation system also sees
severe congestion. These lines were first built in the 1970s by the federal government, but once
authority over urban transport was given to states and cities in 1988, their lack of experience
and funding resulted in years without investment or maintenance. xix
29
Despite this complex system of urban transportation, the government has taken steps to
improve it. For instance, the Bilhete Unico (Unified Ticket) was introduced to connect all transit
systems and provide citizens with greater convenience. Over the next few years, public projects
are expected to expand São Paulo’s railway systems from 322.2 kilometers of track to over 500
kilometers. In fact, the development of the city’s transportation system is often the subject of
contention in elections – for both the city and even the national government.
As the country ramps up for the 2014 World Cup, much infrastructure development is expected
in both São Paulo and the rest of the country. By 2014, a new metro line connecting the São
Paulo International Airport with downtown São Paulo will be completed. This line will also
integrate the city of São Paulo with the greater São Paulo metropolitan area.
Talent
São Paulo’s Human Development Index score of 82 – a metric that combines life expectancy,
literacy, educational attainment and GDP per capita – is higher than Brazil’s national score of
80.xx Roughly 94 percent of São Paulo’s population is literate, compared to the national average
literacy rate of 87 percent.xxi Approximately 90 percent of children between the ages of 7 and
14 are enrolled in primary and secondary education. São Paulo is home to several prominent
Brazilian universities, including the University of São Paulo, the Pontifical Catholic University of
São Paulo, and the São Paulo Federal Institute of Education, Science and Technology. In the
greater state of São Paulo, there are more than 578 universities.
São Paulo is also a center of art, music, and fashion in Brazil. The city is home to prominent
museums, opera houses, and music halls, including the Sala São Paulo theatre, which houses
the São Paulo State Symphony. It is also home to Latin America’s largest and most important
fashion event, São Paulo Fashion Week, or Morumbi Fashion Brasil, which was started in the
city in 1996.
Technology
Several important Latin American R&D centers are based in São Paulo, and more are being
attracted due to the talent pool produced by the city’s universities. In 2008, total R&D
expenditure in São Paulo state stood at R$ 15.5 billion (USD 8.25 billion), or 1.52 percent of its
GDP.xxii Of this amount, 63 percent was provided by the private sector, while the state and
federal government funded 37 percent. The notable companies fueling São Paulo’s R&D
expenditure include Petrobras, a Brazilian oil and gas producer; Vale, a mining company; and
Embraer, a Brazilian aerospace conglomerate. Public organizations also play a large role in
technological innovation in São Paulo. For example, the Foundation for Research Support of the
State of São Paulo stands as an important institution in the promotion of science and
technology in Brazil.
Internet penetration in Brazil stood at 40.7 percent in 2010. With over 81 million internet users
– 54 million of which are in the country’s southeast, which includes São Paulo and Rio de
Janeiro – Brazil has the world’s fifth largest population of Internet users. Such high levels of
30
internet usage led Google to base its Latin American operations in São Paulo. The
preponderance of online networking – over 47 million users of the country’s total internet
audience use social networking sites, has led Newsweek Magazine to call Brazil the “Schmooze
Nation.”xxiii Facebook also has a very large presence in Brazil, with over 36 million Brazilians
visiting the site as of December 2011.xxiv Brazil is also the largest user base for the instant
messenger service MSN Messenger.
Tolerance
Within São Paulo, the population’s ethnic mix comprises over 70 nationalities. Due to an influx
of foreign workers in the 19th and 20th centuries, the city has received immigrants from all over
Europe, Asia, and the Middle East. For instance, the city is home to the largest Japanese
community outside of Japan. Today, however, international immigrants are not widely
accepted. Despite being open to the business-related aspects of globalization, a 2007 Pew
Global Attitudes Survey indicated that 72 percent of Brazilians were in favor of restricting and
controlling immigration.xxv
Homosexuality is widely accepted – both in São Paulo and Brazil as a whole. In a 2007 Pew
Global Attitudes Project survey, 65 percent of Brazilian respondents stated that homosexuality
should be accepted by society.xxvi São Paulo’s Gay Pride Parade is one of the largest in the
world, with four million attendees in 2009. In 2011, the Brazilian Supreme Court granted samesex couples the right to marriage. Gay acceptance, however, is complicated by the large
influence of the Roman Catholic Church; 74 percent of Brazilians identify themselves as Roman
Catholic.
Despite its reputation for corruption, Brazil is a vibrant democracy with regular elections and
constitutional guarantees for freedom of expression. However, Brazilian authorities have
started taking steps toward regulating online content. In the first half of 2010, Google reported
that the government had ordered online content to be removed on 398 occasions. These
restrictions on Internet freedom led Freedom House to give Brazil only a “Partly Free” status in
its 2011 Freedom of the Press Index.xxvii
Crime in São Paulo is also a source of major concern. The development of impoverished favelas
has also been associated with increased crime as these favelas are often centers of drug
trafficking and black market economies. Jardim Ângela, a district of São Paulo, was once
declared by the United Nations as the homicide capital of the world. Through increased police
presence and precautions taken by private citizens, including purchases of armored cars, São
Paulo has taken steps to reduce its crime rate, particularly its homicide rate, which fell from 53
homicides per 100,000 in 1999 to roughly 10 homicides per 100,000 a decade later.xxviii
Outlook
Along with its sister city, Rio de Janeiro, São Paulo stands as one of the primary engines of
Brazil’s economic growth. A booming metropolis with homegrown companies and a diverse and
tolerant population, it plays a large role Brazil’s ascent to the forefront of the global economic
31
stage. However, São Paulo and its fellow Brazilian metropolises must maintain its social and
physical infrastructure to keep pace with the country’s frenetic pace of growth and in order to
foster a city free of crime and congestion. Despite the successes of Brazil’s nationalized firms,
São Paulo should take steps to build a more welcoming environment for international business,
and to not repeat the failed insular policies of the past. While the rest of the world is looking
into Brazilian cities such as São Paulo for the growing opportunities that they represent, these
cities should also look outward for ways to improve their own practices.
32
Mexico
3T2I Index Rank: 61st out of 118
Mexico’s relative ranking is essentially the same regardless of which of the two indices is used.
While its institutional scores are good, with strong investor protections and an easy path to
starting a business, Mexico loses ground on the infrastructure component. Its prospects for
economic growth based on our time series analysis paints a more complex picture. We found
that while mobile subscribers, scientific journal article publications, high tech exports and
hospitals precede GDP growth, patent applications, trademark applications, and international
migrant inflows are preceded by GDP growth. The policy implications of these findings are
difficult to pin down.
Yet, such topline statistics in Mexico never tell the whole story, as Mexico has always seemed to
fall short of economists’ hopes. In countries like Brazil and China, boosters look to recent and
upcoming Olympic Games as symbolic of their nation’s rise. Mexico City’s Olympic Games, in
1968, were not followed by the shared prosperity for which so many had hoped.
Mexico City
Mexico City is often described as underperforming compared to its potential. Among the
world’s largest cities, Mexico City has not forged an identity as a global economic or cultural
powerhouse rivaling New York to the north or São Paulo to the south.
With a population growth rate that was at once both fascinating and threatening, Mexico City
now appears to be on a more sustainable path. The legacy of that boom, however, is still
evident in the sprawling slums and walled compounds that contribute to the challenges to
efficiency and sustainability that the city still faces today.
33
30,000
Population (in millions)
Mexico City,
24,581
25,000
20,000
15,000
10,000
Guadalajara
5,000
Monterrey
—
Mexico City
Monterrey
Guadalajara
Bogotá
Buenos Aires
Rio de Janeiro
São Paulo
Lima
Source: United Nations, Department of Economic and Social Affairs, Population Division: World Urbanization
Prospects: The 2011 Revision
Institutions
Mexico City’s governance has been and remains an ongoing challenge. Instability and
corruption at the national level permeate the Distrito Federal (Federal District). The mayor of
Mexico City was not a popularly elected office until 1997. Before then, the head of state
appointed the mayor.xxix Such an arrangement was not amenable to the city’s booming
population and expansionary built environment. Not only were appointed officials
unresponsive to the needs of citizens, they were not given jurisdiction over the large area that
comprises greater Mexico City, which encompasses not just the Distrito Federal but portions of
several Mexican states.
The inability to implement many decisions at the regional level has contributed to the city’s
problems with housing, the environment, and transportation. All of the population growth in
Greater Mexico City, also known as the Valley of Mexico metropolitan area, occurred in the
suburbs of the city’s historic core, contributing to Mexico City’s challenging relationship with
sprawl.xxx
The democratization of the mayor’s office is not without its benefits, however. Recently,
Mexico City has been attempting to push a more proactive approach toward climate change.
The plan is the brainchild of current Mayor Marcelo Ebrard, whose technocratic decisionmaking has won international plaudits.xxxi His Plan Verde outlines an agenda that rests on
improving land conservation, air pollution, waste management, the water supply, and
transportation. While progress on these fronts is hard to measure, its scale extends beyond
Ebrard’s term in office, which perhaps suggests a future in which Mexico City’s institutions
more regularly and effectively plan for the long run on a regional basis.
34
Infrastructure
Mexico City is infamous for its automobile traffic congestion. Over twenty years ago, the city
implemented an anti-congestion regime, Hoy No Circula, to restrict automobiles from the road
each day based on the last number of the license plate.xxxii This policy was not very effective, as
the public developed workarounds, such as second cars or multiple license plates.xxxiii The city is
not completely without hard public transit infrastructure. The subway is not insubstantial (200
kilometers), but it is left wanting.xxxiv During the summer of 2012, a much needed new subway
line will extend service to the southwest of the city, where four-hour commutes will be
halved.xxxv
Map of Mexico City’s public transportation infrastructure
A major transit innovation in Mexico City is its bus rapid transit program, Metrobus, which is an
efficient bus service that emulates the prepayment and boarding norms of subways or trolleys.
The Metrobus won the 2009 Roy Family Award for Environmental Partnership from Harvard
University for creative public-private partnerships in service of environmental sustainability.
Servicing Mexico City with an estimated 450,000 passenger trips per day, Metrobus is replacing
minibuses from the road, thus reducing carbon emissions and facilitating faster commutes.xxxvi
Benito Juárez International Airport offers excellent downtown connectivity by fixed rail but
expansion options are limited as a result of the density of the surrounding communities. xxxvii
Still, Benito Juárez was the 30th busiest airport in the world in 2010.xxxviii
Talent
The National Autonomous University of Mexico, situated in Mexico City, is highly regarded and
ranks within the world’s top 200 universities.xxxix While it is the only Mexican university in the
top 500, it boasts 250,000 enrollees.
35
Mexico City markets itself as an emerging knowledge city, promoting its financial, healthcare,
telecommunications, and education sectors. Indeed, in finance, Mexico City boasts Latin
America’s second largest stock exchange behind Sao Paulo’s BM&F Bovespa and it is home to
every major bank’s regional headquarters.xl Still, Mexico lags behind in startups and many
sectors remain dominated by monopolies and cartels.
Mexico City maintains an international reputation for its edgy contemporary art scene. xli While
it currently gaining increased global attention, Mexico City has proven itself a durable producer
of world-class art for decades. Mexico City is also developing an international reputation for
world-class restaurants and as a testing ground for chefs working to develop an international
palate. xlii
Technology
Mexico’s struggles with pollution and waste are worrisome, but they could lead to innovation.
Recently, the city announced plans to harness energy from the methane gas emitted from the
closed Bordo Poiniente landfill. The government is leveraging investment in the hopes that
Mexico can develop expertise in the field, but the US already has over 500 similar projects
online or in the pipeline.xliii
In 2006, the municipality funded the Institute of Science and Technology to help entrepreneurs
in those fields navigate the patent process – especially Mexican nationals, who file patents at
anemic rates compared to foreign workers.xliv IBM has opened an Innovation Center in Mexico
City to build up the information technology sector by partnering with universities and existing
Mexican companies. Still, the tech sector is spread in other Mexico cities, particularly wealthy
Guadalajara or around the emerging Research and Technology Park, or PIIT, in Monterey.xlv One
issue for tech entrepreneurs is the cost of broadband, which is ten times higher than the OECD
average, perhaps as a result of the dominance of Mexican business magnate Carlos Slim’s
telecommunications empire.xlvi
Tolerance
Mexico City is among the more liberal and tolerant cities in the hemisphere. In 2009, it became
the first place in Mexico to recognize same-sex civil unions and has recently legalized gay
marriage .xlvii In Mexico at-large, the 2007 Pew Global Attitudes Survey found that 60 percent of
respondents agreed that homosexuality should be accepted, but it is easy to imagine that those
tolerance numbers are buoyed by liberal cities like Mexico City and Guadalajara and tempered
by rural and religiously conservative states.xlviiixlix
Once perceived as insulated from the country’s notorious drug cartels, Mexico City has seen an
increase in gruesome gang murders in recent years. The national death toll from the drug wars
is in the tens of thousands, has totally flummoxed the government, and substantially drains
economic momentum.l While the actual murder rate in Mexico City may be lower than in some
US cities, the perception that it is dangerous for foreigners has been difficult to change.li That
36
Mexico City has the highest rates of bribery of traffic police sends the wrong signal about the
metropolises’ attitude toward progress.lii
Outlook
Mexico’s connection to the United States cuts both ways. Access to remittances has certainly
helped the Mexican economy, and free trade has opened up the US as market for Mexican
manufactured goods. However, the US has also exported to Mexico some unfortunate habits.
One of these involves the suburban lifestyle preferences of Mexico City’s growing middle class.
The impulse to reduce automobile congestion with highways tends to exacerbate the incentive
to leave apartments in the city’s center in favor of less sustainable developments on the
outskirts.liii Even the new subway line opening in the summer of 2012 does not facilitate
movement within the city center, but rather extends the city’s boundaries to the southwest.
Mexico is second to the United States in another troubling category: obesity.liv
These challenges are interrelated. Mexico City is such a dominant economic engine for the
country at large that it can almost single-handedly determine the course of the country. The
extent to which Mexico City can reinvest in its urban core so as to make downtown living more
attractive, the better it will be able to manage the never-ending sprawl exacerbated by the
pesos spent by middle class Mexicans on cars and single-family home construction. The success
of bus-rapid-transit lines show that public transportation can be drastically improved without
the high capital barriers that characterize subways. If Mexico City can link public transportation
improvements to growth in centralized education and the development of finance corridors, it
can change its reputation from a city spreading out to a city building up.
37
VI. City-Level Analysis: Asia
China
Florida Index Rank: 51st out of 118
China’s rise to the international stage has driven by more than just its GDP. Based on our 3T2I
Index, China has been rewarded for the quality of its institutions and infrastructure. Our time
series analysis indicates that, in the case of China, literacy rate and number of patent
applications move ahead of GDP growth, while GDP moves ahead of TV penetration. This
implies that China should continue to invest in its education system, R&D capabilities, and hightech industries in order to generate continued growth.
Shanghai
Ranked first out of 200 global cities as the fastest growing in terms of income and job growth by
the Brookings Institution’s 2011 MetroMonitor report, Shanghai is the commercial and financial
center of China.lv Shanghai’s GDP of RMB 1.56 trillion (USD 247.5 billion) accounted for more
than five percent of China’s national GDP in 2010, an impressive figure considering Shanghai
only covers 0.06 percent of China’s land area and holds less than two percent of the country’s
population.lvi Shanghai is home to about 14 million “officially registered” residents as of 2011,
or approximately one percent of the population in China.lvii Including the long-term migrant
population, there could be anywhere between 22 and 26 million people living in Shanghai – a
number equivalent to Australia’s population.
Institutions
Shanghai is one of the four Province-Level Municipalities in China that are directly under the
administration of the Chinese central government, bestowing the city an administrative level
equal to that of a Chinese province. Like all state entities in China – from city governments to
public universities to state-owned enterprises – Shanghai has a dual-governance system ruled
by a mayor and a Communist Party chief, who possesses the higher authority. Because of
Shanghai’s strategic importance as one of China’s economic powerhouses, a leadership position
in Shanghai’s municipal government is typically a stepping-stone to move up the ranks to
Beijing. While accountability is very high, Shanghai must ultimately adhere to Beijing’s
directives.
As China’s financial center, Shanghai has successfully attracted more than 300 global
corporations to set up regional offices in the city. Multi-national corporations such as Siemens,
Johnson & Johnson, Citibank, HSBC, and Standard Chartered have all established their China
headquarters in Shanghai. It is estimated that more than 30 percent of commercial activities in
China are channeled through Shanghai and its adjacent areas.lviii Building itself to become an
Asian financial center to rival Tokyo and Hong Kong, Shanghai has encouraged the
38
establishment of a wide network of support institutions to facilitate business operations. More
than 800 law firms and 100 CPA firms have started offices in Shanghai to provide professional
assistance to investors.lix
Infrastructure
The development of Shanghai’s infrastructure over the past 20 years has been remarkable. In
both 2009 and 2010, Shanghai ranked as the world’s third leading destination city for foreign
inward investment by number of projects, coming in behind only London and Singapore. lx
Shanghai in 1990 (above) vs 2010 (below). Pudong, situated across the water, has become Shanghai’s prominent
business and financial center, housing many top corporate headquarters.
The 2010 World Expo was for Shanghai what the 2008 Olympics were for Beijing – its chance to
show its newly modernized face to the world. The 184-day event represented 192 countries
and hosted a total of 73 million visitors – or roughly 500,000 each day. Taking advantage of an
authoritative, but efficient government, Shanghai spent an estimated USD 60 billion to hold the
World Expo. In preparation of the event, the Shanghai municipal government tore down
buildings, relocated families and factories, paved roads, improved airports, added a high-speed
rail link to downtown, and constructed new metro lines.lxi
Shanghai suffers from chronic road congestion due to rapidly increasing population and a
growing number of automobile users. To attempt to deal with this congestion, the city has
rigorously developed its metro network in recent years. It built its first metro line in 1995, and
39
has since increased it to twelve lines. With 273 stations and over 420 kilometers of tracks, it is
one of the longest metro networks in the world. By 2010, Shanghai’s metro carried 7.5 million
passengers daily.lxii However, such rapid infrastructure development has also raised questions
about quality and safety, after two trains collided on Shanghai’s newest metro line in
September 2011, injuring more than 260 people.
The Port of Shanghai, which overtook Singapore in 2010 as the world’s busiest container port,
has established stable trading routes with more than 1,100 ports in over 200 countries and
regions. By 2000, the port at the Weigaoqiao Free Trade Zone in Shanghai’s Pudong district saw
a turnover of USD 6.5 billion.
Talent
In 2009, the OECD reported that Shanghai’s publically funded schools had the highest
educational quality in the world due to its students receiving top scores in science, math, and
reading on the OECD Program for International Student Assessment (PISA) test. However, as
education in China is generally centered on competitive examinations, students in Shanghai do
not have as much time to spend on athletics, music, and arts as their western counterparts.
40
As of 2010, Shanghai’s literacy rate stood at 94 percent. lxiii One major challenge for Shanghai
has been to educate children who have come to the city as a part of China’s massive ruralurban migration. Under the directive of China’s Ministry of Education, in 2006 the Shanghai
municipal government spent USD 500 million to create space for migrant children in state
schools. As a result, over 97 percent of Shanghai’s 420,000 migrant children are now enrolled in
nine years of compulsory education, and of these 70 percent attend school for free.lxiv In 2010,
22 percent of Shanghai’s population had a college degree, a 100 percent increase from 2000.lxv
With rapid economic growth and ever-increasing demand for talent, according to a 2011 Hays
survey, Shanghai still faces a severe shortage of skilled managers and engineers, particularly in
the oil, IT, education, new energy, and life science sectors.6 Shanghai is now competing with
regional power cities such as Hong Kong for talent. Offering higher salary incentives and senior
positions to executives, it is now narrowing the salary gaps with its regional competitor.
According to Hays, a CFO employed by a multinational company in Shanghai could earn up to
RMB20 million (USD 3.17 million) in 2012, a 25 percent increase from 2011; a comparable
position offers HKD 28 million (USD 3.60 million) in Hong Kong.
Technology
Piracy has been a major problem in China. However, the central government has began an
explicit policy to transition China into a domestic consumption oriented market, equipped with
a mature manufacturing sector capable of generating local know-how and value-added
products. As a result, there has been wide-scale development of high-tech parks in Shanghai.
By 2000, Shanghai’s high-tech parks occupied 100,000 square meters of land, housing 16
governmental and over 70 civil research institutions.lxvi The Shanghai municipal government has
also encouraged foreign firms to set up research centers in the city to facilitate knowledge
sharing. Dow Chemical, for instance, has extensive R&D facilities and over 500 scientists
working in Shanghai.lxvii
Government-run Jinqiao Export Processing Zone is also a significant base for Shanghai’s hightech industry, producing automobile parts, microelectronics, computer accessories,
telecommunication parts, and biotechnology products. In 2000, for example, Siemens set up a
USD 120 million, 55,000 square meter industrial park in the Export Processing Zone. By then,
Siemens had been manufacturing 10 million cell phones, with RMB 7.4 billion (USD 1.12 billion)
sales in China.lxviii
Shanghai’s main obstacle in the realm of technology is a slow and unreliable Internet
connection. While Internet usage is prevalent in Shanghai, the Chinese central government’s
Internet surveillance has blocked many websites, including Facebook and Twitter.
Tolerance
Shanghai is often cited as the most livable city in China for foreigners. Due to its coastal location
and good port infrastructure, Shanghai has historically been the center of commerce and trade,
6
A British recruiting firm, Hays surveyed 900 employers and data from 5000 vacancies for jobs in China.
41
functioning as a gateway to China for many centuries. As such, it has tended to be relatively
accepting towards foreign ideas and trends. The city’s restaurants feature a wide range of
international cuisines and English-language signs are prevalent. Skilled foreign personnel, such
as general managers and experts with specialized skills, are granted five-year residence permits
in Shanghai with relative ease.lxix
However, Shanghai’s attitude towards Chinese rural migrant workers is not as welcoming. It is
very difficult for migrant workers to become official residents of Shanghai and thus enjoy social
benefits such as medical care, education, and social welfare. Typically, official residencies are
obtained through entering a Shanghai university or via marriage. Since the mid-1990s, the
Shanghai City Council has introduced quotas for migrants, labeling most of them as “a floating
worker-peasant population” (liudong renkou) who cannot enjoy the city’s social benefits. lxx One
caveat, however, is that Shanghai welcomes skilled and qualified migrants, and issues them full
residence permits called juzhuzheng. In effect, Shanghai has created additional layers of
inequality through its migration policies, first discriminating its residents from migrants, then
distinguishing between skilled migrants and can make positive contributions to Shanghai’s
social and economic development, and those who are seen as a danger to public order.
The central government is starting to address this problem, as it constitutes a source of social
instability.lxxi Grievances have been mounting amongst the migrant workers, who have become
aggravated by the growing wealth gap in China. Despite Shanghai’s discriminatory policies
towards migrants, the city also faces a “serious aging problem” and low birth rates. lxxii In fact,
Xie Lingli, director of the Shanghai Municipal Population and Family Planning Commission has
stated that the “city’s future prosperity will have to depend largely on the (young) migrant
population”. lxxiii If this is the case, it may not be too long until Shanghai will have to offer more
concessions toward migrant workers.
With its cosmopolitan legacy, Shanghai is quite accepting of individuals of different ethnicities,
religions, and sexual orientations. Shanghai has a very homogenous population – close to 99
percent of Shanghai residents are of Han ethnicity. However, the city offers affirmative action
for ethnic minorities, such as extra points towards school entrance exams. While secularism
became the norm in China after the Cultural Revolution in 1960s, Shanghai is quite tolerant of
different religious practices. Today, temples, mosques, synagogues and churches are scattered
throughout the city. Attitudes toward homosexuality are also slowly improving in Shanghai. It is
no longer a taboo subject to discuss, and gay parks and bars are springing up in the city.
Shanghai even held a successful three-day “Sexpo” at the New International Exhibition Center
in March 2012, reflecting liberalizing social norms, particularly among the younger
generation.lxxiv
Outlook
As the world’s fastest growing city, Shanghai is already one of Asia’s mega metropolises. The
city’s goal of becoming Asia’s financial capital down the road, while feasible, will largely depend
on how fast the central government relaxes the financial regulatory environment, such as
capital controls. In the meantime, as its business climate is foreigner and investor friendly, its
42
social institutions are relatively efficient, and its infrastructure development continues to
accommodate its residents growing needs, Shanghai is certainly on the right track.
43
India
3T2I Index Rank: 62nd out of 118
India, the most populous country on earth with a population of 1.2 billion, is known for its
cultural and commercial wealth. Having thrown off the ‘Hindu rate of growth’, GDP in India
grew at a compound annual growth rate of 6.4 percent between 1991 and 2009. Key drivers of
this growth include economic liberalization and a growing urban middle class. On the 3T2I
Index, India received a slight boost due to our inclusion of measures of Institutions and
Infrastructure. The findings of our time series analysis indicate that GDP in India precedes
variables such as labor productivity, patent applications, parliament seats held by women and
air freight transportation.
Mumbai
There is no doubt that Mumbai is a growth engine for India.7 Although Mumbai only makes up
two percent of India’s population, Mumbai generates five percent of India's GDP, accounting
for 25 percent of the country’s industrial output and 70 percent of maritime trade. Mumbai is
also the most populous city in India, and the fourth most populous city in the world. Originally
home to fishing colonies, the city has grown to become the commercial and entertainment
capital of India and one of the top ten centers of global financial flows.
Institutions
Brihanmumbai Municipal Corporation (BMC, also known as Municipal Corporation of Greater
Mumbai) administers the majority of Mumbai’s 233 square miles (603 square kilometers) of
land area with a population of 20.5 million. The mayor of Mumbai, who is chosen through
indirect election by the councilors, has few executive powers. The real executive power rests
with the Municipal Commissioner of the BMC, who is appointed by the Maharashtra (state)
government. Below the Municipal Commissioner, Mumbai is divided into twenty-three
municipal wards, each overseen by an Assistant Municipal Commissioner.
However, the BMC is not fully empowered to produce and implement city level planning. The
state government has decision-making powers over metropolitan and urban local-body level
issues such as urban planning, land use, and development controls.lxxv Further, critical aspects
of infrastructure are completely controlled by the state government via the Mumbai
Metropolitan Region Development Authority (MMRDA).lxxvi
The interaction between citizens and the Mumbai government is poor. Citizens view
government departments as poorly structured and without clear roles, resulting in interaction
with multiple departments. Further, lack of defined procedures creates “friction” costs, with
7
Bombay was renamed to Mumbai in 1996.
44
individually negotiated settlements (often incorporating corruption and bribery) for routine
transactions.
Infrastructure
Mumbai’s infrastructure is strained. This is evidenced by an overwhelming number of slums,
frequent flooding during monsoons, uncollected garbage, over-burdened public transportation
systems, poor air quality, and lack of public recreational parks and promenades. The MMRDA
estimates that USD 22.5 billion of funding is required to implement key infrastructure projects.
To secure it, the MMRDA is seeking foreign investment by way of public-privatepartnerships.lxxvii
Public transport systems in Mumbai include the Mumbai Suburban Railway, the Brihanmumbai
Electric Supply and Transport (BEST) buses, black-and-yellow metered taxis, auto rickshaws, and
ferries. Suburban railway and BEST bus services form the lifeline for many in the city,
accounting for about 88 percent of passenger traffic in 2008. Trains are usually filled to three
times the designed capacity during peak hours. Suburban residents in particular spend
significant periods of time travelling south to the main commercial district.
Public transportation vehicles in Mumbai are often filled to over their designated capacity.
There is a wide disparity in Mumbai’s housing. Wealthy Mumbai residents (movie stars,
industrialists, expatriates) live in spacious apartments with ocean views. Middle-class Mumbai
residents experience cramped and relatively expensive housing. Mumbai’s poor live in slums —
Dharavi is the second largest slum in Asia, with a population exceeding 1 million.lxxviii In fact, 60
percent of Mumbai’s population lives in slums.lxxix Efforts to relocate slums (mainly northwards)
to reutilize the land for affordable housing have led to political issues (e.g., voter support) and,
worse, these efforts are subverted by property developers and wealthy clients.lxxx
45
IMAGE: Worli (Mumbai) slums surrounded by high-rise buildings
Mumbai has not stood still, though. Innovations to improve existing rail capacity (more cars per
train and doubling of the number of trains in the system), completion of the 8-lane BandraWorli Sea Link Bridge, development of flyovers, and the creation of a new planned-city (NaviMumbai) are all initiatives that the government has taken to ease congestion.
Talent
Mumbai is home to India’s most important institutions, which prepares and attracts talent from
all over India. First, important financial institutions such as the Reserve Bank of India, the
Bombay Stock Exchange, and the National Stock Exchange of India are based in Mumbai.
Second, corporate headquarters of numerous Indian corporations (Reliance, Tata) and
multinational corporations – including 5 Fortune 500 companies – are based there. Third,
India's premier scientific and nuclear institutes (BARC, NPCL, IREL, TIFR, AERB, AECI, the
Department of Atomic Energy) are based in the city. Fourth, it is home to India's Bollywood and
Marathi film and television industry. Fifth, prominent institutions of higher education such as
the Indian Institute of Technology (IIT), the Veermata Jijabai Technological Institute, and the
University Institute of Chemical Technology are based in Mumbai. Last, the city is host to
sporting institutions such as the Board of Control for Cricket in India, and the Indian Premier
League (IPL). A noteworthy omission is high tech companies, which are based in the Bangalore
(the ‘Silicon Valley of India’).
Mumbai's culture is a blend of traditional festivals, food, music and theatre. The city offers a
cosmopolitan and diverse lifestyle with a variety of food, entertainment and nightlife, which are
available in a form and abundance that are comparable to those in other world capitals.
46
Mumbai celebrates Indian and Western holidays. It is also home to the largest number of
Cinemas in India (playing Bollywood and Hollywood movies), Filmfare Awards, museums, and
art galleries (e.g., Jehangir Art Gallery, National Gallery of Modern Art).
Technology
With 90 percent mobile tele-density, Mumbai has the second highest mobile tele-density
(behind Chennai) of any city in India.lxxxi Both GSM and CDMA services are available through
providers such as Vodafone, Airtel, and Reliance Communications. Mumbai has the highest
number of Internet users in India, with 14.3 million users.lxxxii
Mumbai’s educational institutions (IIT, VJTI, and UICT, mentioned above) all conduct research.
In addition, Mumbai is home to two prominent research institutions: the Tata Institute of
Fundamental Research, which is dedicated to mathematics and science research, and the
Bhabha Atomic Research Centre, which is a nuclear research facility.
Tolerance
In Mumbai, the sex ratio is 848 females per 1,000 males. This number is below the national
average of 940 females per 1,000 males, but can be somewhat explained by a higher number of
male migrants who move to Mumbai for work.lxxxiii
From a religious perspective, Mumbai is more mixed than the rest of India. Hindus are the
largest religious group, making 67 percent of Mumbai’s population. Other religious groups
include Muslims (19 percent), Buddhists (5 percent), Jains (4 percent), Christians (4 percent) as
well as Sikhs, Jews, and Parsis. However, there have been several incidents highlighting tension
between Hindus and Muslims – including 14 terrorist attacks on Mumbai’s public
transportation network.
An underlying source of intolerance in India has been toward migrants, particularly low-skilled
migrants. The main fear has been marginalization of the Marathi. In the 1960s, Shiv Sena, a
right-wing political party, sought to expel migrants from North and South India. More recently,
between 1991 and 2001, 1.2 million people migrated to Mumbai. Tensions continue to this day
after the passage of a controversial proposal in 2008, mandating that all administrative
businesses in the BMC be conducted in Marathi only (previously, it was conducted in both
Marathi and English).lxxxiv
Outlook
Mumbai’s 2025 vision is to become a “world class city”, “achieve economic growth of 8-10
percent” and “deliver above average quality life.” Mumbai is also forecasted to become the
world’s second largest city by 2020.lxxxv To reconcile its vision with continued population
growth, Mumbai will no doubt need to solve its highly visible infrastructure problems. However,
47
the less visible problems related to institutions and tolerance may present an even greater
challenge.
48
Indonesia
The 1997 Asian financial crisis brought dramatic political changes, leading to Indonesia’s
marked transformation from a tightly controlled authoritarian state to the poster child of
democracy – all while being the world’s most populous Muslim country. Although the crisis
devastated its economy, Indonesia has since rebounded. In recent years, Indonesia has been
consistently recognized as an up-and-coming economic superstar.8 Due to its relative lack of
integration with the world economy, Indonesia also emerged relatively unscathed from the
2008 financial crisis. While the world has great expectations for Indonesia, the country is
plagued with widespread corruption, inadequate infrastructure, and an uncompetitive
workforce – reflected in Indonesia’s weaker performance on the 3T2I Index compared to the
Florida Index. Such factors threaten to derail the country’s progress thus far.
Jakarta
There is merit to a greater focus on a country-level analysis when discussing Jakarta, as it helps
to put the city’s problems in a national context. Unlike some major cities in other countries,
Jakarta’s identity is not quite separate from Indonesia as a whole. For instance, while there is a
lack of Jakarta-specific data for the “Technology” and “Tolerance” sections of this report, a
country-level assessment of these pillars typically reflects the situation in Jakarta.
The center of Indonesia’s political and economic gravity, but only contributing to 10 percent of
the country’s 2008 GDP, Jakarta is currently the country’s only realistic hope at spearheading
the level of economic growth that is needed to propel Indonesia from a low-income to an
upper-middle income country.lxxxvi The foremost obstacle to economic development and growth
in Jakarta is the absence of adequate infrastructure. Rapid urbanization has magnified its
infrastructure shortcomings. As with many cities in developing economies, corruption is
endemic to Jakarta. In the wake of recent high-profile corruption busts, heightened scrutiny of
graft has resulted in chronic under-spending. This is further exacerbated by bureaucratic
bottlenecks, such as the difficulty of buying land.lxxxvii In turn, these conditions have become
real disincentives for businesses to either invest in or locate themselves in Jakarta.
Institutions
The lack of coordination among government agencies is one of the major obstacles to Jakarta’s
development. Not quite a city, Jakarta is an Indonesian province that is also designated as the
country’s capital. A governor oversees Jakarta, and the province is divided into five sub-regions,
8
It is among Goldman Sachs’ Next-11, Pricewaterhouse Coopers’ Emerging-7, The Economist’s CIVETS, and
Citigroup’s 3G. It is currently the only Southeast Asian country to be included in the G-20. Inflation in Indonesia has
dramatically declined from a high of 77 percent in 1998 to under five percent in 2011, and its debt-to-GDP ratio
8
has similarly improved from 100.3 percent in 2000 to 25 percent in 2011.
49
each with its own administrative system and mayor. Following countrywide political reforms in
1999 and subsequent sweeping political and fiscal decentralization, the Indonesian government
devolved real power and resources to the country’s hundreds of districts and
municipalities.lxxxviii The resulting disorganization among government agencies is no clearer than
in Jakarta itself. While the regional government is expected to implement the central
government’s plans for the province, it relies on the latter for its budgetary spending. The other
challenge resulting from the lack of coordination is the poor availability and the almost nonexistent sharing of data for policy planning.lxxxix
Infrastructure
Jakarta’s transportation infrastructure – including roads, airports and seaports – has
consistently failed to meet the city’s demands. Traffic congestion has significantly worsened as
the increase in vehicles has outpaced the development of new roads. Under the World Bank’s
“Transportation Business-As-Usual” scenario for Jakarta, total gridlock in the city is projected to
occur as early as 2016.xc Air traffic has risen in tandem with global demand and although
additional airports have been constructed, they are deemed to be “unfit for purpose”.xci Worse
still, Indonesia’s air safety record is unnerving. From 2009 to 2011 alone, there were 23
airplane-related accidents involving Indonesian airlines, and the European Union has also
banned several Indonesian airlines from its airspace. xciixciii Jakarta’s Tanjung Priok port is
essential for international trade connectivity and is a crucial gateway for domestic trade and
transportation, especially for an archipelagic nation of 17,000 islands. However, inefficient
bureaucracy, limited capacity, congestion, and low port productivity hamper both exports and
domestic distribution of products.xciv
The lack of spatial planning and limited availability of land due to ownership constraints have
put pressure on the city’s remaining green spaces. Lack of piped water provision has led to ad
hoc groundwater extraction and subsequent land subsidence; this has been further
exacerbated by topographical constraints – namely, that 40 percent of Jakarta is below sea
level. In addition, the inadequate provision of housing for the urban poor, has contributed to
pollution and sewage clogging throughout the province. xcv These factors have worsened
Jakarta’s perennial flooding woes and culminated in tremendous social and economic costs.
Flooding in Jakarta’s Thamrin Street."
xcvi
50
Talent
Presently, education in Indonesia is still not up to par. Indonesia spends approximately 16.5
percent of its budget on education. While spending has generally increased since the 1990s, it is
still relatively low compared to other countries in the region.xcvii There are also structural
inconsistencies in the central-local spending composition. The central government dominates
the investment budget, while local governments provide the bulk of education financing, which
is also entirely devoted to teacher salaries and based on salary scales fixed by the central
government.xcviii While enrollment rates have increased at the tertiary level, Indonesia still lags
behind both key ASEAN states and all the BRIC countries in access to high-quality education.xcix
Jakarta is home to only 14 of Indonesia’s 2,000 plus universities, including the country’s top
university – Universitas Indonesia, which ranked a mere 50th in the 2011 US News and World
Report’s rankings for the best Asian universities.c Access to education aside, Indonesia also
faces struggles to improve the quality of its current higher education, which is needed to move
up the value-added chain.
Technology
Indonesia’s total expenditure on R&D was 0.08 percent of GDP in 2009. In addition to being
extremely low, the majority of R&D has been undertaken by public R&D institutions and
universities. ci Within the private sector, the manufacturing sector carries out very little
research, with less than five percent of manufacturing companies reported as having an R&D
center.cii Not surprisingly, Indonesia ranks especially low among comparable countries in terms
of traditional R&D output such as scientific publications, fees received from royalties and
licenses, and patents granted by the United States Patent and Trademark Office. ciii
Source: Figures 33 and 35: World Bank Indonesia Economic Quarterly – Enhancing Preparedness, Ensuring
Resilience. Rep. 2011. Print.
Mobile phone penetration in Indonesia, at 110 percent, is the largest in Southeast Asia. civ
However, Internet penetration is the lowest in the region.cv Due to limited availability of highspeed broadband, most Indonesians rely on Internet-capable handheld devices to access the
Internet. The growth of such access is expected to increase by 17 percent by mid-2012.cvi
51
Tolerance
Indonesia’s voting system is one of the most democratic in the world, and is often hailed as a
key example of successful Islamic democracy. One of the major political changes that took place
after 1997 was constitutional reform that formalized a presidential system and established a
one-man, one-vote process.cvii Press freedom has also increased with Indonesia’s evolving
democratization. Although it was given a “Partly Free” status in Freedom House’s 2011
Freedom of the Press Index, this is an improvement from the period before 1997, where media
was tightly controlled by the state and restricted by law.cviii
While homosexuality is not illegal, in a country where 88 percent of the population is Muslim,
there is little social acceptance for homosexuals. In a 2007 Gallup survey on the perceived
acceptance of homosexuals, 71 percent of Indonesian residents indicated that the city or area
in which they lived in was not a good place for homosexuals.cix In Jakarta, all LGBT people are
legally considered mentally handicapped, and as such are not protected by law.cx
A survey jointly conducted by Indonesia’s People’s Consultative Assembly and Jakarta’s Syariff
Hidayatullah University found that 95.4 percent of 2,500 respondents believed that religious
freedom should be respected. Tolerance appears to only exist in theory, however, as 46 percent
of those respondents also indicated that they would not accept an inter-religious marriage
among their immediate family members.cxi Indonesia has also seen an increase in the intensity
and frequency of ethnic and religious violence, and the police have been slow to act or
unwilling to step in at all.cxii This is in stark contrast to Indonesia’s founding ideology of
Pancasila, which stipulates equality for all religions.
Outlook
Endowed with abundant natural resources, a large domestic market, and a young workforce,
Indonesia has the potential to become an economic powerhouse in Southeast Asia. In spite of
the world’s high hopes, Indonesia has many pressing issues to address in the areas of
infrastructure, education, and managing corruption. Jakarta may be Indonesia’s economic hub,
but it is nowhere near the level of readiness required for it to helm the country’s development
path. Jakarta has to address severe infrastructure shortages, develop a skilled workforce,
combat corruption, and enhance coordination among its government agencies before it can
attain the degree of competitiveness that is necessary to rival other emerging markets
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Malaysia
Malaysia’s economic story is one of rapid progression from a production-based economy of raw
materials in the 1970s to a multi-sector, highly open and upper-middle income economy by the
late-1980s. However, since the 1997 Asian financial crisis, the country has hit a plateau.
Malaysia’s inability to reproduce the levels of economic development and success of the past is
due in large part to a sharp decline in private investment that never rebounded after the crisis,
an uncompetitive workforce burdened by high levels of brain drain, and non-inclusive national
growth policies. The latter two problems are captured by our Talent and Tolerance metrics,
respectively, and reflected in Malaysia’s worse performance on the Florida Index relative to the
3T2I Index.
Kuala Lumpur
The driving force of the Malaysian economic engine is the country’s primary city, Kuala Lumpur.
Its GDP is 1.6-1.8 times higher and its population four times greater than Malaysia’s secondary
cities, Penang and Johor.cxiii As the country’s financial, educational and technological hub, Kuala
Lumpur is pivotal to Malaysia’s national planning strategies. In particular, the government’s
“Vision 2020” targets Malaysia’s attainment of developed-nation status by 2020, and the “New
Economic Model” aims at developing an inclusive and sustainable high-income economy. Aside
from managing city-level issues such as congestion, Kuala Lumpur’s ability to shoulder the
responsibility of achieving such weighty economic goals is also constrained by problems that
have to be addressed at the national level – namely enlarging its skilled workforce and
reversing its brain drain.
Institutions
Since Kuala Lumpur was awarded city status in 1972, its local administration has been carried
out by the Kuala Lumpur City Hall, headed by the city’s mayor. Kuala Lumpur City Hall’s
responsibilities include management of the city’s public health and sanitation, waste removal
and management, town planning, and general maintenance of urban infrastructure. Strategic
socio-economic planning for Kuala Lumpur is instead conducted at the national level.
Malaysia’s “New Economic Model” has designated the Greater Kuala Lumpur/Klang Valley
region as a National Key Economic Area, with the objective to “simultaneously achieving top-20
economic growth and being among the global top-20 most livable cities by 2020.”cxiv The goal is
to transform Kuala Lumpur into an innovative city in terms of its key industries and economic
activities. Specific targets include increasing per capita Gross National Income in the Greater
Kuala Lumpur/Klang Valley from RM 40,000 (USD 13,000) to RM 70,000 (USD 23,000) per year,
growing the region’s population from six to ten million, and expanding the foreign talent base
from nine percent to 20 percent of the population.cxv To achieve these goals, the federal
government targeted the following Entry-Point Projects: (1) attract 100 multinationals from
53
priority sectors, (2) attract the right mix of internal and external talent, (3) connect to Singapore
via a high-speed rail system, and (4) build an integrated urban mass rapid transit system.cxvi
Aside from featuring prominently in national growth strategies, Kuala Lumpur also has its own
city-specific plan – Kuala Lumpur Structure Plan 2020. The goals of this plan are to: (1) enhance
Kuala Lumpur’s role as an international commercial and financial center, (2) create an efficient
and equitable city structure, (3) enhance the living environment, (4) create a distinctive city
identity and image, and (5) have efficient and effective governance.cxvii Malaysia’s multi-tier
plan for Kuala Lumpur underscores the economic importance of the city for the country’s
growth and also sheds some light on the extent to which Malaysia views Kuala Lumpur as its
ticket out of the current middle-income trap.
Infrastructure
The Kuala Lumpur International Airport (KLIA) is an important aviation hub in Southeast Asia,
and the city’s Port Klang ranks among the top 20 busiest container ports in the world. However,
Kuala Lumpur’s public transportation situation is dismal. Public transportation is key to the
discussion on Kuala Lumpur’s transportation infrastructure as adequate and reliable urban
transport infrastructure allows more city residents to access city amenities, and facilitates the
delivery of services and goods to marketscxviii.
Kuala Lumpur’s public transit mode share has declined from 35 percent in 1985 to 19 percent in
1997 and further to 12 percent in 2009.cxix This major shift away from public transportation is
largely due to the inefficient and insufficient provision of public transportation. Moreover,
rising individual wealth led to an increase in car ownership, which added pressure on the road
network and exacerbated traffic congestion.cxx Compared to public-transport oriented cities
such as Singapore and Hong Kong, which have more than 40 kilometers of rail per million
people, the Greater Kuala Lumpur/Klang Valley has a severe shortage of rail-based public
transport coverage, with less than 20 kilometers of rail per million population.cxxi Such physical
shortage is compounded by overlap and duplication in the functions of the various agencies
that are responsible for Kuala Lumpur’s transportation network, which make it difficult to
formulate consistent policies.cxxii For example, new public transportation systems are often
isolated from existing infrastructure, resulting in systems that are not integrated.cxxiii
Talent
Malaysia faces complex issues vis-à-vis the development and retention of human capital. Thus,
it is necessary to examine the impact of national education-related policies on both the quality
and the quantity of the Malaysian labor force. Malaysian students’ performance is less
competitive than the performance of their regional counterparts. Furthermore, the country
faces a severe brain drain of skilled workers. One out of every ten skilled Malaysians – double
the world average – chooses to leave their native country.cxxiv The quality of Malaysia’s human
capital is further lowered by the lack of compensating inflows of migrants, as migrants in
Malaysia are mostly low skilled. Only 40 percent of employed migrants have received secondary
54
education, and approximately ten percent have obtained tertiary education.cxxv These factors
culminate in an uncompetitive Malaysian workforce with a very narrow skill base.
High caliber universities are an essential feature of a smart city, as they produce and demand
highly skilled individuals. Kuala Lumpur is home to six large public universities and a number of
private ones. Malaysia’s top university – University of Malaya – is connected to central Kuala
Lumpur through a network of highways and light rail transit. However, the university’s
sprawling campus also reflects the broader sprawl in Kuala Lumpur. It is not as closely
integrated with the city center as other urban campuses, which hampers the city’s access to
university amenities and knowledge exchanges.cxxvi
Additionally, although Malaysia spends slightly more than most countries on its university
students, Malaysian universities still perform relatively poorly in global rankings, with only four
universities placed in a ranking of the top 400 universities worldwide; of these, Kuala Lumpur’s
only representation is with the University of Malaya.cxxvii There is also a mismatch between the
skills produced by Malaysia’s universities and the skills demanded by the labor market. Over 70
percent of the firms in the manufacturing and services sectors indicated that applicants’ lack of
requisite technical and professional skills is one of the top three most important causes of job
vacancies.cxxviii
Technology
The heart of Malaysia’s national information and communication technology initiative – the
Multimedia Super Corridor (MSC) – is located in the Greater Kuala Lumpur/Klang Valley area.
Modeled after Silicon Valley, the establishment of MSC Malaysia in 1996 was intended to
attract foreign companies to locate their businesses in one of the MSC’s five Cybercities
through tax breaks, advanced telecommunications infrastructure, world-class regulatory
frameworks, and its proximity to the KLIA.
Broadband penetration in Kuala Lumpur has accelerated rapidly. At the end of 2010, each
household had an average of 1.2 broadband subscriptions compared to 0.9 at the end of
2009.cxxix The cost of broadband is relatively competitive with European and Southeast Asian
economies, but network speeds are still lagging. To address this issue, Malaysia has
implemented the National Broadband Rollout, which focuses on deploying greater broadband
speeds to the key economic agglomerations of Kuala Lumpur, Penang and Johor.cxxx
Tolerance
Economic incentives and social disincentives are the fundamental push-pull factors for brain
drain in Malaysia. World Bank surveys of the Malaysian diaspora reported that the lack of depth
and breadth of the job market, particularly in knowledge- and skill-intensive sectors, was both
an incentive to emigrate and a disincentive to return.cxxxi The Malaysian diaspora is primarily
ethnically Chinese and it is mostly concentrated in Singapore and OECD countries. That the
Malaysian diaspora is geographically and ethnically skewed indicates not only the
unattractiveness of career prospects in Malaysia, but more so of the deep social injustice felt
55
within non- Malay communities in Malaysia. Ethnic Malays or Bumiputeras, have long benefited
from race-based socio-economic policies at the expense of non-Bumiputeras. These policies
have favored Bumiputeras in areas of education by providing access to scholarships and higher
education. They have also favored them in business by allowing only Bumiputera-owned
companies to operate in certain industries. Due to this non-inclusive growth, Malaysia’s human
capital has been depleted and the country’s economic competitiveness is at stake.
Sources: Figure 83: World Bank Malaysia Economic Monitor - Smart Cities. Rep. 2011. Print. Figure 3.32: World
Bank Malaysia Economic Monitor – Brain Drain. Rep. 2011. Print.
Societal attitudes toward homosexuality and gays remain conservative and are unlikely to
liberalize in the near future. A predominantly Muslim nation, homosexuality is outlawed in
Malaysia. Sodomy remains a crime in the country – punishable by as much as 20 years in prison
– though it is rarely prosecuted.cxxxii In a 2007 Gallup survey on the perceived acceptance of
homosexuals, 74 percent of Malaysian residents indicated that the city or area in which they
lived in was not a good place for homosexuals.cxxxiii More recently in 2011, Malaysian authorities
blocked an annual festival aimed at promoting greater tolerance for homosexuals on grounds
that the event threatened national security.cxxxiv
Malaysian mainstream media has been largely servile to the government and its censorship
rules. However, in August 2011, Malaysian Prime Minister Najib Razak noted that in today’s
borderless, interconnected world, censoring newspapers and magazines was increasing
outdated, ineffective, and unjustifiable, and announced a review of print censorship laws. cxxxv It
is unclear whether this will actually result in a genuine attempt at liberalizing the press or if it
was just a stop-gap measure in response to the public’s outcry over the government’s July 2011
crackdown on civic group demonstrations calling for electoral reform.
Outlook
Entrusted with the onerous task of leading Malaysia out of the middle-income trap and
leapfrogging the country into developed-nation status by 2020, Kuala Lumpur’s ability to do so
56
is complicated by several factors. Human capital development and retention is at the heart of
Malaysia’s economic woes, but its deep-rooted, ethnically divisive policies are also major
obstacles on its path to further growth. However, there might be a glimmer of hope. Najib
recently commented that Malaysia’s post-independence affirmative-action policies were
anachronistic and should be dismantled slowly but surely. cxxxvi The establishment’s public
recognition of the increasing irrelevance and detrimental impact of such policies could signal
that the winds of changes in Malaysia may be strengthening.
Nonetheless, whether reform of such magnitude will take place in the near future remains to
be seen. On the issue of Bumiputera policies, Najib faces fierce opposition from his political
party, the United Malays National Organization (UMNO), which was founded specifically to
protect Malay privileges and has ruled Malaysia since independence. Having come to power in
2009 through an internal coup and via elections, Najib lacks the electoral legitimacy and
political clout within UMNO to affect momentous changes to policies that have been central to
Malaysian history.
57
VII. City-Level Analysis: Middle East
Egypt
Egypt is in a time of enormous upheaval. The ouster of Hosni Mubarak in February 2011 and
the subsequent rule of an interim military government leave the country in a precarious state
between total disorder and the path to becoming a modern democracy. Egypt’s GDP per capita
masks tremendous income inequality, and the difference between its 3T2I Index and Florida
Index ranks is due in large part to how abysmally Egypt performs in the tolerance category,
where variables such as press freedom and political rights are measured. Additionally, from our
time series analysis, we see that variables such as internet penetration and female labor
participation have preceded changes in the country’s GDP. This suggests that the Egyptian
government may do well to reconsider restrictive policy decisions in these areas.
Cairo
Any analysis of the city of Cairo must be humble in its predictions. The revolution that took
place in the spring of 2011 had its focal point in Cairo’s Tahrir Square, and its implications for
the city’s governance and future prospects are at best unclear. Nevertheless, the analysis
presented in this report reflects an understanding of Cairo’s fundamental characteristics, some
of which have remained unaltered by the revolution.
Cairo is unquestionably the center of gravity of the Egyptian state. As of 2011, Greater Cairo
was home to 17.5 million people, with a density of 25,600 per square mile.cxxxvii Over 20 percent
of all Egyptians live in Greater Cairo, which, in 2000, accounted for 43 percent of public sector
jobs, 40 percent of private sector jobs, and 49 percent of industrial jobs.cxxxviii According to a
2008 estimate by Pricewaterhouse Coopers, Greater Cairo contributes 35 percent of total
Egyptian GDP.cxxxix9
Institutions
The greatest challenge facing Cairo’s metropolitan institutions is the centralization of power at
the national level. The municipal councils and elected leaders in the various Greater Cairo
jurisdictions have limited ability to raise funds and enact policy. As a result, most major urban
planning decisions are made at the national level, which is less sensitive to local needs and
conditions.cxl
If the centralization of power in the hands of the national level is the greatest challenge for
Cairo’s institutions, then the lack of power overall is the second greatest challenge. Many places
9
This estimate was made using PWC’s city GDP estimate and comparing it to that year’s national GDP.
58
within Greater Cairo suffer from neglect and disorder. A telling statistic is that an estimated 65
percent of greater Cairo lives in informal housing areas. cxli Almost two thirds of Cairo residents
live in housing that is either illegal or extralegal, meaning that their participation in the formal
economy is extremely difficult.
These were the challenges facing Cairo’s institutions before the end of the Mubarak regime,
and these are the challenges that remain for the new government. To the extent that power is
decentralized and that the vast swaths of the population are legitimized, the new government
has an opportunity to improve the governance and institutional health of Cairo.
Infrastructure
In large part due to the institutional disorder facing Cairo’s metropolitan government, Cairo’s
infrastructure is often described as chaotic. Traffic congestion is a highly visible reminder of the
state of infrastructure. The Cairo police estimate that, daily, 2 million cars flood a system
designed for 500 thousand vehicles.cxlii The Cairo metro currently has two full lines and a third
partially completed line, which together carry nearly four million passengers per day. Due to a
rapidly increasing population, the metro system severely underprovides the public transport
demand, and has led to an increase in informal public transportation, mainly shared taxis. cxliii
Plans to increase the capacity of the metro system were made during the Mubarak regime, but
the prospects for completion of the third metro line are unknowable during this period of
transition.
Another major feature of the city’s infrastructure is the physical layout of its various
communities. As mentioned earlier, nearly two-thirds of the population lives in informal
housing. Some well-off proportion of the remaining third lives in gated communities that were
the creation of the “conquest of the desert” ethos in urban planning during the 1970s.cxliv These
enclaves divide up the city and access to public resources such as parks, hospitals, public safety
and universities. The map below vividly displays the “success” of this urban planning goal, as
well as the extent of the informal settlements in Greater Cairo. cxlv
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Talent
The outlook for Egypt’s pool of talented individuals is extremely poor. According to the World
Economic Forum’s 2011-2012 Global Competitiveness report, Egypt ranks 141th out of 142 on
labor market efficiency and 107th out of 142 on higher education and training.cxlvi The main
story for Egypt is not principally one of brain drain, but one of brain waste: the best and
brightest are not being educated either because they do not have access to quality education or
because the labor market as it stands in Egypt does not reward educational investments.
Cairo itself is home to nearly all of Egypt’s higher learning institutions, many of them foreign
language institutions such as the American University in Cairo (AUC). The AUC, however,
presents a bleak picture of educational access in Cairo. The University moved from its longtime
home near Tahrir Square in downtown Cairo to the edge of the City in a new-construction burg
in the desert, physically and intellectually isolated from the rest of Cairo.
To the extent that the Creative Capital Theory applies to the Cairo context, the lack of a diverse
talent pool coupled with a poor institutional framework suggests that a vibrant knowledge
economy is a far way off in Cairo.
Technology
The revolution in Cairo was well known for its use of mobile phones and social networking to
mobilize support. Mobile phone penetration is high, with 87 mobile subscriptions per 100
people, though Internet access is relatively low, at 24 percent.cxlvii According to a pre-revolution
report from Freedom House, this low level of internet access is likely due to a combination of
three factors: illiteracy, computer illiteracy, and prohibitively high prices of computers for large
portions of the population.cxlviii
The role of technology in Richard Florida’s Creative Capital Theory is to facilitate the exchange
of ideas. Excessive government monitoring and censoring of communications on the Internet
was a flash point in the spring of 2011. It remains to be seen if the new Egyptian government
can expand freedom of expression beyond pre-2011 levels.
Tolerance
The February 2012 soccer riot in Port Said that left at least 74 dead is a grim reminder of the
divisions that remain within Egyptian society post-revolution. Much of the populace’s anger is
directed toward the interim military government, and a major fault line in the upcoming
elections will be the extent to which Islam should be applied in political life. cxlix
Egypt’s social values are likely to be in flux as the country adjusts to the post-Mubarak era.
Nevertheless, by some measures of tolerance of heterodox ideas or lifestyles, Egypt is clearly
far behind. For example, a 2007 Pew Research survey found that only one percent of
respondents said that homosexuality was a way of life that society should accept, while 95
percent said that it should not. This extreme response was among the most negative towards
gays and lesbians in the survey.
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Outlook
As Egypt recovers from the revolution, the near-term prospects for Cairo seem rather bleak.
Institutionally, Cairo needs to wrest local control from the national authorities and find a way to
normalize the housing and economic activity of 65 percent of its citizens. Major infrastructure
projects, such as linking the airport to the metro system, need to be carried out in an efficient
and transparent manner. Internet freedom and access must be expanded. Finally, tolerance
towards a diversity of religions, backgrounds, and points of view needs to be instilled as a
national value. If these five pillars are indeed true drivers of economic and social growth, they
predict a challenging coming decade for Cairo.
61
Israel
GDP per Capita Rank: 23rd out of 118
Israel scored well on both the 3T2I and Florida Indices. This is not surprising given that Israel’s
economy is more established than the other countries explored in this report. In our time series
analysis, we see that variables such as international migrants and female labor participation
have preceded GDP growth in Israel. Such results are also somewhat expected, given the
nation’s reputation for tolerance. While the country’s institutions and infrastructure perform
well relative to the other emerging market countries discussed, improvements to alleviate
traffic congestion will help Israel continue to rank highly on both indices.
Tel-Aviv
There is a buzz around the state of Israel’s creative economy. Recent books and articles have
emerged calling Israel a “start-up nation” that represents the greatest concentration of
innovation and entrepreneurship in the world today.cl In particular, American investors are
looking to Israel to understand from where the country’s entrepreneurial energy emanates, and
how other countries can generate some of their own.cli Tel Aviv is the business and commercial
center of Israel, and thus the engine that drives its national successes.
Tel Aviv’s population is about 404 thousand, and it is spread over 20 square miles, yielding a
population density of about 20,000 people per square mile.clii While Tel Aviv is the smallest
district in the State of Israel, taking up less than one percent of the total land area, it houses
about 17 percent of Israel’s population.cliii As international tourism in the city rises to more
than two million tourists annually, new boutique hotels and a hip culinary scene have emerged
making Tel Aviv a mix of contemporary and classic culture.cliv
Institutions
When Israel was founded in 1948, relations between Tel Aviv (a primarily Jewish township) and
Yafo (a primarily Arab township) were hostile, and grew more so as the Jewish hold on the
country grew stronger. After a violent clash, Yafo surrendered to Tel Aviv and Tel Aviv-Yafo was
established.clv Yafo takes up about 12 percent of Tel Aviv and houses some 45,000 residents.clvi
Yafo has historically been underdeveloped and lacked the same entrepreneurial spirit found in
Tel Aviv proper. Current mayor Ron Huldai has initiated a policy of rehabilitation and
development aiming to develop tourism, rebuild infrastructure, and rehabilitate the Yafo port
as a cultural center.
The joint municipality of Tel Aviv-Yafo is unified under one government and is run by a 31person city council, members of which are elected every five years in direct elections. The
municipality has governmental and administrative powers and is responsible for the provision
of services to its constituencies. City council members or the mayor may submit motions for
new policies, which must then be approved by a majority of the council, the mayor, and the
62
Ministry related to the policy.clvii The mayor can reverse motions approved by the city council.
Huldai is a strong mayor, committed to increasing social welfare services, culture, and urban
planning. He is directly concerned with, and has been criticized for, attempts to move Tel Aviv
away from religious policies (e.g., the closing of the subways on Sabbath) towards more secular
policies that promote innovation and creativity.
In 2005, the Tel Aviv Municipality prepared a strategic plan for the city to improve its current
and future operations. The plan’s major goals are to make Tel Aviv an economic and cultural
center, create an attractive urban environment, ensure that there is a citizen-oriented
governance, and, most important, make Tel Aviv a “city for all its residents”.clviii The recurring
theme of the three overarching goals is to make Tel Aviv a center suitable for and attractive to
many different types of residents: young and old, religious and secular, Jewish and not Jewish.
The Tel Aviv Municipality is focused on enhancing pluralism and strengthening community
cohesion.clix
Infrastructure
Tel Aviv ranks high, on a per capita basis, on telephone lines, Internet users and computers. clx
Israel was one of the first countries worldwide to have 100 percent digitalization of its
telephone network, which enables state-of-the art services for subscribers. Israel has one of the
world's highest cellular phone penetration rates, with the majority of use coming from Tel Aviv
and Jerusalem.clxi
Israel is a country of short distances where roads are the most common mode of
transportation. The majority of residents in Tel Aviv travel to and from work by car, yielding
traffic congestion and pollution. The Trans-Israel Highway, Israel’s first toll road stretching 324
kilometers from the Galilee in the north to Negev in the south, was completed in 2002 in an
effort to alleviate traffic in heavily populated areas, such as Tel Aviv. clxii Additionally, a rapid rail
transit service, which uses upgraded existing tracks, is being installed in Tel Aviv, and will be
completed by 2016. The plans for this light rail include seven different lines, the first four of
which are already approved and cover 100 kilometers (62 miles) around the Tel Aviv
metropolitan area. The project is expected to cost USD 1.5 billion.clxiii These railways will
operate in transit with bus feeder lines to provide convenience to commuters.clxiv
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Planned Tel Aviv subway map
Israel has 48 airports, the largest being Ben Gurion Airport, located just outside Tel Aviv and
used for almost all international flights into and out of Israel. The new light rail service will
provide an inexpensive and easy way to travel from Ben Gurion to the heart of Tel Aviv. Israel is
working to upgrade airports in an effort to increase international tourism as only 30 of its 48
airports currently have paved runways.
Talent
There are seven universities in Israel and a number of regional colleges. Only two universities,
the Hebrew University of Jerusalem and Tel Aviv University, are recognized as Top 500
universities in the world, ranking at 120 and 173, respectively.clxv Women make up 56.5 percent
of all students, more than their percentage in the population.clxvi In recognition of the increasing
need for higher education in today’s market, the Israeli government is encouraging more high
school graduates to take matriculation examinations, and providing a wider range of nonuniversity degrees in areas with wide employment opportunities.
Students in Israel start their university experience between the ages of 20 and 22, later than
most countries, because of military service. In fact, Israel has a policy of mandatory conscription
at the age of 18 for both male and female Jewish residents.clxvii Proponents of mandatory
service believe that it increases the strength of the military and strengthens the character of
the youth. It has also been posited that the discipline learned from serving in the army leads to
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increased productivity in the workforce.clxviii Unlike other military hierarchies, Israeli cadets
receive extensive computer training, and are encouraged to make suggestions and ask
questions of ranking officers, potentially training them to take more risks in the business world.
The tenacity and willingness to question authority encouraged in the Israeli military is claimed
to be associated with entrepreneurial energy, motivation, and willingness to take risks.clxix
Headquartered in Tel Aviv are most industrial organizations, the stock exchange, major
newspapers, commercial centers and publishing houses.clxx Tel Aviv is also the focus of Israel’s
cultural life. Due to Mayor Huldai’s Strategic Plan to build up Yafo, the area around the Yafo
port has been developed into an artists' colony and tourist center, with galleries, restaurants,
and nightclubs.clxxi Tourism across all of Israel has increased in recent years. In 2010, National
Geographic ranked Tel Aviv as one of the world’s ten best beach cities. clxxii In 2011, Tel Aviv
welcomed 2.7 million tourists, more than ever before, and it is building hotels and restaurants
to accommodate this tourism boom.
Technology
Israel is a hotbed for technological start-up activity. Parts of Tel Aviv have become incubators
that rival Silicon Valley. With just 7.1 million people, Israel brought in close to USD 2 billion in
venture capital money. This is comparable to the monetary inflow in the United Kingdom,
which has 61 million residents.clxxiii Of Israel’s total investment in venture capital, nearly 60
percent of venture capital firms are located in Tel Aviv.clxxiv Tel Aviv is home to The Israel Export
Institute, most international banks, venture capital funds, international law offices, and
consulting companies, and employs over 80 percent of the Israeli banking and financial sector.
Israelis innovate because they have to. The land is arid, surrounded by enemies and has limited
oil, but it has human capital and innovative energy.clxxv Israel has learned to nurture the
65
innovations of young entrepreneurs through accelerators and incubators designed to support
the successful development of entrepreneurial companies, and monthly “rapid-pitch
conferences” where hundreds of firms are given five minutes each to pitch new ideas to willing
and wealthy investors.clxxvi As a result of these ubiquitous conferences and incubation firms, it is
relatively easy to raise a substantial amount of capital at a very early stage, thus continuing the
trend of innovation and start-ups in Tel Aviv and greater Israel.
Tel Aviv is also a center of business and scientific research, and was recently described as a
“flourishing technological center” by Newsweek.clxxvii In 1998, the city was ranked as one of the
ten most technologically influential cities in the world. Under the guidance of Mayor Huldai and
his vision of Tel Aviv as a more secular and innovative city, the Tel Aviv metropolitan area has
continued to develop technologically, and is sometimes referred to as Silicon Wadi (Hebrew for
Silicon Valley).clxxviii Foreigners are now migrating to Tel Aviv in search of the entrepreneurial
energy in the city center.clxxix
Tolerance
Israel is the only Middle-Eastern country to support gay rights legislation. Even though samesex marriage is not legally sanctioned, same-sex marriages performed elsewhere are
recognized. Israel, and specifically Tel Aviv, attracts gay people from nearby Palestine and
Lebanon where homosexuals are persecuted.clxxx Tel Aviv has a growing homosexual scene and
is tolerant and gay-friendly for both men and women.clxxxi The Tel Aviv Gay Vibe, a periodical,
gives any tourist or resident the newest gay spots in the city.clxxxii In 2002, a LGBTQ organization
emerged in Tel Aviv to “inspire LGBTQ Jews to deepen their Jewish identity through connection
with Israel”. The organization provides education, college programs, advocacy, and online
resources for LGBTQ youth of Israel.clxxxiii The organization is widely respected and well known
in Tel Aviv.
Public perception of homosexuals in Israel is also positive. According to an Angus Reid Public
Opinion poll conducted in 2010, at least three in four Israelis believe that gays and lesbians
should be allowed to serve in the army and participate actively in politics as lawmakers or
ministers, while three in five agree with homosexuals marrying in civil marriages and adopting
children.clxxxiv This type of openly tolerant culture is conducive to attracting and retaining young
and creative talent.
Pini Shani, the head of the Israel's Tourism Ministry, claims that culture is a big draw to Tel Aviv,
which has recently become a unique tourist destination rather than just one stop on an Israeli
tour.clxxxv Tel Aviv is working to create more events that appeal to the international community,
such as the Tel Aviv Marathon and the reopening of the Tel Aviv Museum of Art. clxxxvi The city
exemplifies pluralism at its best. Shani explains, “Tel Aviv is a place where Reform or Orthodox
Jews can practice Judaism as they want to, and from the other end, it's a place where gays and
lesbians can openly live their way of life”.
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Outlook
While Tel Aviv has established itself as a creative hub for entrepreneurs and technological
companies of all sorts, the city is now interested in enhancing its attractiveness and relevance
on a more global level. In 2011, the Tel Aviv Municipality spearheaded a Global City Initiative in
concert with the Israeli government, major financial institutions, and academic institutions.clxxxvii
The Initiative seeks to attract global financial institutions and international corporations. The
Global City has three guiding principles, including: (1) identifying Tel Aviv’s unique local assets
and utilizing them as global attractions, (2) seeing the greater metropolitan area as the realm of
international activity, and (3) impacting the entire state of Israel as the financial gains from the
Initiative will spread beyond the borders of the municipality.clxxxviii
If Tel Aviv can continue to capitalize on the financial and cultural successes that it already has, it
is poised to emerge as one of the truly great world cities. Its investment in rapid rail transit
systems will mitigate the emerging problem of congestion in city centers, and the growth of
incubators and in-migration of foreigners looking to start venture capital firms will keep Tel Aviv
a bustling metropolis with boundless economic potential
67
Turkey
Florida Index Rank: 73rd out of 118
Turkey receives middling scores on both indexes but is rewarded in the 3T2I Index for its stable
business environment and infrastructure foundations. It is especially penalized in the Florida
Index for its low tolerance scores, dragged down by a low female workforce participation rate.
From our time series analysis, we see that increased political rights, female labor participation,
and government seats held by women can help to predict GDP growth in Turkey and
resultantly, that the country can stand to benefit from tolerance-promoting policies. Yet,
despite these results, focusing on national-level creative capital factors also masks Turkey’s
urban-rural differences, especially the cosmopolitan nature and economic potential of Istanbul.
Istanbul
Istanbul has long held worldwide mystique as a historical crossroads. Its emergence as a global
city is a better-kept secret. While China and Brazil grab headlines about GDP growth and rapid
economic development, Turkey’s GDP growth rate outpaced all of Europe in 2010 and was
second only to China’s among the world’s 20 largest economies for the fourth quarter of
2011.clxxxix
Istanbul’s population is booming, its growth more closely mirroring Shanghai than its
counterpart European capitals. With a long-standing reputation as a cosmopolitan art capital,
Istanbul is using a tourism boom as a catalyst to attract company headquarters and other valueadded institutions. However, dealing with the negative consequences of rapid urban growth –
including sprawl and congestion – remains a challenge.
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
—
Population (in millions)
Istanbul,
14,897
Ankara
Izmir
Ankara
Istanbul
Izmir
London
Madrid
Paris
Tehran
Moskva (Moscow)
Source: United Nations, Department of Economic and Social Affairs, Population Division: World Urbanization
Prospects: The 2011 Revision
68
Institutions
Istanbul and other large Turkish cities are governed as whole metropolitan municipalities,
inclusive of suburban environs. National law has been regularly amended to expand the
jurisdictional boundaries of Istanbul such that Istanbul’s municipal governance is contiguous
with its provincial boundaries. There are now 39 district municipalities within Istanbul’s
metropolitan municipality. Each district has its own mayor and council and contributes
representatives to the larger Municipal Council, which is headed by a strong mayor. Provincial
functions are largely limited, and most city governance occurs at the level of the Metropolitan
Municipality.cxc
In 2005, Mayor Kaddis Topbas created the Istanbul Metropolitan Planning and Design Centre
(IMPDC) as a joint public-private agency charged with drawing master plans to govern
modernization and development in this famously haphazard city. Already, the IMPDC has issued
Requests for Proposals to solicit ideas from leading developers and architecture firms for a
dense new city center on the east bank of the Bosporus, and skyscrapers and transit projects
are already under construction.cxci
Infrastructure
Under the direction of the Istanbul Transport Corporation, the city is in the midst of a public
transportation expansion. As of 2005, the city boasted 119 kilometers of existing fixed transit
lines, including subways, light rail, and trams, and had an additional 68 kilometers in the
pipeline.cxcii
69
This includes the ambitious, though delayed, Marmaray project, which will at last link the
Asiatic and European banks of the Bosporus with a 13-kilometer underwater tunnel, and will
provide new commuter service to metropolitan residents.
Two international airports serve Istanbul. Ataturk International Airport, on the European side of
the Bosporus, is one of the world’s busiest airports. It is connected to the metro system and is
accessible from downtown Istanbul within 30 minutes.cxciii Sabiha Gökçen International Airport,
on the Anatolian side, is being expanded to accommodate growing air traffic into the city. A
light rail connection to the city center is being developed under the existing public
transportation expansion plan.
Talent
Istanbul University is the only Turkish institution of higher learning that appears on the
Academic Ranking of World Universities’ list of the top 500 global universities.cxciv A substantial
number of new private universities have been founded in the past decade, as Istanbul has
become a magnet for Turkish youth.cxcv According to 2004 data, there were over one million
Turks between the ages of 20 and 24 living in Istanbul, nearly a third of Turkey’s entire
population of youth between 18 and 25.cxcvi
Over half of the 19,000 foreign firms operating in Turkey are located in Istanbul, and the city is
the regional base for corporate titans such as Coca-Cola, Nestle, Unilever, Pepsi, Intel, and
Microsoft.cxcvii Istanbul is a hub for international banks, and the Turkish government is moving
rapidly to build it into an even more forceful financial center. While the Istanbul Financial
Centre Project aims at simplifying market regulation, state banks like Halkbank and Vakifbank
are relocating their headquarters from Ankara to Istanbul.cxcviii
Istanbul has recently emerged as one of the greatest contemporary art capitals in Europe. The
twelfth Istanbul biennial, held in 2011, attracted nearly 4,000 artists, nearly a thousand more
art-world journalists, and droves of tourists for a highly celebrated event.cxcix In the winter of
2011, a grand 100,000 square foot contemporary art space called SALT opened to the public,
reflecting the growing profile of Istanbul’s art scene and, since it received a subsidy, the
government’s acknowledgement of its economic potential. The New York Times suggested that
its opening signaled the city’s emergence as a contemporary cultural competitor to New York
City and called it Istanbul’s “moment of rebirth.”cc
Technology
The energy emanating from the city’s financial institutions has contributed to a flourishing
mobile application startup community, which in turn contributed to Istanbul’s rise to the
HubCulture’s top ten places for new ideas in the world.cci Very recently, Intel announced that it
was opening an office for its capital investment arm in Istanbul to take advantage of
opportunities to invest in technology startups in Turkey and the surrounding region.ccii
70
In addition to housing corporate headquarters of technology titans like Intel and Microsoft,
Istanbul is attracting R&D investment from companies like Pfizer, Mercedes-Benz, Bosch,
Ericsson, and Alcatel-Lucent. The city is home to the technology research and start-up
campuses ITU ARI Teknokent, Marmara Teknokent, and Istanbul Teknokent. Homegrown
telecom firms like Turk Telekom, Kron Telecom, and Bilim Ilac also center their R&D operations
in Istanbul.
Tolerance
The election of Prime Minister Recep Tayyip Erdogan signaled to many in the West that Turkey
was at risk of slipping away from its secular traditions. Indeed, in 2007 the Pew Global Attitudes
Project found less agreement (roughly 18 percent less) than in 2002 with the notion that
religion and government should be kept separate.cciii In 2007, Turkey was also among the few
nations whose residents responded less favorably than in 2001 to the societal acceptance of
homosexuality in 2007 (57 percent said that homosexuality should be rejected). Nonetheless,
Istanbul is considered highly gay-friendly and many gay-friendly tourism guides, bars, and clubs
advertise readily on the Internet.
Compared to Izmir and Ankara, Istanbul features a much higher proportion of single-person
households. New York University’s Eric Kilnenberg suggests that this is indicative of a city’s
cosmopolitan nature, its tolerance of the single life, its cultural attractiveness, and its
prosperity.cciv
Survey responses about public safety indicate that street crime is a growing concern for
residents in Istanbul and a risk to its attractiveness for creative individuals. ccv Still the crime
boom many feared would accompany the rapid population growth has not materialized and
Istanbul continues to have a good reputation for safety and police ingenuity.ccvi
Outlook
Known throughout the 20th century for its beautiful decay and ugly sprawl, Istanbul has been
enabled by the political reforms of recent years to plan and execute ideas according to a
regional agenda. Turkey’s recent economic success is reflective of Istanbul’s modernization.
Because Istanbul’s economic and population boom brings risks of congestion and sprawl, it is
critical that infrastructure expansions focus on easing the burden on public transportation
rather than on facilitating unsustainable urban footprint expansion.
That Istanbul is, now as much as ever, considered to be one of the hippest and most creative
cities in the world will only enhance its appeal for those knowledge and service industries that
Florida believes thrive on the cosmopolitan lifestyle. While regional instability and wariness
about religious conservatism may give some Westerners pause, Turkey is as historically stable
at least as any emerging market nation, and maintains strong alliances with Europe and the US.
71
VIII. City-Level Analysis: Africa
South Africa
South Africa’s economic prospects stand as one of the brightest on the continent, but barriers
still stand in the way of its path to sustainable prosperity. In our analysis, South Africa ranked
higher on the 3T2I Index than on the Florida Index. However, it still faces serious challenges
with regards to the efficiency of service delivery, completeness of country registries, and lack of
safe and affordable public transport, the inefficiencies of which may not be picked up in the
3T2I Index. From our time series analysis, we see that international migrants and air freight
transport are variables that have preceded South African GDP growth.
Johannesburg
Johannesburg is a city of stark contrasts. It is home to both wealthy and poor, has large
mansions as well as dense shack settlements, and faces population increases due to an evergrowing number of in-migrants, while simultaneously losing population due to the high
mortality rate of the HIV and AIDS epidemic. Currently a city of approximately three million,
Johannesburg is the product of historical circumstances unique to Africa. The apartheid regime
intentionally planned for low-density black areas, creating an urban living environment that is
spatially and socially segregated. Johannesburg also faces rising violent crime rates and
increasingly problematic public transport systems.
Despite these challenges, Johannesburg has enormous economic potential as it generates 16.5
percent of South Africa’s wealth and employs 12 percent of the national workforce. ccvii Under
the leadership of newly appointed mayor, Parks Tau, Johannesburg has unveiled “Joburg 2040,”
a growth and development strategy that aims at improving quality of life, providing a livable
and sustainable urban built environment, creating an inclusive, job-intensive, resilient and
competitive economy, and ensuring a high performing metropolitan government.ccviii It remains
to be seen whether the new administration will be able to address the challenges facing
Johannesburg.
Institutions
Johannesburg is located in the Gauteng province and is governed by an executive mayor. In
2011, Parks Tau was selected as the second post-apartheid mayor of the city by the African
National Congress’s national executive office. Tau oversees the 10-person City Council whose
decisions are implemented by the City Management Team (CMT). The CMT is largely
responsible for supplying services and collection of revenues, while the police department, fire
department, department of sanitation, and traffic control are run by separate city agencies. ccix
This division of powers and lack of cohesion under one city agency makes service delivery
72
fragmented. Many low-income, high-density areas have intermittent and often inadequate
service delivery with regards to necessities like water and electricity. According to the South
Africa Cities Network (SACN), a key challenge for Johannesburg’s future is the promotion of
reliable and trusted city service delivery.ccx
This fragmented governance approach is exemplified by Johannesburg’s recent phenomenon of
“billing problems”. Currently, Johannesburg does not have a complete register of the street
addresses of its residents. A Land Information System (LIS) has been established to compile
such information in order to collect taxes efficiently and accurately. In an address in early 2012,
Mayor Tau said, “Financial sustainability is dependent on the ability to collect taxes and services
charges fairly.”ccxi Other concerns facing Johannesburg are slow call center response times in
the event of emergencies, issuance of home owners certificates needed to sell homes, and an
urgent need to register townships that are currently not part of the billing systems. ccxii This
inability of the Johannesburg government to register residents and provide basic services is a
major challenge facing the city’s future economic growth. Johannesburg will need to establish
these basic institutional functions if it wants to keep its place as an emerging market nation to
watch.
Infrastructure
According to SACN, “apartheid cities have unusual spatial contradictions.” SACN’s State of the
City reports that Johannesburg is a sprawling urban city that has density levels that are too low
for sustainable public transport, but at the same time includes high-density townships on the
city’s periphery. Under apartheid, these settlements were deliberately surrounded by freeways
and railways to protect those outside from the inhabitants within. ccxiii This “marginalization and
containment” has been perpetuated in post-apartheid years with the continued building of lowcost housing on the city’s edge. Furthermore, the city’s subway system is considered dangerous
and most residents avoid it, leaving many without cost-effective transportation options.ccxiv This
development strategy increases inequality, as it is more expensive for residents on the
periphery to find safe, low-cost public transport to employment opportunities in the city
center.ccxv
73
Johannesburg authorities face many challenges in their efforts to create a more affordable and
accessible public transport system. National, local, and provincial governments share the
provision of public transport, and this shared responsibility is often a source of conflict as the
ability of cities to deliver sustainable public transport is inherently limited.ccxvi Johannesburg has
little leverage over the public funding directed towards the main modes of transportation. The
Metrorail is a national entity and receives an operational subsidy decided upon by the national
government, although city-based commuter systems are not part of a national network.
Johannesburg’s municipal bus company shares customers with a provincially subsidized,
privately owned company, thus losing out on available revenues. Minibus taxis, which are the
main mode of public transport for 72 percent of residents, receive no operating subsidy at all.
For close to six years, the national government has attempted to establish a taxi recapitalization
program, but it has been unsuccessful and disconnected from any metro-level planning.ccxvii
Furthermore, the provincial government is poised to construct a rapid rail, which will inevitably
be a costly project that benefits the wealthy and does little to mitigate the inequities of public
transport.ccxviii In order for Johannesburg to successfully implement sustainable transport, the
city government needs to lobby for greater autonomy over the control of the system and focus
on projects that will help middle-income residents.ccxix
An increase in urban migration in recent years has also led to an increasing need for
infrastructure. According to the city’s director of financial management support,
Johannesburg’s financial capacity to provide the infrastructure and services required for
economic development depends on a process of continual assessment of the operational and
financial performance of the city.ccxx The financial management support team also noted that
electricity, lands, roads, sanitation, and water distribution are areas that are in large need of
finance. In 2008, the SACN identified sustainable public transport and infrastructure as a
priority theme for all member cities in South Africa.ccxxi Insofar as city leaders can obtain
devolution of responsibility to the municipal level, Johannesburg can begin to create a cohesive
approach to a safe, accessible public transport system that can accommodate the city’s growing
needs. If they are unable to coordinate with regional governments, Johannesburg will face
increasing difficulties as its population grows.
Talent
In 2004, South Africa began reforming its education system, merging small universities into
larger institutions, and renaming all higher education systems “universities.” Historically,
institutions called technikons (polytechnic institutes) were vocational schools that serviced
particular racial and language groups. Since the restructuring of 2004, these technikons have
been incorporated into the traditional universities to form Comprehensive Universities and
service all races and ethnicities. According to the 2011 Academic Ranking of World Universities,
the University of Witwatersrand in Johannesburg and the University of Cape Town are the only
two universities in Africa that are ranked as leading institutions with a reputation built on
research contributions and academic excellence.ccxxii Johannesburg is in dire need of more
universities to meet the demand of applications received. In 2011, roughly 85,000 applicants
74
applied for the 11,000 seats available at the University of Johannesburg. The inability to
institutions of higher learning to admit the entirety of students who are eligible for higher
education is reaching a crisis level.ccxxiii
Despite the fact that Johannesburg has restructured its university system, only 15 percent of
South African youth graduate from a university, one of the lowest rates in the world.ccxxiv While
this is partly due to lack of university seats available, it can also be attributed to the poor
preparation of the primary education system in South Africa. The education system represents
broader racial inequalities in that the graduation rate for white students is more than double
that of black students.ccxxv This is of major concern given modern, technological shifts in
employment distribution and the subsequent shifts in necessary skills. As such, South Africa is
experiencing a critical shortage of high-level skills in the labor market.ccxxvi In addition, university
educated South Africans often leave the country and take their talent with them. This “brain
drain” or migration of South African talent to other countries will not help Johannesburg build
its economic and cultural capacity. It is essential that the SACN institutes policies aimed at
retaining their talent if South Africa wishes to maintain its place on the global stage.
According to South African scholars Bernstein and McCarthy, “Johannesburg has identified two
key social issues to be addressed if the city is to provide a space for serious levels of investment
and economic growth: skills and crime.”ccxxvii If the city fails to educate its young residents with
the skills necessary for the future technological economy of Johannesburg, the city is an
increasingly unlikely member of a global network of world cities. Unfortunately, neither of
these social woes is fully within the range of powers that are formally available to the city
government.
Technology
Historically, Johannesburg was a mining center and industrial city, but today, Johannesburg’s
economy is made up of financial and business services. The city boasts a large concentration of
businesses, with approximately 290,000 formal sector enterprises that employ almost one
million people.ccxxviii Almost 75 percent of national corporate head offices are in Johannesburg’s
financial district, and approximately 70 percent of South African banks have their headquarters
in the city center.ccxxix While office space used to be concentrated in the city center as well, it is
slowly spreading out toward the wealthy northern suburbs.ccxxx The city is also home to the
Johannesburg Securities Exchange (JSE), which recently ranked 20th in the world, as measured
by capitalization of shares of domestic companies.ccxxxi
Like many other African cities, a large part of Johannesburg’s economy is informal. It is
estimated that at least one-sixth of all “jobs” in the city are informal, and that number is
expected to rise in upcoming years. ccxxxii Informal sector jobs are characterized by nonpermanent work with few benefits, and include home-workers, street vendors, and some
agricultural workers. A major challenge facing Johannesburg’s government is to find policies
that support raising productivity and income levels of the informal economy towards those of
the formal economy.ccxxxiii
75
Tolerance
In a Gallup survey of perceived acceptance of homosexuals, South Africa is considered to be
one of the more progressive countries in the world.ccxxxiv South Africa outlawed discrimination
based on sexual orientation in its constitution in 1996, and made same-sex marriage legal in
2006.ccxxxv According to the poll, 31 percent of South African respondents say their city is a good
place for gays and lesbians, which is the highest perceived acceptance on the African
continent.ccxxxvi
While South Africans may have progressive attitudes towards homosexuals, a more pressing
problem for the city is eradicating the social and economic inequities faced by different racial
groups, a lasting legacy of apartheid. Despite efforts toward integration, the intractability of
apartheid’s urban spatial landscape has created two separate cities within Johannesburg – one
white and one black.ccxxxvii Additionally, the growing prevalence of city inhabitants infected with
HIV and AIDS poses challenges for true integration and tolerance. City government must invest
in policies that promote health and wellness as well as racial integration.
Outlook
Johannesburg has the economic potential to build its capacity and emerge as one of the truly
great cities of the 21st century. However, as this analysis has shown, Johannesburg needs to
meet serious challenges if it intends to compete with other emerging cities in Europe and
around the globe. Johannesburg’s governmental system is largely fragmented, which inhibits its
ability to provide efficient service delivery, public education, and safe public transport. The city
faces stark population changes as AIDS ravages the city’s current population and migrants
continue to come to the city. Johannesburg has attempted regeneration projects to improve
the urban environment, which will need to take effect soon if the city can remain competitive.
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IX. City-Level Analysis: Europe
Russia
3T2I Index Rank: 63rd out of 118
Florida Index Rank: 42nd out of 118
Russia is penalized by the 3T2I Index for its weak institutions and infrastructure. The findings
from our time series analysis indicate that, in the case of Russia, GDP moves ahead of 3T2I
variables like tertiary enrollment rate, patent and trademark applications, international migrant
stock, political rights, and air transport-passengers. This suggests that Russia is still a country
that depends heavily on its natural resources, is vulnerable to global shocks, and must improve
its fundamental creative capital to generate more sustained, internally driven growth.
Moscow
Moscow, the capital of the Russian Federation, has recently become the largest metropolis in
Europe, surpassing Istanbul and London, and is now the sixth largest city in the world in terms
of population living within the city’s administrative boundaries. Moscow’s official population
stands at 11.5 million, a 10.9 percent increase from 2002, but uncharted migration could push
the real number to as high as between 13 and 17 million.ccxxxviii The large influx of legal and
illegal migrants into Moscow comes mainly from within Russia and the former Soviet Republics,
drawn to the city’s higher salaries, better living conditions, and social services.
In 2009, at the onset of the global financial crisis, Moscow experienced the sharpest dip in GDP
growth (negative 13 percent) among 150 world cities, mostly attributable to Russia’s resource
dependent economy. ccxxxix
Institutions
Due to the lack of institutional development in much of the country, most of the economic
activity in Russia occurs in Moscow. Between 1993 and 2007, Moscow had the ninth best
average income and employment growth out of 150 world cities.ccxl
Despite Russia’s notorious reputation for lack of rule of law and corruption, over the past 15
years Moscow has been quite successful in attracting global firms. According to Globalization
and World Cities (GaWC) research, Moscow ranked 36th out of 315 cities in global firm
connections in 2000, and it upped its rank to 12th by 2008.10 Nevertheless, many foreign
investors are still cautious about the Russian market, alarmed by the troubles faced by wellknown companies like Shell. Unfortunately, rampant corruption is still a fact of life in Moscow –
the result of inadequate legislation, particularly in the area of property rights. ccxli The
amalgamation of political and economic power has bred ongoing corruption and, unfortunately,
10
This study measured the network of 100 global services firms in 315 cities worldwide, indicating the importance
of a city in the office network of a firm. GaWC data was taken from 2000 and 2008.
77
the Russian state still tends to rely on force rather than law to sustain its authority. To attract
more foreign investment to Moscow, Russia must enhance its rule of law and protection of
property rights.
Infrastructure
Moscow has a highly efficient public transportation system, with excellent metro networks and
bus systems. Most rides are affordable at approximately USD 1 per ride. The metro system is
also renowned for its cleanliness, art, and ornate mosaics and chandeliers.
However, Moscow also possesses a variety of infrastructure weaknesses. Roads are heavily
congested and highways are in dire need of maintenance, especially following recent upticks in
population growth. Traffic congestion is exacerbated by free parking in the city, a policy to
accommodate individuals who live in the suburbs but commute into Moscow for work.
According to the Moscow government, as of 2010, there are over 2.6 million cars in the city
each day. Thus, it should not come as a surprise that Moscow ranked as the world’s fourth
worst city in IBM’s 2010 Commuter Pain study, only behind Beijing, Mexico and
Johannesburg.ccxlii About 35 percent of people surveyed said that they were not able to reach
the office at least once a month due to commute-related issues.
Moscow traffic at night
In light of its recent migrant boom, Moscow must work to improve its social and transportation
infrastructure in order to prevent its suburbs from transforming into slums. Effective 1 July
2012, Moscow’s boundaries will expand, increasing its city limits to 2.4 times its current size.
Under this decree, 21 municipalities will be transferred to Moscow, and the city’s territory will
increase by 160 hectares. ccxliii According to a draft program, "Development
of Moscow's Transport System in 2012-2016," published on the Moscow municipal
government's website, over the next five years city authorities are planning to create a system
78
of intermodal passenger transportation on the Moscow River, including ferries and river taxi
services.
Talent
Russia is at risk of losing its talent to foreign countries. In a 2010 study on low-risk cities for
recruiting and relocating employees by Aon Consulting, the human capital consulting arm of
Aon, Moscow ranked 78th out of 90 world cities.
Moscow’s reputation for homegrown talent has weakened compared to the Soviet era. In
theory, Russia is endowed with a decent talent pool. The population is young, with an average
age of 37.7 years as of 2004. As of the 2002 census, the literacy rate of the total population
stood at 99.4 percent. Male and female literacy rates are comparable in Russia, with 99.7
percent literacy among males and 99.2 percent among females. ccxliv
The quality of Russian educational institutions seems to be declining. In 2010, Moscow State
University was ranked at 33rd place in the Times Higher Education’s top 100 list of world
universities.11 In 2011, despite over 220 higher education institutions in Moscow, including 60
state universities, no Russian university made it onto the list. ccxlv
Still, Moscow is undeniably the center of talent within Russia. In 2011, the monthly salary in
Moscow stood at 38,200 Rubles (USD 1,287), which is almost double the nationwide average of
20,300 Rubles (USD 684). ccxlvi
Technology
Soviet-era Moscow was famous for engineering and fundamental sciences, and this legacy
continues today. There are over 250,000 researchers currently working in Moscow, about a
third of all scientists in Russia. Roughly 70 percent of Moscow’s science program funds are
dedicated to R&D, with the rest allocated to fundamental research and applied studies.ccxlvii
The government contributes to more than 60 percent of these funds via the state budget.
The Moscow city government has an explicit policy spelt out in its “Comprehensive Innovation
Program of Moscow, 2010-2012” to invest in high-tech sectors such as nuclear, aerospace,
automatics engineering, electronics and biology. The city promotes public-private partnerships
for technological innovation, and has set up organizations such as the Department for Support
and Development of Small Enterprises of Moscow and the Russian Technological Development
Fund. Moscow has also established Naukograds, or towns with clusters of R&D facilities and
science and technology parks, and has given preferential terms to these enterprises.
Although Moscow’s telecommunications network quality is quite poor, mobile phones are
extremely popular primarily due to their cheap cost. A mobile phone costs approximately USD
30, and most Moscow residents are on pay-as-you-go phone plans.
11
The Times Higher Education’s World Reputation Rankings ‘Top-100 University List’ is an annual index of the
world’s top universities, and is created based on an international poll of academics’ opinions.
79
Tolerance
With the disappearance of dissident journalists making international headlines, Russia certainly
cannot be praised for its commitment to freedom of speech.
Portrait of investigative journalist and human rights activist Anna Politkovskaya. She was known for her opposition
th
in the Chechen conflict and then-President Valdimir Putin. Anna was shot and killed on 7 October 2006. The
ccxlviii
assassination is still unresolved, and she is one of the 19 journalists that have been killed since 2000.
Nevertheless, Moscow is moving in a more liberal direction. This year, after a rigged Duma
election, a few organized political protests were able to take place in Moscow. Currently,
several non-state run media publications are allowed to operate and are at times critical of the
Russian government. Novaya Gazeta, for instance, is a liberal newspaper predominantly
circulated in Moscow, known for its investigative journalism. Echo Moscow is a radio station
based in Moscow that broadcasts liberal messages online and in many Russian cities.
With 88 percent of Moscow’s residents being of East Slavic descent, racism against Jewish,
Turkic, African, Chinese and Central Asian populations is widespread in Moscow. ccxlix
Homosexuality, which was punished with jail terms during the Soviet-era, was decriminalized in
1993. Even so, it is still not tolerated publically in Moscow today, though some gay
establishments exist in the city. In fact, Russian lawmakers recently submitted a bill that would
impose fines for spreading gay propaganda among minors.ccl Over seven decades of Soviet-rule
has made practicing worshippers of religion a minority. Still, Moscow seems to be a place
where religious minorities tend to reside. The most widespread religion in Russia is Eastern
Orthodox Christianity, with an estimated 15-20 percent of the population being practicing
worshippers of this religion. Another 10-15 percent of the population are Muslim.ccli In the city,
there are four Muslim mosques and five Jewish synagogues.
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Outlook
Within Russia, Moscow is definitely the city where one will find opportunities for growth.
However, for it to efficiently attract and retain talent, foreign technologies and investment,
Moscow still needs to intensify its efforts at improving social infrastructure. It is also paramount
that Russia as a whole continues to reform its political institutions to enhance both rule of law
and accountability of politicians.
81
Appendix A: 3T2I Index Variables
Calculation of the Florida Index and 3T2I Index
The calculation of the Florida Index gave equal weight to the three pillars that formed it: Talent,
Technology, and Tolerance. The Talent and Technology pillars each comprised five variables
and the Tolerance pillar comprised four variables. We chose to give each pillar equal weight
rather than give each variable equal weight in an effort to let Florida’s Creative Capital Theory
dictate our procedure. A sensitivity analysis was conducted in which each variable was given
equal weight, which impacted our results minimally.
The formula to calculate a country’s Florida Index score is as follows:
The formula to calculate a country’s 3T2I Index score is as follows:
For example, Argentina’s Florida Index and 3T2I Index scores were calculated as follows:
82
Description of Variables
Talent
Tertiary Education Enrollment Rate - Percentage
This variable was taken from the World Bank (WB) World Development Indicators (WDI)
dataset. The 2010 value was used.
Local Availability of Specialized Research and Training Services – Survey Response
This variable was taken from the 2011-2012 World Economic Forum (WEF) Global
Competitiveness Report (GCR), which asked the following question of a random sample
of respondents in all 118 countries included in this analysis:
In your country, to what extent are high-quality, specialized training services available?
[1: not available; 7: widely available]
Quality of Education System – Survey Response
This variable was taken from the 2011-2012 WEF GCR, which asked the following
question of a random sample of respondents in all 118 countries included in this
analysis:
How well does the educational system in your country meet the needs of a competitive
economy? [1: not well at all; 7: very well]
Capacity for Innovation – Survey Response
This variable was taken from the WEF GCR, which asked the following question of a
random sample of respondents in all 118 countries included in this analysis:
In your country, how do companies obtain technology? [1: exclusively from licensing or
imitating foreign companies; 7: by conducting formal research and pioneering their own
new products and processes]
Brain Drain – Survey Response
analysis:
Does your country retain and attract talented people? [1: no, the best and brightest
normally leave to pursue opportunities in other countries; 7: yes, there are many
opportunities for talented people within the country]
83
Technology
Company Spending on Research and Development – Survey Response
analysis:
To what extent do companies in your country spend on R&D? [1: do not spend on R&D;
7: spend heavily on R&D]
Mobile Phone Subscriptions – Percentage
This variable was taken from the WB WDI dataset. The 2010 value was used. It
measures the number of mobile cellular telephone subscriptions per 100 population.
Availability of Latest Technologies – Survey Response
analysis:
To what extent are the latest technologies available in your country? [1: not available; 7:
widely available]
Foreign Direct Investment and Technology Transfer – Survey Response
analysis:
To what extent does foreign direct investment bring new technology into your country?
[1 = not at all; 7: FDI is a key source of new technology]
Internet Users - Percentage
This variable was taken from the WB WDI dataset. The 2010 value was used. It measures
the number of Internet users per 100 population.
Tolerance
Female Labor Participation Ratio - Percentage
the ratio of female labor participation rate to male labor participation rate. For values
84
over 1, that is, for countries which have a higher female labor participation rate than
male labor participation rate (only Burundi and Rwanda), the value was assigned a 1.
Press Freedom
This variable was taken from Freedom House’s ‘Freedom of the Press 2011’ Report. It is
an annual survey about media independence in countries around the world that
assesses the degree of print, broadcast, and Internet freedom. Countries are given a
score from 0 (best) to 100 (worst) based on 23 methodology questions divided into
three subcategories: the legal environment, the political environment and the economic
environment.
International Migrant Stock (percent of population) - Percentage
the percentage of the population that is foreign-born.
Political Rights
This variable was taken from Freedom House’s ‘Freedom in the World 2011’ Report. It is
an annual survey that provides a comparative assessment of global political rights and
civil liberties. The ratings process is based on a checklist of 10 political rights questions
and 15 civil liberties questions. Scores are awarded to each of these questions on a scale
of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of
rights or liberties present. Based on these scores, countries are assigned numerical
ratings from 1 (most free) to 7 (least free).
Institutions
Property Rights – Survey Response
analysis:
How would you rate the protection of property rights, including financial assets, in your
country? [1: very weak; 7: very strong]
Intellectual Property Rights – Survey Response
analysis:
85
How would you rate intellectual property protection, including anti-counterfeiting
measures, in your country? [1: very weak; 7: very strong]
Judicial Independence – Survey Response
analysis:
To what extent is the judiciary in your country independent from influences of members
of government, citizens, or firms? [1: heavily influenced; 7: entirely independent]
Strength of Investor Protection – Index Score
This variable was taken from the World Bank/International Finance Corporation’s 2011
Doing Business Report, which rated countries on their Investor Protection Index on a 010 scale, with 10 being the best.
Days Required to Start a Business – Quantitative Measure
This variable was taken from the WB WDI dataset. The 2010 value was used. It
measures the average number of days required to formally start a business.
Infrastructure
Quality of Port Infrastructure – Survey Response
analysis:
How would you assess port facilities in your country? [1: extremely underdeveloped; 7:
well developed and efficient by international standards]
For landlocked countries, the question is as follows: How accessible are port facilities?
[1: extremely inaccessible; 7: extremely accessible]
Quality of Air Transport Infrastructure – Survey Response
analysis:
How would you assess passenger air transport infrastructure in your country? [1:
extremely underdeveloped; 7: extensive and efficient by international standards]
86
Quality of Electrical Supply – Survey Response
analysis:
How would you assess the quality of the electricity supply in your country (lack of
interruptions and lack of voltage fluctuations)? [1: insufficient and suffers frequent
interruptions; 7: sufficient and reliable]
Quality of Roads – Survey Response
analysis:
How would you assess roads in your country? [1: extremely underdeveloped; 7:
extensive and efficient by international standards]
Normalization of Variables
We applied different normalization techniques for each of the three categories of variables in
our dataset:
Quantitative variables that can take any value
As an example, Days Required to Start a Business is a variable that is measured in days, where a
larger number of days is worse. This variable had to be both rescaled and inverted.
First, the raw data had to be rescaled so that they varied between 0 and 1. We adopted the
following formula that was used to calculate the Human Development Index.:
The maximum value for Days Required to Start a Business is 694 days (Surinam) and the
minimum value is 1 day (New Zealand). Applying the formula above produced a rescaled
variable that varied between 0 and 1, but yielded higher values for countries that performed
worse. To correct this, we applied the following formula:
|
|
Applying these formulae in sequence to the Days Required to Start a Business variable assigned
New Zealand a score of 1 and Suriname a score of 0.
87
Survey responses coded on an arbitrary scale
Survey measures are constrained by the scale imposed by the questions asked. The survey
variables in the WEF GCR were scored on a scale of 1 to 7. These variables were rescaled
according to the following formula:
This difference between this formula and the rescaling formula that was applied in part (a) is
that it does not consider the maximum and minimum values observed in the dataset. Instead, it
considers the possible maximum and minimum values allowed by the question scale.
Percentage variables that varied between 0 percent to 100 percent
The percentage variables in our data set were coded correctly. These variables were only
divided by 100 so that their values would vary between 0 and 1.
88
Appendix B: Time Series Variables
The table below lists the units of measure and sources associated with each of the time series
variables discussed in Section III.
Factor
Output
Talent
Technology
Tolerance
Variable
GDP
Unit
PPP, constant 2005 international $
Adults, % of people ages 15 and
Literacy rate
above
Tertiary school enrollment, % of
gross
Real GDP (PPP) in 2005 US$ per
Labor productivity
person employed
Working age population (15-64 years
old) growth (% pa)
Unemployment rate
% of total labor force
Number of personal computers per
PCs
100 people
Estimated number of television sets
TVs
in use per 1,000 people.
Estimated Internet users per 100
Internet
people
Total number of mobile-phone
Mobile subscribers
subscriptions
Number of scientific and technical
Journal articles
journal articles
Number of patent applications
Patent applications
(residents and non-residents)
Number of trademark applications
(residents and non-residents)
High tech exports
Current USD
Free = 0-30, Partly Free = 31-60, Not
Free = 61-100
% of population
Political rights
Survey: 1-7 (1 is highest)
Civil liberties
Survey: 1-7 (1 is highest)
Female labor participation % of female population ages 15+
Source
World Bank (Indicators Data)
Economics Intelligence Unit
Freedom House
Freedom House
Freedom House
Gov. seats held by women % of parliament seats held by women World Bank (Indicators Data)
Infrastructure Air Transport-passengers
Passenger cars
Telco. investment
Hospitals
Number of passengers carried
Million ton-km
Consumption of motor gasoline
(excludes aircraft)
Total registered passenger cars in
use per 1,000 people
% of GDP
Per million population
OECD
89
Appendix C: Endnotes
i
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“Global city GDP rankings 2008-2025.” Pricewaterhouse Coopers.
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iii
Libertun de Duren (2007)
iv
“Corruption Perceptions Index 2010 Results.” Transparency International.
<http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results>.
v
Warren, Michael. “Leaked Embassy report accused Argentina of fostering money laundering.”
Associated Press. 2 Dec. 2010.
<http://www.startribune.com/templates/Print_This_Story?sid=111223324>.
vi
“Urban rail news in brief.” Railway Gazette. 12 May 2011.
<http://www.railwaygazette.com/nc/news/single-view/view/urban-rail-news-in-brief-12.html>.
vii
“Investigación de Transporte Urbano Público de Buenos Aires.” Secretaría de Transporte. Web.
<http://www.transporte.gov.ar/content/intrupuba/>.
viii
“Annual Report 2008.” Metrovías. Web.
<http://www.metrovias.com.ar/v2/Images/Inversores/memoria_2.pdf>.
ix
World Port Source. Web. < http://www.worldportsource.com/>.
x
World Bank 2010. Web. <http://www.worldbank.org.>
xi
“Argentina.” CIA – The World Factbook. Web. <https://www.cia.gov/library/publications/the-worldfactbook/geos/ar.html>.
xii
Inter-American Development Bank (2008) The Quality of Education in Argentina
xiii
Sametband, Ricardo. “Latin America: brain drain largest for Argentina.” SciDev.Net. 10 May 2005.
Web. <http://www.scidev.net/en/news/latin-america-brain-drain-largest-for-argentina.html>.
xiv
Sreeharsha, Vinod. “Fiscal Chaos Aside, Start-Ups Boom in Argentina.” The New York Times. 25 Dec.
2008. Web. <http://www.nytimes.com/2008/12/26/business/worldbusiness/26peso.html>.
xv
International Trade Union Conference (2012): Frozen in Time
xvi
Gross Domestic Product of Municipalities 2004-2008.” Instituto Brasileiro de Geografia e Estatística
(IBGE)
<http://www.ibge.gov.br/english/presidencia/noticias/noticia_visualiza.php?id_noticia=1780&id_pagin
a=1>.
xvii
xviii
Corruption Perceptions Index. Transparency International.
<http://www.transparency.org/policy_research/surveys_indices/cpi>.
xix
“Not yet fit for a metropolis.” The Economist. Web. 31 March 2012..
<http://www.economist.com/node/21551503>.
xx
“Human Development Index.” Urban Age: The Economy of the Cities. <http://urbanage.net/10_cities/_data/_EC_SP/EC_HDI.html>.
xxi
“Literacy Rate.” Urban Age: The Economy of the Cities. <http://urbanage.net/10_cities/_data/_EC_SP/EC_LR.html>.
xxii
Science, Technology & Innovation Indicators in the State of São Paulo / Brazil 2010
<www.fapesp.br/indicadores/2010/english/highlights_cap3A.pdf>.
xxiii
“Schmooze Nation.” Newsweek Magazine. Web. 18 Sept. 2007.
<http://www.thedailybeast.com/newsweek/2007/09/18/schmooze-nation.html>.
xxiv
“Facebook Finally Beats Google’s Orkut…in Brazil.” Mashable. Web. 17 Jan. 2012.
<http://mashable.com/2012/01/17/facebook-beats-orkut-brazil/>.
ii
90
xxv
The Pew Global Attitudes Project. “World Publics Welcome Global Trade – But Not Immigration.” 47Nation Pew Global Attitudes Survey. Web. 4 Oct. 2012 <http://www.pewglobal.org/2007/10/04/worldpublics-welcome-global-trade-but-not-immigration/>.
xxvi
Ibid
xxvii
Freedom House, Freedom of the Press 2011 - Brazil, Web. 1 September 2011,
<http://www.unhcr.org/refworld/docid/4e5f71b9c.html>.
xxviii
Barrionuevo, Alex. “Fearful Brazilians Keep Armored Car Sales Booming.” The New York Times. Web.
3 May 2009. <http://www.nytimes.com/2009/05/04/world/americas/04brazil.html?pagewanted=all>.
xxix
Preston, Julia. “In Mexico City, Elected Mayor Opens New Political Era.” New York Times 06 Dec. 1997.
<http://www.nytimes.com/1997/12/06/world/in-mexico-city-elected-mayor-opens-new-politicalera.html>
xxx
Cox, Wendell. “The Evolving Urban Form: The Valley of Mexico.” New Geography 02 Mar. 2011.
<http://www.newgeography.com/content/002088-the-evolving-urban-form-the-valley-mexico>
xxxi
“Mexico’s Al Gore To Make Smog Capital The Greenest City In The Americas,” Global Post for
Huffington Post, 04 Dec. 2008. < http://www.huffingtonpost.com/2008/12/04/mexicos-al-gore-tomake-s_n_148400.html>
xxxii
Davis, Lucas W. “Driving Restrictions and Air Quality in Mexico” Resources for the Future 18 Aug.
2008.
<http://www.rff.org/Publications/WPC/Pages/08_15_08_Driving%20Restrictions%20and%20Air%20Qua
lity%20in%20Mexico%20City.aspx>
xxxiii
Eskeland, Gunnar S. And Feyzioglu, Tarhan. “Rationing Can Backfire: The ‘Day without a car’ in
Mexico City.” The World Bank Economic Review Vol 11, No. 3 (Sept., 1997), pp.383-408. JStor.
<http://www.jstor.org/stable/3990252>
xxxiv
Schwandl, Robert. “Ciudad De Mexico.” UrbanRail.Net 2009.
<http://www.urbanrail.net/am/mexi/mexico.htm>
xxxv
Weissenstein, Michael. “Mexico City modern metro meets ancient Aztec life.” The Guardian 09 Feb.
2012. <http://www.guardian.co.uk/world/feedarticle/10085627>
xxxvi
Walzer, Robert P. “Metrobus of Mexico City Gets a Boost.” New York Times 12 Nov. 2009.
<http://green.blogs.nytimes.com/2009/11/12/mexico-citys-metrobus-gets-a-boost/>
& da Camara, Patricia. “WB: Metrobus Wins Harvard University Award for Sustainable Transit Project in
Mexico City.” World Bank 12 Nov. 2009.
<http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22387548~pagePK:64257043~pi
PK:437376~theSitePK:4607,00.html>
xxxvii
“Mexico City: Getting There.” Frommer’s 12 Apr. 2012.
<http://www.frommers.com/destinations/mexicocity/0041020009.html>
xxxviii
“Traffic Movements 2010 FINAL” Airports Council International 01 Aug. 2011.
<http://www.airports.org/cda/aci_common/display/main/aci_content07_c.jsp?zn=aci&cp=1-5-5457_666_2__>
xxxix
“Academic Ranking of World Universities 2010.” Academic Ranking of World Universities
<http://www.arwu.org/Country2010Main.jsp?param=Mexico>
xl
“Knowledge City.” Mexico City Experience 12 Apr. 2012.
<http://www.mexicocityexperience.com/knowledge_city/banking_financial_services/>
xli
Chaplin, Julia. “Contemporary Art: In Mexico City, an edgy (and busy) art scene emerges.” New York
Times 26 Jun. 2006. <http://www.nytimes.com/2006/06/26/arts/26iht-trmex.2055689.html>
xlii
Rayner, Jay. “World’s 50 best restaurants 2011.” The Guardian 18 Apr. 2011.
<http://www.guardian.co.uk/lifeandstyle/2011/apr/18/worlds-50-best-restaurants-2011>
91
xliii
Malkin, Elisabeth. “For Mexico City, a Repurposed Landfill.” New York Times 17 Feb. 2012.
<http://green.blogs.nytimes.com/2012/02/17/for-mexico-city-a-repurposed-landfill/>
xliv
Villagran, Lauren. “Mexico City patents program spurs innovation.” Smartplanet 23 Dec. 2011.
<http://www.smartplanet.com/blog/global-observer/mexico-city-patents-program-spursinnovation/1721>
xlv
“IBM Opens Innovation Center in Mexico to Fuel Growth.” IBM 15 Mar. 2011. <http://www03.ibm.com/press/us/en/pressrelease/34033.wss>
xlvi
"Making the Desert Bloom." The Economist, 27 Aug. 2011.
xlvii
“Gay Marriage Around the World.” The Pew Forum on Religion and Public Life, 09 July 2009.
<http://www.pewforum.org/Gay-Marriage-and-Homosexuality/Gay-Marriage-Around-the-World.aspx>
xlviii
Pew Research Center. Pew Global Attitudes Project. “World Publics Welcome Global Trade – But Not
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xlix
"Steps Forward and Back." The Economist 30 Sept. 2011.
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l
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<http://www.nytimes.com/2012/01/19/world/americas/mexico-drug-war-bloodies-areas-thoughtsafe.html>
li
"Making the Desert Bloom." The Economist, 27 Aug. 2011.
lii
"Where the Kickbacks Kick." The Economist. 19 May 2011.
liii
Wilkinson, Tracy. “Mexico City road project pits rich against richer.” Los Angeles Times. 25 Feb. 2009.
<http://articles.latimes.com/2009/feb/25/world/fg-mexico-urbanwar25>
liv
"One Taco Too Many." The Economist. 21 Oct. 2010. <http://www.economist.com/node/17314636>.
lv
Brookings Institution, 2011
lvi
Oxford Economics Data, in constant 2005 prices
lvii
2011 China City Statistics, All China Data Center
lviii
Maninvest Asia. <www.ManinvestAsia.com>
lix
Ibid
lx
IBM Global Business Services, 2011
lxi
"Shanghai surprise is you'll want to stay; Chinese city isn't just growing, it's growing up and looking like
a great place to call home." The Toronto Star, November 13, 2010 Saturday
lxii
Shanghai metro website. <http://shmetro.com>
lxiii
All China Data Center, 2010 census
lxiv
"Success Stories; Some of the most innovative educational programs are coming out of places with
the hardest-to-reach populations." Newsweek, September 2010
lxv
All China Data Center, 2010 census
lxvi
Maninvest Asia. <www.ManinvestAsia.com>
lxvii
“Optimism on patent protection" South China Morning Post, Apr 10th 2012
lxviii
"Siemens Industrial Park set up in Shanghai." BBC, Jan 17th 2001
lxix
"Shanghai Municipality, Seven Measures for Providing Convenience in Entry into and Exit from China
for Foreign High-level Skilled Personnel and Investors." China Law & Practice, Feb 2010
lxx
China Perspectives “Migrant Workers in Shanghai” 2005
lxxi
"Migrant workers closer to city residency rights; State Council urges reform of the household
registration system to clear a way for 200 million rural workers to enjoy the benefits of urban living."
South China Morning Post, Feb 25th 2012
92
lxxii
,Quote by Xie Lingli, director of the Shanghai Municipal Population and Family Planning Commission,
“Shanghai seeks more migrant workers”, China Daily, Apr 7th 2011
lxxiii
“Shanghai seeks more migrant workers”, China Daily, Apr 7th 2011
lxxiv
"Sex fair's success is challenge to taboos" South China Morning Post, Mar 19th, 2012
lxxv
Janaagraha Urban Governance Report for Mumbai. Rep. Janaagraha Centre for Citizenship and
Democracy, Nov. 2009. Web. <http://www.janaagraha.org/>.
lxxvi
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2012. <http://mumbaiboss.com/2012/02/17/why-mumbai%E2%80%99s-elections-are-irrelevant-tothis-city-state/>.
lxxvii
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lxxviii
Jacobson, Mark. "Dharavi: Mumbai's Shadow City." National Geographic Magazine. May 2007. Web.
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lxxix
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<http://articles.timesofindia.indiatimes.com/2010-11-15/mumbai/28263181_1_slum-population-rajivawas-yojana-urban-poverty-alleviation-ministry>.
lxxx
Manecksha, Freny. "Pushing the Poor to the Periphery in Mumbai." Economic and Political Weekly.
Web. 8 Apr. 2012. <http://epw.in/epw/uploads/articles/16883.pdf>.
lxxxi
"In Mobile Penetration, Press 1 for Chennai." Business Standard. Web. 08 Apr. 2012.
<http://www.business-standard.com/india/storypage.php?autono=355149>.
lxxxii
"India Business News, Stock Market Personal Finance, Economy." Rediff. Web. 08 Apr. 2012.
<http://www.rediff.com/business/slide-show/slide-show-1-internet-surfers-mumbai-scores-bengalurufalls/20111027.htm>.
lxxxiii
"Brief Analysis of Provisional Population Figures 2011 Census (Maharashtra)." Census India 2011.
Web. 8 Apr. 2012. <http://censusindia.gov.in/2011-provresults/data_files/maharastra/Census%20of%20India%202011-Brief%20analysis.pdf>.
lxxxiv
"From Today, BMC Will Do Business Only in Marathi." The Times Of India. Web. 08 Apr. 2012.
<http://articles.timesofindia.indiatimes.com/2008-06-25/mumbai/27763034_1_marathi-bmc-jairajphatak>.
lxxxv
"City Mayors: World's Largest Urban Areas in 2020 (1)." City Mayors: Mayors Running the World's
Cities. Web. 08 Apr. 2012. <http://www.citymayors.com/statistics/urban_2020_1.html>.
lxxxvi
"Statistics Indonesia." Statistics Indonesia. Web. 12 Apr. 2012. <http://www.bps.go.id>.
lxxxvii
"The Komodo Economy." The Economist. The Economist Newspaper, 18 Feb. 2012. Web.
lxxxviii
Ibid.
lxxxix
World Bank - Jakarta Case Study Overview. Rep. Web.
<http://siteresources.worldbank.org/INTURBANDEVELOPMENT/Resources/3363871306291319853/CS_Jakarta.pdf>.
xc
Ibid.
xci
"Indonesia Looks Increasingly to Private Sector for Essential Airport Infrastructure Funding." Center for
Aviation. 6 May 2011. Web. <http://www.centreforaviation.com/analysis/indonesia-lookingincreasingly-to-the-private-sector-for-essential-airport-infrastructure-funding-50944 s>.
xcii
"Aviation Safety Network ASN Aviation Safety Database Geographical Regions Indonesia Air Safety
Profile." Aviation Safety Network. Web. 16 Apr. 2012. <http://aviationsafety.net/database/country/country.php?id=PK>.
93
xciii
"Indonesia Looks Increasingly to Private Sector for Essential Airport Infrastructure Funding." Center
for Aviation. 6 May 2011. Web. <http://www.centreforaviation.com/analysis/indonesia-lookingincreasingly-to-the-private-sector-for-essential-airport-infrastructure-funding-50944 s>.
xciv
World Bank Indonesia Economic Quarterly - Current Challenges, Future Potential. Rep. 2011. Print.
xcv
World Bank - Jakarta Case Study Overview. Rep. Web.
<http://siteresources.worldbank.org/INTURBANDEVELOPMENT/Resources/3363871306291319853/CS_Jakarta.pdf>.
xcvi
"Flood in Jakarta - Thamrin Street."xcvi NowPublic.com. 1 Feb. 2008. Web.
<http://www.nowpublic.com/environment/flood-jakarta-thamrin-street>.
xcvii
World Bank - Investing in Indonesia’s Education – Allocation, Equity and Efficiency of Public
Expenditures. Rep. 2007. Print.
xcviii
Ibid.
xcix
"Is Indonesia Bound for the BRICs?" Foreign Affairs (2011). Print.
c
US News. US News & World Report. Web. 16 Apr. 2012. <http://www.usnews.com/education/worldsbest-universities-rankings/best-universities-in-asia?page=2>.
ci
World Bank Indonesia Economic Quarterly – Enhancing Preparedness, Ensuring Resilience. Rep. 2011.
Print.
cii
Ibid.
ciii
Ibid.
civ
“Major Operators Look to Expand Broadband This Year,” The Jakarta Post, January 14, 2012,
http://www.thejakartapost.com/news/2012/01/14/major-operators-look-boost-broadband-year.html
cv
“RI Highly Dependent on Mobile Internet,” The Jakarta Post, July 12, 2011,
http://www.thejakartapost.com/news/2011/07/12/ri-highly-dependent-mobile-internet.html
cvi
Ibid.
cvii
“Is Indonesia Bound For The BRICs?”, Foreign Affairs, November/December 2011
cviii
Freedom of The Press 2010, Freedom House, http://www.freedomhouse.org/report/freedompress/2011/indonesia
cix
“Perceived Acceptance of Homosexuals Differ Around The Globe,” Gallup World, November 1, 2007
http://www.gallup.com/poll/102478/perceived-acceptance-homosexuals-differs-around-globe.aspx#1
cx
“Indonesia: Gays Fight Sharia Law,” Z-Net, October 18, 2006,
http://www.zcommunications.org/indonesia-gays-fight-sharia-laws-by-doug-ireland
cxi
“Tolerance In Theory, But Not In Action,” The Jakarta Globe, February 13, 2012,
http://www.thejakartaglobe.com/home/tolerance-in-theory-but-not-in-action/497627
cxii
“Is Indonesia Bound For The BRICs?”, Foreign Affairs, November/December 2011
cxiii
World Bank Malaysia Economic Monitor - Smart Cities. Rep. 2011. Print.
cxiv
Ibid.
cxv
Ibid.
cxvi
Ibid.
cxvii
"Kuala Lumpur Structure Plan 2020 : Transportation." Document Moved. Web. 6 Apr. 2012.
<http://www.dbkl.gov.my/pskl2020/english/transportation/index.htm>.
cxviii
Ibid.
cxix
Ibid.
cxx
cxxi
Ibid.
cxxii
"Kuala Lumpur Structure Plan 2020 : Transportation." Document Moved. Web. 6 Apr. 2012.
<http://www.dbkl.gov.my/pskl2020/english/transportation/index.htm>.
cxxiii
94
cxxiv
World Bank Malaysia Economic Monitor – Brain Drain. Rep. 2011. Print.
Ibid.
cxxvi
cxxvii
Ibid.
cxxviii
World Bank Malaysia Economic Monitor – Repositioning for Growth. Rep. 2009. Print.
cxxix
cxxx
Ibid.
cxxxi
World Bank Malaysia Economic Monitor – Brain Drain. Rep. 2011. Print.
cxxxii
"Malaysia Gay Festival Is Banned." The New York Times. 3 Nov. 2011. Web.
<http://www.nytimes.com/2011/11/04/world/asia/malaysia-gay-festival-is-banned.html>.
cxxxiii
"Perceived Acceptance of Homosexuals Differs Around Globe." Gallup. 1 Nov. 2007. Web.
<http://www.gallup.com/poll/102478/perceived-acceptance-homosexuals-differs-around-globe.aspx>.
cxxxiv
"Malaysia Gay Festival Is Banned." The New York Times. 3 Nov. 2011. Web.
<http://www.nytimes.com/2011/11/04/world/asia/malaysia-gay-festival-is-banned.html>.
cxxxv
"Against the Tide." The Economist. The Economist Newspaper, 27 Aug. 2011. Web.
cxxxvi
"Najib at Bay." The Economist. The Economist Newspaper, 04 Feb. 2012. Web.
cxxxvii
Demographia 2011
cxxxviii
El Kadi 2000.
cxxxix
cxl
The Congested City, Diane Singerman (2009)
cxli
Sejourne 2002
cxlii
Slackman, Michael. “Stepping Boldly Off the Curb, With a Wave and a Prayer.” The New York Times.
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cxliii
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INDIC_UR
CITIES/TIME
Turkey
Ankara
Istanbul
Izmir
Total Resident Population 20-24
1989_1993 1994_1998 1999_2002 2003_2006
:
:
3,187,044 :
:
:
:
377,263
:
:
:
1,046,789
:
:
:
237,850
2007_2009
:
:
:
:
2010_2012
:
:
:
:
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INDIC_UR
One person households (Total)
CITIES/TIME 1989_1993 1994_1998 1999_2002 2003_2006 2007_2009
Turkey
:
:
:
:
:
Ankara
:
:
55,287
58,700 :
Istanbul
:
:
150,050
162,900 :
Izmir
:
:
48,789
52,200 :
2010_2012
:
:
:
:
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100

The Evolving Creative Class in Emerging Markets

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