According to the Global Cities Index (GCI), seven of the top 20 cities listed are in the Asia-Pacific region. Tokyo is the most integrated of the Asian cities, ranking fourth globally, closely followed by Hong Kong in fifth place, Beijing in Eighth, Singapore in Ninth, Seoul in Twelfth, Sydney in Fourteenth and Shanghai in Eighteenth.
Cities have always served as epicenters of trade and commerce, but in an age where globalization is becoming ever more prevalent and important, it is no longer enough for cities to solely operate within their own geographic regions. A city must be globally influenced and integrated in order to reach its maximum potential for economic growth and development.
The economic and developmental status of cities is measured by the Global Cities Index, created by A.T. Kearney et al. According to the index, there are five dimensions for measuring how globally integrated a city is. These dimensions include business activity, human capital, information exchange, cultural experience and political engagement. Cities possessing and exhibiting these dimensions are more likely to attract, retain and produce talent, business, innovation and capital than cities lacking these critical dimensions. Business activity and human capital are especially important to cities wishing to improve or retain their economic competitiveness.
As a city’s position in the GCI improves, it becomes more difficult to climb higher. Lower rankings are more volatile and likely to shift drastically over time. For instance, since its inception in 2008, the top 20 positions in the GCI have only been held by 23 cities. The bottom initial 20 positions, 41-60, have been occupied by 33 cities.
GCI Highlights in Asia
Tokyo (4) and Hong Kong (5) are positioned firmly at the top of the GCI ranking, and have been since its launch.
Increases in the amount of Fortune 500 companies, international schools, broadband subscribers and museums have enabled Beijing to climb from 14th place in 2012 to 8th place in 2014.
Shanghai, ranked 18th in the index, is the only city in mainland China that can compete with Beijing. In terms of human capital, Shanghai is ahead of Beijing given its larger population (foreign-born and native), greater number of individuals with tertiary education and large amount of international schools. Shanghai is also performing particularly well in the realm of business activity.
Singapore, ranked ninth in the GCI, has no close rivals in business activity, human capital, or information exchange in Southeast Asia.
Bangkok, once thought by many to be on the rise, descended from 22nd place in 2008 to 42nd place in 2014, while sill performing as the best in the region culturally.
South East Asian cities listed on the index generally stand out in the dimension of information exchange. Though Mumbai (41) does not fall short in this area, it excels in comparison to its peers in business activity and human capital. New Delhi (48) has increased its scores across every dimension except information exchange, but has still fallen in rank as its improvements have not been rapid or extreme enough to keep up with similarly ranked cities.
Seoul (12) scores admirably in most dimensions, but is lacking in human capital due to its small foreign-born population and few international schools.
Two Australian cities place in the GCI’s top 25 with Sydney (14) and Melbourne (25). Melbourne’s rise is primarily attributed to increases in information exchange, as well as cultural exchange and business activity.
Looking to the Future: Emerging Cities Outlook
As indicated by the examples above, cities that wish to improve or maintain their global positioning must focus strongly on developing business activity and human capital. The obstacle of physical distance is lessened everyday by globalization. As competition increases and intensifies on a global scale, cities in emerging economies will not only need to vie for a top position within their own countries, but with cities around the world.
The Emerging Cities Outlook (ECO) complements the GCI by measuring the potential for cities to raise their standing in the GCI. This is accomplished by measuring how long it would take a developing city, given its rise between 2008 and the present, to reach the global leader in each of 10 indicators of business activity, human capital and innovation.
Two Southeast Asian cities, Jakarta and Manila, are at the top of the list of emerging cities most likely to progress. Though they both fall in the lower half of the GCI, rapid improvements in the ECO’s indicators suggest they may climb swiftly in the GCI rankings.
Jakarta is developing quickly in terms of human capital and innovation, and is also addressing concerns such as income inequality and environmental issues. Manila is also bolstering its human capital with incentives such as improved health care quality and availability.
Another Southeast Asian capital, Kuala Lumpur, is also among the top 10 cities in the ECO. Kuala Lumpur may quickly catch up with the other leaders in terms of business activity in the near future.
New Delhi, in fifth place on the ECO, is the South Asian city most primed for improvement, followed by Mumbai in eighth place and Bangalore in 11th, as Indian cities enjoy the benefits of the country’s thriving global services industry and its greater connectivity to the global economy.
As for China, Beijing’s 12th place position on the ECO reflects the fact that the city is already in 8th place in the GCI, where it is extremely difficult to move up in rank. Other cities within mainland China, where the health care (a leading indicator of human capital) is not improving as rapidly as Beijing’s, are less likely to improve their global positioning in the short-term. An increase in patent filings in many of them indicates promise for the future, however.
The GCI and ECO show that global cities need to constantly produce and grow just to compete with one another. Business leaders and investors should not only know which countries to operate in, but which cities to start in as well.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.
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