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1 A report from the Economist Intelligence Unit Hot spots 2025 Benchmarking the future competitiveness of cities Commissioned by

2 Benchmarking the future competitiveness of cities Hot Spots 2025 Contents Executive summary 2 Methodology overview 5 Key fi ndings and selected cities 6 The United States 8 Asia 9 Europe, The Middle East and Africa (EMEA) 11 Latin America 13 Overall 2025 City Competitiveness rankings table 15 Regional fi 19 ndings Appendix: methodology 21 Overview 21 Category and indicator selection 22 Data sources and indicator normalisation 28 Weighting 29 Data modelling 29 City selection 30 1 © The Economist Intelligence Unit Limited 2013

3 Hot Spots 2025 Benchmarking the future competitiveness of cities Executive summary One hundred years ago only two out of ten of the The combined GDP of China and India is l projected to exceed that of the major seven world’s population were living in urban areas. By 1 Despite this, (G7) OECD economies in 2025 . the middle of the 21st century, seven out of ten leading cities in Western countries will continue people will be living in cities. Already global successfully to compete against fast-growing business is beginning to plan strategy from a city, emerging-market cities. rather than a country, perspective. Understandably so: well over half of the world’s population lives in ected in the l Asia’s economic rise is refl cities, generating more than 80% of global GDP. competitiveness of its cities in 2025 . Asian Standard population projections show that virtually cities dominate the economic strength category all global growth over the next 30 years will be in of the City Competitiveness Index. This category, urban areas. The number of people living in the which accounts for 30% of the overall Index— world’s cities is growing by nearly 60m every year. more than any other category—measures how ndings of the research are as follows. The key fi fast a city grows, how rich or poor its citizens are North American and European cities are l and how well a city is integrated into the global among the world’s most competitive today economy. Delhi and Tianjin top the list. All but and are likely to retain their advantage until three of the top 20 cities in this category can be 2025, despite concerns over ageing c region. New York (3rd), found in the Asia-Pacifi populations and infrastructure, indebtedness Doha (16th) and London (19th) are the only and slow growth . While there is much concern non-Asian cities to make the cut. There are nine in the West about the lingering impacts of the Chinese and seven Indian cities in the top 20. nancial crises that have slowed plans for urban fi The dominance of Chinese and Indian cities renewal, this has not reduced the ability of US, ects rising incomes and urbanisation. Indian refl Canadian and European cities to attract capital, cities do particularly well on the measure of businesses and people, which is ultimately what economic strength. This is in part because, much this Index seeks to measure. New York (1st) and like in China’s cities, average incomes will have London (2nd) are rated as the world’s two most doubled by 2025. But more signifi cantly, India competitive cities in 2025, while cities in the is less urbanised than China and will therefore US, Canada and Western Europe account for 21 see many more tens of millions of people with of the top 30 cities. Singapore (3rd), Hong Kong middle-class aspirations move from the rural (4th) and Tokyo (5th) retain their position as 1 Looking to 2060: Long-term growth prospects for the world , OECD, globally competitive centres. 2012. 2 © The Economist Intelligence Unit Limited 2013

4 Benchmarking the future competitiveness of cities Hot Spots 2025 areas to its cities. Apart from Delhi (1st) and particularly poorly, with South Africa providing Mumbai (7th), Chennai (10th), Bangalore and the only decent contenders, such as Pune (joint 11th), Hyderabad (13th) and Johannesburg (66th), Cape Town (77th) and Ahmedabad (14th) make the top 20 on the Durban (95th). In northern Africa, Cairo (106th) measure of sheer economic might. ts from the economic power derived from benefi its sheer size in 2025. In Latin America, major l The quality of institutions matters greatly for Brazilian cities—São Paulo (36th), Rio de cities’ economic competitiveness . There is a Janeiro (76th) and Porto Alegre (97th)—will strong correlation between the quality of a city’s have improved their competitiveness institutions and its overall competitiveness. This signifi cantly in 2025. All three cities are among makes sense: a city’s ability to tax, plan, the top 15 risers in the overall Index rankings. legislate and enforce laws and its willingness to Their rise, combined with the relative stagnation be held accountable by its citizens require of African cities’ competitiveness, will be seen as strong institutions. Five American cities top the vindication by those who argue that Brazil list in this category: Seattle, New York, San rightly belongs to the select club of BRIC Francisco, Dallas and Washington DC. In all, 11 countries (Brazil, Russia, India and China)— out of the top 20 cities rated best in the famously predicted by Jim O’Neill, a former institutional character category join the top 20 economist at Goldman Sachs, to be among the in the overall Index. Among the top 20 for dominant economies by 2050—which have come ve developed cities institutional character are fi to symbolise the shift in global economic power in Asia-Pacifi c: Hong Kong, Taipei, Incheon, away from the developed G7 economies. Sydney and Auckland. Not a single city in l Easy maritime access helps cities rapidly to developing Asia makes the top 20. At the other ascend in the overall rankings . Nine out of ten end of the spectrum, cities rated poorly on of the fastest risers (led by São Paolo) in terms institutional character in 2025 are also the least of improvement on the overall competitiveness competitive overall. measure are seaports or have easy maritime . The top Cities of all sizes can be competitive l access. (Incidentally, only three of the top risers ten most competitive cities in 2025 range from are capital cities.) The reverse is true for cities the world’s biggest (Tokyo, with an estimated that have seen the steepest fall in their population of 37m) to some of the smallest competitiveness ranking. The vast majority of (Zurich, estimated population 1.4m). Indeed, them are either landlocked or face substantial there is no major correlation between a city’s challenges in their access to major seaports. size and its competitiveness ranking in the ndings support a broad trend: a second These fi Index. Densely populated small city states such tier of cities, often propelled by demographics as Singapore (3rd) and Hong Kong (4th) will be and favourable geography, is becoming more among the most competitive places in 2025, competitive and closing the gap with its well- along with Sydney (6th) and Stockholm (8th), established rivals. The port city and Omani which are spread out over a large geographical capital Muscat (ranked 64th) rises faster than area. any other city in the Middle East. Saint Petersburg (92nd), Russia’s trade gateway to l African cities lag most on competitiveness, the West, improves its overall ranking, while while major cities in Latin America improve Panama City (65th) owes its very existence to . All regions have leaders and laggards in theirs maritime trade through the Panama Canal. terms of competitive cities. Africa performs 3 © The Economist Intelligence Unit Limited 2013

5 Benchmarking the future competitiveness of cities Hot Spots 2025 l The quality of a city’s physical capital is eight sub-categories that make up the Index. highly correlated with its overall Two Chinese cities, Shanghai and Beijing, . Statistically, the correlation competitiveness ascend to the top 20 in terms of their physical between a city’s competitiveness and the capital in 2025 and are among a group that is otherwise dominated by a mix of rich, well- ned in the quality of its physical capital—defi established global cities. Eleven of them are Index as the quality of physical infrastructure, also among the 20 most competitive overall. public transport and telecommunications infrastructure—is the strongest among the 4 © The Economist Intelligence Unit Limited 2013

6 Hot Spots 2025 Benchmarking the future competitiveness of cities Methodology overview Competitiveness is a holistic concept. While indicators for each city. Indicators are grouped economic size and growth matter, several other into eight distinct, thematic categories and factors determine a city’s competitiveness, assigned weights: economic strength 30%, including its business and regulatory environment, physical capital and fi nancial maturity 10% each, its institutions, the quality of human capital, institutional character and human capital 15% cultural aspects and the quality of environmental each, global appeal 10%, social and cultural governance. These factors not only help a city to character 5%, and environment and natural sustain high economic growth, but also secure its hazards 5%. future competitiveness. The Index includes a total of 27 qualitative and Against this backdrop, the Economist fi ve quantitative indicators. nes a city’s competitiveness Intelligence Unit defi A city’s overall ranking in the benchmark Index as its ability to attract capital, businesses, talent is a weighted score of the individual categories. For and visitors. The 2025 City Competitiveness Index a full breakdown of the categories, individual benchmarks the competitiveness of 120 cities indicators and sub-indicators, weightings and data across the world at two distinct points in time: sources, see the Appendix. today and in 2025. We do so by examining 32 5 © The Economist Intelligence Unit Limited 2013

7 Hot Spots 2025 Benchmarking the future competitiveness of cities Key fi ndings and selected cities Major cities in India, Brazil and Russia are expected to improve their competitiveness and catch up to many cities in the developed world . Six of the top 25 most improved cities in terms of their overall competitiveness ranking are located in BRIC countries (bar China). Of these, three—São Paulo, Mumbai and Saint Petersburg—are in the top fi ve. Delhi, Rio de Janeiro and Porto Alegre complete the list of major cities from the BRIC economies. There is no Chinese city among the top 25 most improved cities. This refl ects the progress that Chinese cities have already made and the fact that many cities in India and Brazil still have a bit of catching up to do before they can match the competitiveness of their Chinese rivals. São Paulo (36th), the Index’s most improved, is also the most competitive city among the BRIC countries. Shanghai (38th) comes in second, Beijing ranks 49th, while Mumbai, India’s commercial capital, ranks 51st. Delhi, India’s capital city, ranks 56th. South Africa and Indonesia, countries with the ambition of becoming the new “S” and “I” in an enlarged BRIICS, do not have a city in the top half of the Index in terms of overall competitiveness in 2025. Their leading contenders, Johannesburg (66th) and Jakarta (74th), just fall short. The top movers or most improved cities in terms of their competitiveness are São Paulo, Incheon and Mumbai. São Paulo , Brazil’s commercial and fi nancial capital, is the most improved city in the Index. The city leapfrogs from the bottom half of the table today to 36th place in 2025. A young and rapidly growing workforce, a good telecommunications infrastructure, and the city’s openness are behind the surge in its competitiveness. Well-established democratic transitions and stable democratic institutions underpin its attractiveness for fi rms and nancial maturity, the completion of a high-speed rail link to people. Easy port access and fi 6 © The Economist Intelligence Unit Limited 2013

8 Hot Spots 2025 Benchmarking the future competitiveness of cities Rio de Janeiro, a low risk of natural disasters, and its overall openness account for São Paulo’s competitive edge in 2025. ranks 43rd and is the second biggest mover in the 2025 City Competitiveness Incheon Index. South Korea’s third largest city has been one of the main engines behind the country’s rapid economic development. Investments in a world class port, transport infrastructure and the development of the Incheon Free Economic Zone have all resulted in the city becoming a commercial, business, logistics and leisure hub for all of northeast Asia. It scores particularly well in quality of its physical capital (physical infrastructure, public transport and telecommunications), institutional character (particularly local government fi scal autonomy, electoral process and government effectiveness), low risk of natural disasters, human capital (quality of education and healthcare) and global appeal (frequency of international fl ights). Mumbai , India’s commercial capital, comes third in terms of improved competitiveness. The city improved its rank to 51st in the overall Index. This surge in competitiveness is nancial maturity and driven by Mumbai’s sheer economic strength and its improved fi cultural vibrancy. Unlike São Paulo, which improves in all categories, Mumbai is losing out to other cities in an astonishingly large number of categories: physical capital (88th), institutional character (joint 76th), environment and natural hazards (joint 102nd), global appeal (73rd) and human capital (84th). Jakarta edges up two ranks to 74th position on the overall Index. Its competitiveness improves signifi cantly owing to its rising economic strength, its unrivalled position as a fi nancial centre of a vast archipelago, and better connectivity with the region and the world. It is held back by its geography, its liability to fl ooding and the vast gap it will have to close to counter decades of chronic underinvestment in its defences. Although its importance as Indonesia’s capital and largest city will only rise, Jakarta fares relatively poorly in higher education development and regional market integration. 7 © The Economist Intelligence Unit Limited 2013

9 Benchmarking the future competitiveness of cities Hot Spots 2025 ight effectiveness, the quality of healthcare and fl connectivity. l Washington DC is America’s third most competitive city and ranks 14th in the overall America’s capital is a good all-round Index. performer. It scores particularly well in the categories institutional character (joint 4th), social and cultural character (joint 6th) and nancial maturity (joint 32nd). The city is seen as fi THE UNITED STATES one of the worst US cities in terms of traffi c congestion and waiting times, and investment in l New York is the most competitive city today and physical capital (joint 31st) is currently not a will remain so in 2025. The city makes gains in priority. There has been a dramatic improvement in almost all major categories. It tops the ranking in the telecommunications infrastructure, with a rise terms of fi nancial maturity and is among the most in broadband adoption and Wi-Fi spots, making competitive on institutional character (2nd) and Washington a “wired city to watch”. Education is a economic strength (3rd). While building on its priority, but healthcare much less so, and relative nancial capital and a strength as the world’s fi to other cities Washington descends in the magnet of opportunity for people from America and rankings on both counts. The capital, one of the beyond, the city owes its competitive edge in 2025 wealthiest US cities, is still seen by Americans as to improvements in other areas. New York’s one of the best places to live. environmental governance still lags behind other Los Angeles ranks 17th on the overall Index, l cities, but its NYC 2030 plan sets out a credible ascending by seven places between 2012 and blueprint for improvement. The quality of The city is the second most competitive US 2025. healthcare, although not among the best globally, city in terms of economic strength (ranked 27th improves in 2025, pushing up the city’s ranking in globally). It is one of the largest and most diverse the human capital category by 20 places to 27th. jurisdictions in the US and ranks third in North Chicago ranks ninth in the overall Index and is l America on global appeal (21st overall). The city America’s second most competitive city after New scores particularly well in the category social and As America’s second most important fi nancial Yo rk . cultural character (joint 6th), a refl ection of its hub after the Big Apple, Chicago ranks 20th in the cultural diversity, openness and tolerance. Like category of fi nancial maturity. It ranks above any scal many of its peers the city struggles with fi other US city on its environmental governance and constraints, but is projected to improve in terms of ability of dealing with environmental challenges its government effectiveness. Continuous upgrades (joint 4th). Its public transport plan runs until to the infrastructure of its port help to protect the 2040, and its water management plan controls c city’s position as a trade gateway to the Pacifi water quality, supply and demand through to 2050. Rim. By far the biggest improvement, moving up 43 The city’s economy is projected to grow by an ranks in 2025, is seen in the category environment average of 3% per year, roughly on par with San and natural hazards (52nd). The City of Los Angeles Francisco and Washington DC. The city has a long has credible and long-term water and air quality history of attracting immigrants and ranks 15th improvement strategies in place and is committed globally on social and cultural character. Other to improving environmental governance and a components that underpin its competitiveness are performance-based budgeting system, which it projected improvements in government introduced in 2012. 8 © The Economist Intelligence Unit Limited 2013

10 Hot Spots 2025 Benchmarking the future competitiveness of cities San Francisco is ranked 18th in the overall l fth most competitive city in the Index and the fi It is the second best performer on North US. America’s West Coast, behind Los Angeles (17th), but ahead of Vancouver (28th) and Seattle (35th). The city performs particularly well in the category institutional character (joint 2nd). As a specialised global hub for IT venture capital and private equity, it ranks joint 32nd in terms of its fi nancial maturity. San Francisco gains strongly as a result of ASIA improvements in the categories quality of healthcare and government effectiveness. It is l Singapore ranks third overall in the Index and proactive in attracting businesses and provides The city state is the highest-placed Asian city. both quality education and healthcare services to scores particularly well in terms of its physical citizens, with a “Healthy SF Initiative” aiming to capital (ranked joint fi rst overall), fi nancial improve access to healthcare. The city benefi ts rst), and environment and natural maturity (joint fi from its reputation as one of the most liberal and rst) and global appeal (3rd). None hazards (joint fi most accepting cities. cient of this is surprising given the city’s effi transport system, lean bureaucracy, safe and clean environment, and its increasingly high international reputation. The city’s focus on improving the quality of education allowed it to jump 27 places to 10th in the human capital category in 2025. Singapore drops 24 places to 39th in the economic strength category, displaced by the 20-plus cities from developing Asia that dominate the top 30 positions. Singapore’s demographics weigh on its competitiveness: its working-age population is projected to be stagnant at 3.6m between 2012 and 2025, highlighting the need to ensure that the city remains a hub open to the fl ow of people, ideas, capital and goods and services. l Hong Kong ranks fourth overall in the Index. It shares with Singapore many of the features that underpin its competitiveness. Hong Kong is ranked particularly highly in terms of its physical infrastructure (joint fi rst overall), fi nancial maturity (joint fi rst) and global appeal (5th). Like Singapore, however, it is moving down the ranks in the category economic strength in 2025 (ranked 60th, down 39 places). Hong Kong’s income level is below Singapore’s; it is growing more slowly and lags its rival in terms of managing the 9 © The Economist Intelligence Unit Limited 2013

11 Hot Spots 2025 Benchmarking the future competitiveness of cities environment. But Hong Kong is able to fend off in terms of economic strength (17th) as it is Singapore in the category social and cultural overtaken by cities in emerging Asia. Its ageing ts from the effi ciency gains of character and benefi workforce and limited government effectiveness a well-run, densely populated area located on the are also a drag on its competitiveness. Tokyo would have struggled to retain its competitive edge in our southern coast of China, the world’s largest benchmark assessment without an impressive economy in 2025. improvement in its projected ability to cope with natural disasters and environmental governance. l Delhi, India’s capital, is ranked 69th overall in (In this category, Tokyo ascends from the bottom 2012 and rises to 56th place in 2025, by which half of the rankings to joint 36th.) time it will top the global ranking in the economic Delhi’s rise mirrors that of many strength category. Jakarta edges up to 74th place in the overall l large urban areas in India. The city is a magnet of Jakarta scores well in the categories Index. opportunity for companies and people alike. Its economic strength (24th)—a big chunk of shared border with Uttar Pradesh, a state with a economic activity of Indonesia’s 272m-strong population larger than Brazil’s, is a locational population in 2025 is concentrated in Jakarta—and advantage few companies can afford to ignore. fi nancial maturity (32nd). Improving the Delhi’s competitiveness will improve in areas such connectivity of the capital with the vast nancial maturity and social and cultural as fi archipelago that is Indonesia and the world is a character. But rapid, often poorly managed priority of the federal government’s 2025 Economic urbanisation and breakneck economic growth will Masterplan. Jakarta is held back by its topography take their toll. Delhi performs poorly in the (as a low-lying city it is prone to fl ooding) and the environment and natural hazard category, as its chronic underinvestment in its defences. It ranks policymakers struggle to put in place among the worst in the world (114th) in the environmental policies that limit pollution and category of environment and natural hazards. ensure a sustainable supply of water. Although its economic importance as Indonesia’s nancial capital, ranks 51st in Mumbai, India’s fi l primary city will only rise, it scores relatively poorly The city’s surging economic the overall Index. in the categories global appeal (73rd), social and nancial maturity strength (ranked 7th), improved fi cultural character (86th) and human capital (9th) and a better score in the category social and (97th). cultural character (60th) account for the improvement in competitiveness. Unlike its nancial and commercial Brazilian counterpart, the fi capital São Paulo, which recorded improvements in all categories, Mumbai is losing out to competitors in three categories: institutional character (76th), environment and natural hazards (102nd) and global appeal (73th). l Tokyo is ranked 5th in the overall Index and remains Asia’s most competitive city that is not a city state (Singapore third, Hong Kong fourth). Tokyo’s primary strengths are the maturity of its rst) and impeccable fi nancial system (joint fi rst). Tokyo loses out physical infrastructure (joint fi 10 © The Economist Intelligence Unit Limited 2013

12 Benchmarking the future competitiveness of cities Hot Spots 2025 The only category in which London struggles to keep up with the world’s most competitive cities is human capital, in which it is ranked 44th in 2025. l Dubai moves up to 23rd place overall in the . Dubai is one of several cities in the Middle Index East that are among the top climbers in the overall Index—the others are Doha (24th), Abu Dhabi (39th), Muscat (64th), Kuwait City (63rd) and Riyadh (87th). Dubai is a good all-round performer EUROPE, THE MIDDLE EAST AND AFRICA (EMEA) and improves its ranking in seven out of eight categories. Its competitiveness is in part owing to l London ranks second overall in the Index. It is the fact that the city has been planning actively for the only European city—apart from Paris (7th) and a future without petrochemicals for some time. London ranks Stockholm (8th)—in the top 10. Dubai ranks 44th overall on economic strength, particularly well in terms of its fi nancial maturity ecting the rapid growth of its tourism, real refl rst overall), physical capital (joint fi rst) and (joint fi nancial services sectors. Its low-tax estate and fi rst). The city retains its role global appeal (joint fi and pro-business economic philosophy continues as the UK’s and Europe’s leading fi nancial centre. to attract businesses and people as Dubai attempts Notably, London is the only city in the developed nancial to expand its status as a global city and fi world that rises signifi cantly in terms of its and cultural hub of the Middle East and the Persian economic strength between 2012 and 2025 Gulf region. The city, one of seven emirates in the (ranked 19th, up 18 places). The South-East of United Arab Emirates, is making major strides in England is among Europe’s most densely populated terms of competitiveness in the categories of areas, and London’s population is projected to rise nancial maturity (9th), human capital (5th), fi from 8.6m currently to 14.4m in 2025. The city thus global appeal (31st) and physical capital (37th). remains a magnet of opportunity for businesses Its opaque political system and lack of pluralism and people, although a tightening of immigration and diversity limit progress until 2025 in the rules has made hiring foreign nationals more categories institutional character (joint 43rd) and diffi cult. The quality of its physical capital, social and cultural character (joint 78th). compromised by decades of underinvestment, has l Saint Petersburg, Russia’s second city, ranks been given a boost by multi-billion investments in 92nd on the overall Index. Its capital city Moscow the city’s public transport infrastructure as part of ranks 59th. Russia’s gateway to the West is its bid for the London Olympics in 2012. Public among the least competitive in Europe—only transport is a key priority, and the city has been . However, Ankara (103rd) has a lower ranking successful in implementing innovative ways of Saint Petersburg ascends by 15 places, driven by c. London moves up the managing road traffi improvements in the categories of economic overall ranking in the categories of institutional strength (74th), human capital (73rd) and character (12th) and its ability to implement environment and natural hazards (joint 69th). environmentally sustainable policies and mitigate Russia’s only major port on the Baltic Sea is the impact of natural hazards (joint 15th). The expanding, with its population projected to cross provision of quality primary and secondary the 5.1m threshold in 2025 (from 4.6m currently). education and access to affordable healthcare are, The city also improves in the categories physical as any Londoner will tell you, a matter of concern. 11 © The Economist Intelligence Unit Limited 2013

13 Benchmarking the future competitiveness of cities Hot Spots 2025 capital (joint 56th) and fi nancial maturity (joint improve in the category physical capital (69th). 77th). Saint Petersburg improves but still performs The strategy also focuses on measures to improve poorly in the category institutional character nancial maturity (joint 77th) and is the city’s fi scal autonomy, (102nd). The city has very limited fi generally pro-business and pro-investment. The struggles with endemic corruption and lacks city has a vibrant cultural and sporting scene, but political autonomy, with the mayor and many city compared with better-connected global cant infl cials appointed by or under signifi offi uence competitors it scores poorly on the quality of of politicians in the capital Moscow. education and healthcare. The city has a comprehensive disaster management plan in place. Tel Aviv ranks 41st in the overall Index. Its l As a major tourist destination it performs better position improves by 16 places as the city becomes than its African competitors in the category more competitive in the categories human capital environment and natural hazards, but globally it (35th), institutional character (40th) and only ranks joint 81st. economic strength (81st). It performs best in the nancial maturity (joint 20th) and human category fi capital (35th). A fi rm and long-standing commitment to fi rst-class education and universal quality healthcare underpins Tel Aviv’s attractiveness. Despite ongoing political and security concerns the city remains open and tolerant, and its pro-business policies make it attractive to both businesses and people. This attractiveness is refl ected in Tel Aviv’s size (its population is projected to rise by 1m to 4.3m in 2025), and the pace at which its economy is growing (at an annual average of 3.8%, its economy is growing faster than that of many cities with a comparable level of income). Cape Town’s rank moves to 77th in the overall l Cape Town is South Africa’s second most Index. competitive city after Johannesburg (66th), but notably outranks Johannesburg and all other ve out of eight African cities in the Index on fi categories. In terms of overall competitiveness, the economic strength (98th) of South Africa’s third most populous city is lower than some other regional cities, owing to its slower growth rate. Its high score in the institutional character category ects Cape Town’s high degree of fi (28th) refl scal autonomy, simple tax code, transparent electoral process and improved government effectiveness. The city’s development strategy includes investment in port infrastructure and public transport and telecommunications, allowing it to 12 © The Economist Intelligence Unit Limited 2013

14 Benchmarking the future competitiveness of cities Hot Spots 2025 and commercial capital is projected to struggle in tackling environmental challenges that will only worsen as the city’s economy grows (annual GDP growth is expected to accelerate from an average of 2.7% to 3.5% during 2012-25). The challenges include poor air quality and chronic water shortages. The city’s global rank deteriorates in four categories: drags on its competitiveness are worsening scores in the categories global appeal (54th) and human capital (65th), an uneven institutional character (89th), and the relatively LATIN AMERICA poor quality of its physical capital (joint 95th). Individual factors that limit the city’s l São Paulo is the most improved city in the competitiveness are a quota system for foreign nancial overall ranking. Brazil’s commercial and fi workers, a decline in its working-age population, capital ascends from the bottom half of the corruption and relatively poor governance, and low overall rankings table today to 36th place in educational attainment. . The city’s rank improves in seven out of eight 2025 categories. Its ascent is fuelled by improvements in Santiago ranks 60th in the overall Index. The l nancial maturity (ranked joint 9th the categories fi Chilean capital is the second most competitive overall), institutional character (54th), physical city in Latin America after São Paulo (36th). capital (60th) and human capital (77th). A young Santiago’s competitiveness improves on the back and rapidly growing workforce, good of its growing economic strength (56th)—the city’s telecommunications infrastructure and improved population is expected to grow by more than 1m to government effectiveness drive the surge in 7.1m in 2025. The city scores better than in any competitiveness. Other factors underpinning São other category on the quality of its physical capital Paulo’s competitive edge in 2025 are its massive (24th). It benefi ts from a well-developed and growing port and rising fi nancial might, the telecommunications infrastructure and the completion of a high-speed rail link to Rio de government’s continued focus on investment in the Janeiro, a low risk of risk of natural disasters, and areas that shaped the city: maritime transport and the city’s overall openness and diversity. São commerce. The government plans to double the Paulo’s growing economic strength (50th) matters city’s airport capacity by 2030, a step that will as well. However, in contrast to Mumbai, the third mitigate the city’s relative isolation, which is most improved city in the Index, sheer economic ected in its limited global appeal currently refl size and growth is not the primary driver behind (65th). Santiago’s rank improves in the categories this improvement in competitiveness. fi nancial maturity (joint 32nd) and environment l Mexico City ranks 72nd in the overall Index . and natural hazards (joint 85th). Despite having higher income levels than most of Panama City ranks 65th in the overall Index. It l fth its regional competitors, the city is only the fi ranks third in terms of competitiveness in South most competitive in South and Central America. and Central America after São Paolo (36th) and Mexico City’s performance is mixed. It makes up Panama City does particularly well Santiago (60th). ground in four categories: fi nancial maturity (joint in the category economic strength (48th), on 20th), economic strength (59th), social and which it beats all of its peers in Latin America. This cultural character (joint 67th) and environment is because, despite its tiny population of 1.4m, it is and natural hazards (joint 81st). Mexico’s political 13 © The Economist Intelligence Unit Limited 2013

15 Hot Spots 2025 Benchmarking the future competitiveness of cities growing at rates only seen in developing Asia (the population is projected to rise to 2m in 2025). The future of the Panama Canal, on which the city’s future depends, is secure. Under the 2005-25 Logistics and Transport Masterplan, post-Panamax- size ships will traverse the canal starting in 2015, in effect doubling its capacity. A trade agreement with the US, its biggest trading partner, will further improve the trade integration of Panama City’s dollarised economy with that of the US. The city government has ambitious plans to create a fi rst- class public transport system by 2030, but limited government effectiveness and high levels of corruption will make implementation tricky. Already a leader in the fi eld of telecommunications in Latin America, improvements in the quality of the telecoms infrastructure help the city to improve its ranking in the category physical capital (joint 56th). Panama City’s fi nancial maturity (joint 56th) remains mixed, despite government efforts to get the OECD to remove Panama City from its grey list of tax havens. 14 © The Economist Intelligence Unit Limited 2013

16 Benchmarking the future competitiveness of cities Hot Spots 2025 Overall 2025 City Competitiveness rankings table Weighted total of all category scores (0-100 where 100=most favourable) Rank Change Change Score/100 2025 from 2012 from 2012 City 1 75.7 +7.1 New York +1 2 London 73.1 +5.3 +4 3 71.2 +0.6 -2 Singapore -1 68.1 +0.1 4 Hong Kong Tokyo 68.0 -0.1 5 -2 +2 6 67.3 +4.5 Sydney 7 Paris 67.0 -0.9 -2 +5 65.7 +5.7 8 Stockholm 9 +3 Chicago 65.6 +4.6 - Toronto 64.7 10 +2.6 =11 Taipei 64.1 +6.5 +14 =11 Zurich 64.1 - -4 13 -2 Amsterdam 63.8 +2.0 14 +3 63.2 +4.0 Washington +6 63.0 +4.9 =15 Copenhagen =15 +7 Seoul 63.0 +5.0 +7 Los Angeles 62.7 +5.0 17 18 +1 62.5 +4.0 San Francisco -3 Boston 19 +2.7 62.3 =20 -11 Frankfurt 62.0 -0.3 =20 -6 Melbourne 62.0 +2.2 22 +5 61.4 +4.3 Dublin +6 Dubai 23 +5.2 61.3 24 +14 Doha 61.1 +6.3 25 +1 Brussels 61.0 +3.6 26 Oslo 60.8 +5.4 +8 27 +2 Houston 60.7 +4.7 28 -5 Vancouver 60.6 +2.8 15 © The Economist Intelligence Unit Limited 2013

17 Benchmarking the future competitiveness of cities Hot Spots 2025 Rank Change Change 2025 from 2012 City Score/100 from 2012 +0.6 60.4 Vienna -15 29 59.4 -10 30 +1.0 Geneva 31 +4.3 58.9 Kuala Lumpur +8 +2.9 Dallas +1 32 58.6 +9 33 +4.2 58.1 Atlanta 57.7 Berlin +2 +2.8 34 +2.2 35 -1 Seattle 57.6 +0.7 =36 -8 Montréal 57.5 +9.6 57.5 =36 +25 São Paulo 38 +1.3 57.3 Shanghai -6 57.2 +3.1 39 +2 Abu Dhabi 56.5 40 +10 Miami +5.9 56.1 41 +16 Tel Aviv +6.7 +0.1 56.0 Auckland -11 42 55.8 =43 +3 +3.5 Birmingham =43 +7.6 55.8 Incheon +17 55.8 Warsaw +6 =43 +5.0 55.7 +2.2 =46 -2 Hamburg -3.0 55.7 Madrid -28 =46 55.0 +0.5 Philadelphia -8 48 Beijing 54.9 +0.1 49 -13 +4.0 54.5 Osaka - 50 Busan =51 +12 54.3 +6.9 +7.8 54.3 Mumbai +16 =51 54.0 -5 53 +2.1 Budapest 54 +1.8 53.9 Prague -7 53.6 Barcelona -13 55 -0.1 53.3 +7.8 56 +13 Delhi 53.1 57 +1 Lisbon +3.8 53.0 58 -0.3 -13 Milan +3.9 52.5 Moscow - 59 Monaco 52.1 +4.4 =60 +2 +5.9 52.1 Santiago +8 =60 Bangkok -9 62 52.0 +2.1 63 +12 Kuwait City 51.7 +6.7 +14 Muscat +7.2 64 51.4 +3.4 50.8 Panama City -2 65 Johannesburg 50.5 +3.5 66 -1 +0.4 49.9 Buenos Aires -11 67 16 © The Economist Intelligence Unit Limited 2013

18 Benchmarking the future competitiveness of cities Hot Spots 2025 Rank Change Change 2025 from 2012 City Score/100 from 2012 -0.5 49.8 Rome -16 68 49.4 -0.5 69 -16 Shenzhen 70 +3.9 49.3 Istanbul +1 +3.9 Fukuoka - 71 49.2 +1 72 +4.0 49.0 Mexico City 48.6 Nagoya -18 -1.2 73 +3.1 74 +2 Jakarta 48.1 +4.6 75 +8 Lima 48.0 47.6 76 Rio de Janeiro +5.8 +13 +4.8 47.4 Cape Town +10 77 47.3 +3.3 78 +2 Athens Manila 79 +12 47.1 +5.7 46.9 80 -3 Bucharest +2.5 +1.2 46.7 Tianjin -12 81 46.4 82 +6 +4.3 Qingdao =83 +2.5 46.1 Dalian -2 46.1 Suzhou (Jiangsu) -1 =83 +2.6 45.8 +2.6 85 - Bogotá +1.2 45.4 Chengdu -8 86 45.3 +0.3 Kraków -14 =87 Riyadh 45.3 +6.3 =87 +11 -1.4 45.2 Guangzhou -23 89 Kiev 90 +13 44.9 +7.2 +5.4 44.4 Medellín +7 91 44.1 +15 92 +7.1 Saint Petersburg 93 +2.4 44.0 Hangzhou -3 43.6 Bangalore -8 94 +1.0 42.9 +2.9 95 -2 Durban Ho Chi Minh City 96 - 42.3 +2.9 +4.8 Porto Alegre 41.7 97 +12 -2.4 41.0 Chongqing -15 98 Pune 40.9 +2.7 99 +2 +1.6 40.6 Hyderabad -2 100 Chennai +4 =101 39.7 +2.3 =101 -6 Monterrey 39.7 +0.1 - Ankara +2.0 103 39.6 -1.0 39.2 Ahmedabad -12 104 Belo Horizonte 38.8 +1.9 105 +3 +3.5 38.5 Cairo +8 106 17 © The Economist Intelligence Unit Limited 2013

19 Benchmarking the future competitiveness of cities Hot Spots 2025 Rank Change Change 2025 from 2012 City Score/100 from 2012 -1.0 38.3 Almaty -11 107 38.2 108 -6 +0.2 Colombo 109 +0.5 38.1 Kolkata -4 37.4 Bandung +5 110 +3.3 37.0 +0.8 111 -1 Karachi -3.1 36.9 Hanoi -19 =112 36.9 +1.0 Nairobi -1 =112 Surabaya 35.8 +0.1 114 -1 -0.8 35.0 Guadalajara -3 115 Dhaka - 116 34.9 +3.5 +4.6 34.6 Alexandria - 117 Beirut +2.4 -1 118 32.4 Lagos 29.0 +0.1 119 - -1.6 25.0 Tehran - 120 18 © The Economist Intelligence Unit Limited 2013

20 Hot Spots 2025 Benchmarking the future competitiveness of cities ndings Regional fi One of the fi ndings revealed by the 2025 City Mapping city competitiveness Competitiveness Index is the fact that very few of The hotspots of competitiveness in 2025 are the most competitive cities can do without three concentrated in North America, Europe and a things: a high level of income, favourable handful of advanced economies in Asia and the demographics and access to quality seaports. c region. Despite rapid growth in Africa and Pacifi l A city’s access to and quality of seaports are Latin America, there is a vast competitiveness gap particularly good predictors of its between their best-performing cities (São Paulo: . Almost every single city in the competitiveness 36th, Johannesburg: 66th) and those in the top 50 of the Index is rated “excellent” or “very developed world. good” in the category access to and quality of North American cities dominate the list of the seaport(s). The three notable exceptions are most competitive cities in the 2025 Index. Six of Delhi, India’s landlocked and hugely populous the top 20 are US cities: New York (1st), Chicago capital city, Atlanta and Philadelphia. (9th), Washington DC (14th), Los Angeles (17th), Money matters l . Only two cities among the top San Francisco (18th) and Boston (19th). One 40 in the overall ranking—Dubai (23rd) and Canadian city, Toronto, falls into the top 20, Kuala Lumpur (31st)—fail to make the top 40 in ranked at 10th. terms of income per head, a category in which Europe , with seven of the 20 best-performing cities, Dubai ranks 56th and Kuala Lumpur joint 77th. is another hotspot of competitiveness. However, a Demography matters . The faster a city grows, l closer look reveals a “competitiveness divide” the more likely it is to ascend in the overall between northern and western Europe on the one ranking. hand, and southern and eastern Europe on the other. The top 15 cities in Europe are those that are located in the core of the eurozone (Paris, Amsterdam), plus Copenhagen, London, Stockholm and Zurich. The bottom half are located in eurozone countries that have been hit particularly hard by the euro crisis (Madrid, Rome, Lisbon and Athens among them) or in new EU member states (or countries that aspire to join the EU) such as Bucharest or Ankara. 19 © The Economist Intelligence Unit Limited 2013

21 Benchmarking the future competitiveness of cities Hot Spots 2025 cities continue to face the biggest African bourgeoning cities of Delhi and Mumbai may competitiveness challenges of all regions. They are appear to suggest otherwise) that there is no spread across the bottom half of the overall Index. automatic correlation between rapid urbanisation The three top performers are Johannesburg and population growth and competitiveness as (ranked 66th), Cape Town (77th) and Durban defi ned in the 2025 City Competitiveness Index. (95th). And there is a concentration at the very Middle East , cities in the member states of bottom: Cairo (106th), Nairobi (112th), Alexandria In the the Gulf Co-operation Council perform well: the (117th) and Lagos (119th). top performers are Dubai (23rd), Doha (24th) and Asia ’s cities are a source of growth and a magnet of Abu Dhabi (39th)—all of them are among the opportunity for businesses and people alike, but most improved cities in the overall index. Tel Aviv, here, too, there is a competitiveness divide. The too, improves between 2012 and 2025 and is most competitive Asian cities in 2025 are spread ranked 41st. across the four “Asian Tigers” (Seoul and Incheon BRIC countries in South Korea, Taipei in Taiwan, Hong Kong and Finally, a number of cities in the are on the verge of becoming hotspots of Singapore) and the advanced economies of the competitiveness. Six of the top 25 most improved region (Tokyo, Sydney and Melbourne). The best- cities—São Paulo, Delhi, Mumbai, Saint performing Chinese city is Shanghai (38th). The region is led by Kuala Lumpur South-East Asia Petersburg, Rio de Janeiro and Porto Alegre, are (31st). Other rapidly growing cities in the region, located in Brazil, Russia and India. There is no such as Bangkok (62nd), Jakarta (74th) and Hanoi Chinese city among the top 25 most improved South (112th), are struggling to keep pace. In cities, which refl ects the fact that despite the , the Indian cities of Delhi (56th) and Mumbai Asia progress that many cities in India and Brazil have (51st) show signifi cantly increased already made, they will still have some catching competitiveness. The low ranking of Dhaka up to do before they can match the (116th), one of the world’s fastest-growing cities, competitiveness of their Chinese rivals. is a reminder (although the ascent of the 20 © The Economist Intelligence Unit Limited 2013

22 Hot Spots 2025 Benchmarking the future competitiveness of cities Appendix Methodology compared with 18.9m people living in the New Overview York-Northern New Jersey-Long Island The 2025 Global City Competitiveness Index metropolitan area. Typically, an urban measures the competitiveness of 120 cities. In its ned as agglomeration or metropolitan area is defi broadest form, competitiveness is defi ned as a the continuous area encompassing the city proper city’s ability to attract capital, businesses, talent and smaller cities or towns close to the city’s and people. The Index benchmarks the boundaries at comparable urban density levels competitiveness of cities at two points in time: (World Urbanisation Prospects, United Nations, today and in 2025. 2009). In the context of this benchmark, “city” is The Index scores each city across eight defi ned as the urban agglomeration or categories: economic strength, physical capital, metropolitan area it holds together. fi nancial maturity, institutional character, social The 120 cities included in the Economist and cultural character, human capital, Intelligence Unit’s assessment were the same as environmental and natural hazards and global those analysed in the previous Index. For that appeal. These eight categories are composed of a study, we selected cities on the basis of their size total of 32 indicators (as well as 17 sub-indicators). and regional economic importance. Data A city’s overall ranking in the Index is a weighted availability was a consideration too. To build a score of the underlying categories. rst considered all relevant set of global cities, we fi The eight category scores are calculated from cities with populations estimated at over 1m in the weighted mean of underlying indicators and 2010. From this selection, we excluded cities with scaled from 0-100, where 100=most favourable. an estimated nominal GDP of less than US$20bn in The overall score for the 2025 Index (from 0-100) 2008 (the most recent year for which comparable is calculated from a simple weighted average of the data were available). To ensure a balanced category and indicator scores. regional representation, we established an upper limit on the number of cities for several large Defi nition economies: China (12 cities), India (8 cities), and Today cities are no longer limited to their political the US (12 cities). Finally, the EIU analyst team boundaries. They are rapidly metamorphosing into reviewed the list and included established bigger urban agglomerations or metropolitan fi nancial and commercial centres (for example, areas, with the city proper at the core. New York Geneva), as well as important emerging cities City, for example, has a population of only 8.2m, (such as Ahmedabad, Ho Chi Minh City, Nairobi, 21 © The Economist Intelligence Unit Limited 2013

23 Hot Spots 2025 Benchmarking the future competitiveness of cities Panama City), which did not meet our initial stable institutional environment is often cited as criteria of population and GDP size. To preserve developed markets’ key advantage. Both are analytical rigour, we limited our selection for important and, therefore, human capital and benchmark assessment to 120 cities. institutional effectiveness categories carry substantial weights (15% each) in our benchmark Categories and indicator selection assessment. A city’s physical infrastructure, We assessed 32 indicators across eight thematic fi nancial maturity and global appeal help categories: economic strength, physical capital, ciently. While concerns businesses to operate effi fi nancial maturity, institutional character, social around accessibility and connectivity are becoming and cultural character, human capital, less urgent with the growing use of technology, environment and natural hazards and global these factors remain important in driving a city’s appeal. The benchmark includes 27 qualitative and competitiveness. The categories physical capital, ve quantitative indicators. fi fi nancial maturity and global appeal have each The EIU research team assigned category and been assigned a 10% weight. indicator weights after consultations with internal Although not a necessary condition for and external experts. The economic strength of a competitiveness, the social and cultural character city (GDP size, pace of growth, income levels) is of a city plays an important role in shaping its undisputedly a key driver of attractiveness. attractiveness for talent and visitors. This category Investors follow sizeable and growing markets. has been weighted at 5%. With the growing Therefore, we have given a relatively higher weight incidence of natural disasters, investors are (30%) to the economic strength category, with a increasingly building locational risks into their city’s real GDP growth rate as the dominant operational strategies. Equally, the environmental indicator. quality of cities is increasingly being compared and Both demographic and institutional benchmarked as cities lead their countries’ charge underpinnings are important determinants of against climate change. Taking note of this trend, competitiveness. While emerging economies boast our benchmark framework includes environment of their demographic dividend, developed markets and natural hazards as a category with a 5% weight. have to resort to allowing increased levels of The following table provides a brief description migration to deal with a shrinking workforce. A of indicators, data sources and weights. CATEGORY WEIGHTS 2025 2012 ECONOMIC STRENGTH 30 30.0% 30.0% 10 10.0% PHYSICAL CAPITAL 10.0% FINANCIAL MATURITY 10 10.0% 10.0% INSTITUTIONAL CHARACTER 15 15.0% 15.0% SOCIAL AND CULTURAL CHARACTER 5.0% 5.0% 5 HUMAN CAPITAL 15 15.0% 15.0% ENVIRONMENT AND NATURAL HAZARDS 5 5.0% 5.0% 10.0% GLOBAL APPEAL 10 10.0% 22 © The Economist Intelligence Unit Limited 2013

24 Hot Spots 2025 Benchmarking the future competitiveness of cities 2025 INDICATOR WEIGHTS 2012 ECONOMIC STRENGTH 5 27.8% 27.8% Real GDP (US$, 2005 prices) Real GDP per capita (US$, 2005 prices) 11.1% 2 11.1% 0 n.a. 0.0% HHs with annual consumption >US$14,000 (PPP) City real GDP growth rate 50.0% 50.0% 9 Regional market integration 11.1% 11.1% 2 PHYSICAL CAPITAL 6 42.9% Quality of physical infrastructure 42.9% Quality of public transport 2 14.3% 14.3% Quality of telecommunications infrastructure 6 42.9% 42.9% FINANCIAL MATURITY nancial cluster 75.0% 75.0% Breadth/depth of the fi 9 0 0.0% 0.0% Location of the Central Bank 0 0.0% 0.0% Location of EXIM bank/agency Location of the country’s main stock exchange 3 25.0% 25.0% INSTITUTIONAL CHARACTER Electoral process and pluralism 14.3% 14.3% 5 Local government fi scal autonomy 10 28.6% 28.6% Taxation 5 14.3% 14.3% Rule of law 5 14.3% 14.3% 10 Government effectiveness 28.6% 28.6% SOCIAL AND CULTURAL CHARACTER 20.0% Freedom of expression and human rights 20.0% 1 Openness and diversity 1 20.0% 20.0% Presence of crime in the society 20.0% 1 20.0% 2 40.0% 40.0% Cultural vibrancy HUMAN CAPITAL 3 16.7% 15.0% Population growth Working-age population (% of total population) 2 10.0% 11.1% 0 n.a. 0.0% Entrepreneurship and risk-taking mindset 8 40.0% 44.4% Quality of education 10.0% 2 11.1% Quality of healthcare Hiring of foreign nationals 3 16.7% 15.0% 2 n.a. Women’s Economic Opportunity 10.0% ENVIRONMENT AND NATURAL HAZARDS Risk of natural disasters 33.3% 33.3% 2 Environmental governance 4 66.7% 66.7% GLOBAL APPEAL Global business attractiveness 25.0% 25.0% 1 International fl ight ranking 1 25.0% 25.0% Conference/convention development 1 25.0% 25.0% Higher education leadership 1 25.0% 25.0% 0.0% Globally-renowned think-tanks 0 n.a. 23 © The Economist Intelligence Unit Limited 2013

25 Hot Spots 2025 Benchmarking the future competitiveness of cities 2025 SUB-INDICATOR WEIGHTS 2012 Quality of physical infrastructure Quality of road network in the city 41.7% 5 41.7% 41.7% 41.7% Quality of regional or international links 5 Access to and quality of seaport(s) 16.7% 2 16.7% Taxation 50.0% 50.0% Tax complexity 1 1 50.0% Standard VAT rate 50.0% Government effectiveness 1 25.0% 50.0% Corruption 1 Effectiveness in policy formulation 25.0% 50.0% n.a. 0.0% 0 Quality of bureaucracy 1 25.0% n.a. Orderly transfers 1 25.0% n.a. Transparent performance indicators Presence of crime in the society Prevalence of petty crime 1 50.0% 50.0% 1 50.0% 50.0% Prevalence of violent crime Risk of natural disasters Disaster management/business continuity plan 1 n.a. 33.3% 1 33.3% Physical exposure to natural hazards n.a. 33.3% 1 Susceptibility to climate change n.a. Environmental governance 1 33.3% Water quality monitoring 33.3% Waste strategy 33.3% 33.3% 1 1 Air quality code 33.3% 33.3% Quality of air in the city/pollution 0 n.a. 0.0% Note on comparability with the 2012 City Economic strength (30%) This category captures the speed at which a city’s Competitiveness Index GDP is growing, the size of the national economy Although the vast majority of categories and and the level of development measured by indicators are the same as in the previous year’s income per head. Large and fast-growing City Competitiveness Index, the actual scores are markets tend to be more successful in the not the same, as the specifi c indicator weightings competition to attract capital, fi rms and people. were shifted following the removal of certain The economic strength category comprises four indicators (such as globally renowned think-tanks, sub-categories with different weights. A city’s real entrepreneurship and risk-taking mind-set, etc). GDP growth carries a weight of 50%. This is Such indicators were removed owing to the followed by the speed at which the national culty in forecasting them to 2025. As a result, diffi economy is growing (real GDP growth, 27.8%), the the remaining indicators were reweighted; the average income level at country level (measured by updated weightings are described below. Thus, the real income per head, 11.1%) and the extent to 2012 rankings given in this Index will differ slightly which the city is economically integrated with from the rankings given in last year’s version. regional economies through trade or other agreements (regional market integration, 11.1%). 24 © The Economist Intelligence Unit Limited 2013

26 Benchmarking the future competitiveness of cities Hot Spots 2025 All income-related data have a base year of 2005 Yen Group’s 2012 Global Financial Centres Index 12 and originated from city-level GDP fi gures from the (GFCI). GFCI is a barometer that seeks to track last study. The relationship between historical GDP nancial movements in the competitiveness of fi growth rates of each city and the wider country was centres around the world. It uses assessments by established using regression analysis. The results nancial service professionals to rank fi fi nancial of this analysis enabled us to forecast city-level clusters based on their breadth, depth and outlook. GDP using the EIU’s country-level GDP growth The results of this review were also augmented with forecasts, which were then adjusted on a city-by- nancial expert opinion on the likely trajectory of fi city basis by our analyst team. market development. The indicator scores are Regional market integration was based on a presented on a scale of 1-7 ( 1=Basic fi nancial careful review of the current regional market infrastructure is missing, 7=Established global status, as well as any potential trade agreements. ). clusters, broad and deep The city was then rated on a scale of 1-5, where Institutional character (15%) 1=The country is not likely to 1=Lowest, 5=Highest ( A city’s ability to tax, plan, legislate and enforce be a member of any regional trade agreement or rules as well as the degree to which citizens can grouping, 5=The country will belong to an economic hold a city’s politicians accountable require union, e.g. the European Union. There will be strong institutions. freedom of movement for goods, people and We identifi ed fi ve factors that play an important capital ). role in shaping a city’s institutional character and Physical capital (10%) effectiveness. They are local government fi scal A city’s infrastructure—ranging from airports, autonomy, government effectiveness, electoral trains and ports to roads, bridges and process and pluralism, taxation, and rule of law. telecommunications networks—is at the heart of scal The sub-indicator local government fi its ability to function and attract businesses and autonomy is a proxy for the degree of people. decentralisation and fi scal autonomy and This category comprises the qualitative ultimately the extent to which a city is in control of assessment of a city’s physical infrastructure, its own fi nances. To assess this, our research team public transport network and telecommunications drew on country profi les published by the Global infrastructure. The indicator scores are presented Observatory on Local Democracy and ). The 1=Intolerable, 5=Acceptable on a scale of 1-5 ( Decentralisation to assign scores of 1-4, which data are based on the EIU’s Global City Liveability were then augmented by further primary and Index and EIU expert assessments, which included 1=No secondary research on local autonomy issues ( review of current and potential plans for scal autonomy exists, scal autonomy, 4=Extensive fi fi infrastructure investment at the national and majority of policy and budgetary decisions are made metropolitan level. ). by the city government The government effectiveness sub-category Financial maturity (10%) looks at four sub-indicators. First, the research Financial maturity determines the ease of access team assessed the likely level of corruption among nance (through for fi rms and a city’s ability to fi 10=Very low, 0=Very high public offi ) cials in 2025 ( the local banking system) productive investment by drawing on the EIU’s long-term economic and allocate capital effi ciently. forecasts. Second, we assessed the ability of The qualitative assessment of fi nancial market prospective governments to effectively formulate maturity is based on a review of a number of policy ( ). Third, cities 0=Strongly no, 5=Strongly yes nancial depth, including Z/ secondary reports on fi were rated on how clear, established and accepted 25 © The Economist Intelligence Unit Limited 2013

27 Hot Spots 2025 Benchmarking the future competitiveness of cities mechanisms for the orderly transfer from one diversity; (2) the number of different languages government to another are. Fourth, to gauge a spoken or heard; (3) whether English or another cials’ preparedness to city’s ability to plan and offi major language is widely spoken; (4) whether be held accountable, we established whether or foreigners feel comfortable; and (5) whether there not a city has clear and transparent performance is an acceptance of different lifestyles and beliefs. indicators. The scores are presented on a scale of 1-5 ( 1=Very Local government fi scal autonomy and ). closed and homogenous, 5=Very open and diverse government effectiveness are weighted equally and Last, we assess each city’s cultural vibrancy. The account for more than one-half of a city’s current score for cultural vibrancy is based on the institutional character. categories culture, sport, and food and drink in the Three additional sub-indicators—electoral latest EIU City Liveability Index. The score for 2025 process and pluralism, taxation and rule of law— is based on a qualitative assessment by EIU complete the category. experts, based on city investment plans in cultural The research team assessed the nature of a city’s issues, and presented on a scale of 1-3 ( 1=Cultural electoral processes and degree of pluralism on a 0- vibrancy is expected to decrease, 3=Cultural vibrancy 10 scale ( 0=Electoral process and pluralism is is expected to increase ). suppressed by ruling party, 10=Electoral process and Human capital (15%) pluralism is transparent, fair and open to all A growing skilled labour force with easy access qualifi ed citizens ). The sub-category taxation to quality education and healthcare makes a city considers two factors: fi rst, the level of value- attractive for businesses. The quality of added tax observed today and projected in 2025, education and healthcare feeds into fi rm and second, tax complexity derived from the World productivity and growth, and ultimately city Bank’s Doing Business Survey and scored on a scale competitiveness. of 1-5 ( 1=Very complicated, 5=Very simple ). The human capital category considers six factors Social and cultural character (5%) that shape the attractiveness of a city in terms of A diverse and open city with a thriving social and rms value its ability to create a pool of labour that fi cultural scene attracts investors and visitors, when they choose a location or decide to expand making a city more dynamic and thus their operations in a city. competitive. We scored cities’ quality of education on a scale Although perhaps the least tangible category, ) by looking at the 1=Very Poor, 5=Very good 1-5 ( this is nevertheless an important feature of a city’s quality and quantity of private and public competitiveness. It comprises four aspects of education. The scores are based on the EIU’s Global liveability. First, freedom of expression and human City Liveability Index. The future score assessed rights, as measured by Freedom House on a scale of cities’ plans or initiatives to improve the education 1-7, which was forecasted by country experts based system, such as planned investments in new school 1=Most free, on the trajectory of such issues ( construction (including plans to hire new teachers ). Second, prevalence of crime in the 7=Least free or provide additional training to existing ones), society, based on relevant categories in the EIU’s investment in public/private partnerships, most recent City Liveability Index and a qualitative investment in vocational/technical education. A assessment of EIU researchers of the prevalence of similar assessment, based on the EIU’s Global City petty and violent crimes as well as external factors Liveability Index, was made for the quality of affecting future crime. Third, we consider openness healthcare in each city. ve attributes: and diversity in each city based on fi One of the key factors that makes a labour (1) the degree of global/regional ethnic/racial market attractive is a sizeable working-age 26 © The Economist Intelligence Unit Limited 2013

28 Benchmarking the future competitiveness of cities Hot Spots 2025 population. There are two indicators that look at Environment and natural hazards (5%) High standards of environmental governance how demographic trends impact on a city’s make a city attractive for both businesses and competitiveness in this regard. The fi rst is the people. In the long term, sustainable working-age population, defi ned as people aged environment policies are key to preserving a between 15 and 64. These data were collected from city’s competitiveness. national statistical agencies and the UN World We assess each city’s quality of environmental Urbanisation Prospects and Demographia for the governance by considering city authorities’ likely latest available year. We used population growth performance in three areas: (1) Water quality rates as measured by the UN to project the size of ( 0=City does not have a long-term water quality the working-age population in 2025, which was strategy; water quality is likely to remain the same or adjusted by country analysts to account for city- worsen. 10=The city has an in-depth and long-term specifi c demographic factors. These adjusted water quality improvement strategy that is credible population growth rates were used as another and includes performance metrics/monitoring indicator. policies; the city’s water quality is likely to improve, Finally, we believe that the quality of a city’s or if it is already at a high level, will stay the same ). workforce depends on its ability to attract people (2) Air quality ( 0=City lacks a comprehensive long- from outside the country and to provide equal term strategy for dealing with air quality issues. Air economic opportunities to women. This is quality is likely to be a major problem owing to lack ned to, particularly relevant for, but not confi of investment and focus on this issue. 10=City has a countries with ageing populations, which depend credible long-term air quality monitoring and on the migration of foreign skilled workers to improvement strategy. The city has a rigorous ect the maintain their competitive edge. To refl monitoring and evaluation policy in place which importance, we scored cities on the ease of hiring ensures that any issues will be dealt with. There is foreign nationals ( 1=Very diffi cult, 5=Very easy ), very little chance that air quality will be an issue for based on a qualitative assessment of immigration the city 0=City ). (3) Waste management strategy ( barriers, rules of employment of local nationals lacks a comprehensive long-term strategy for dealing (such as quotas) and unoffi cial barriers to hiring with waste. Waste management is likely to be a foreign workers. The Women’s Economic major problem given lack of investment and focus on Opportunity score was taken from the EIU’s this issue, 10=City has a credible long-term waste Women’s Economic Opportunity Index, which is a management strategy, including a comprehensive dynamic quantitative and qualitative scoring model recycling programme. There is very little chance that constructed from 26 indicators that measure waste management will be an issue for the city ). The c attributes of the environment for women specifi scoring is based on the EIU’s 2010 Green Cities employees and entrepreneurs. Index, adjusted based on each city’s relative priority in this area, as well as the likelihood of achieving set environmental goals based on current trends. The risk of natural disasters indicator is composed of three sub-indicators. First, we included a qualitative assessment of each city’s disaster management/business continuity plans. The score is presented on a scale of 1-5 ( 1=Strong adaptive capacities, 5=Highly unadaptive ). Second 27 © The Economist Intelligence Unit Limited 2013

29 Hot Spots 2025 Benchmarking the future competitiveness of cities and third, an assessment of each city’s physical quartiles and scored on a 1-4 scale. exposure to natural hazards and susceptibility to The third indicator looks at each city’s level of climate change, based on the forward-looking conference/convention development. The 2012 scores in the 2012 World Risk Report of the UN scores were derived from the actual number of University Institute for Environment and Human conferences and conventions held in the city in the Security (UNU_EHS), the Alliance Development most recent year. The 2025 scores are informed by Works/Bündnis Entwicklung Hilft and The Nature the city’s current state of conference and Conservancy (TNC). The scores are presented on a convention development and the city government’s 1=Very low, 5=Very high ). Country- scale of 1-5 ( policies and priorities in this area, if any. The 2025 level scores were reviewed by EIU analysts and 0=No real scores were ranked on a 0-3 scale ( adjusted based on city-specifi c factors. policies or investment focused on establishing/ promoting the city as a tourism and conference Global appeal (10%) destination; 3=The city government has long-term This category seeks to gauge a city’s plans that are focused on strengthening its appeal international orientation measured by its ability as a conference centre; the city is likely to be a major to attract people and businesses from around international destination for conferences ). This 1-3 the globe. scale was then used to increase the city scores We believe that a city’s international orientation appropriately. has a bearing on its competitiveness. To assess a Finally, the global leadership in higher city’s global appeal, we consider four factors. education category scores cities based on our First, global business attractiveness is scored by assessment of the number of globally competitive a qualitative assessment of a city’s policies towards higher education institutions and the city attracting investment and supporting local government’s policies to invest and promote businesses (such as tax breaks, public-private university education. The scores were ranked on a partnerships or the presence of technology parks, 1=City has no globally competitive scale of 1-4 ( Special Economic Zones, free-trade zones). The higher education institutions and has shown no 1=City indicator scores were ranked on a 1-3 scale ( focus on this issue in its policies; 4=City has a large has none of these policies in places, 3=City has many number of globally competitive higher education of these policies in place and has allocated institutions and has shown its focus on maintaining substantial funding to improving business such an environment through already established environment issues ). The 1-3 ranking was then long-term plans, investment, and partnerships with applied to the city’s score from the last Index, other globally recognised institutions ). Similar to which was based on the number of Fortune 500 the other indicators in this category, the 2012 companies as well as EIU’s Business Operating Index fi ed by this scoring gures were then modifi Environment rankings. system to increase the appropriate cities’ higher ight Second, we determine an international fl education scores. ranking based on the frequency of international Data sources and indicator ights from and to a city. The indicator score is fl normalisation 1=Very low, 4=Very high presented on a 1-4 scale ( ). The EIU collected data for the Index from ight data were taken from the last Historical fl November 2012 to March 2013. Wherever possible, study, then forecast using estimates of regional cial sources are publicly available data from offi ight trends from the UN’s and country fl used for the latest available year. The qualitative International Civil Aviation Organization (ICAO). indicator scores were informed by publicly These forecasts to 2025 were then put into 28 © The Economist Intelligence Unit Limited 2013

30 Benchmarking the future competitiveness of cities Hot Spots 2025 available information and assigned by the EIU’s Data modelling research team. Qualitative indicators scored by the Indicator scores are normalised and then EIU are often presented on an integer scale of 1-5 aggregated across categories to enable a (where 1=worst, 5=best). This scale varies for comparison of broader concepts across countries. ratings from third-party sources. Normalisation rebases the raw indicator data to a Indicator scores are normalised and then common unit so that they can be aggregated. The aggregated across categories to enable an overall indicators where a higher value indicates a more comparison. To make data comparable, we favourable environment for city competitiveness normalised the data on the basis of: have been normalised on the basis of: Normalised x = (x - Min(x)) / (Max(x) - Min(x)) where Min(x) and Max(x) are, respectively, the x = (x - Min(x)) / (Max(x) - Min(x)) lowest and highest values in the 120 cities for any where Min(x) and Max(x) are, respectively, the given indicator. The normalised value is then lowest and highest values in the 120 cities for any transformed into a positive number on a scale of 0- given indicator. The normalised value is then 100. This was similarly done for quantitative transformed from a 0-1 value to a 0-100 score to indicators, where a high value indicates greater make it directly comparable with other indicators. competitiveness. This in effect means that the city with the highest Weighting raw data value will score 100, while the city with The weighting assigned to each category and the lowest will score 0. ect different indicator can be changed to refl For the indicators where a high value indicates assumptions about their relative importance. Three an unfavourable environment for city sets of weights are provided in the Index. The fi rst competitiveness, the normalisation function takes option, called “EIU default”, attaches the the form of: weighting described above. The second, called x = (x - Max(x)) / (Max(x) - Min(x)) “neutral weighting”, assumes equal importance of all indicators and evenly distributes weights. The where Min(x) and Max(x) are, respectively, the third option, called “2011 weighting”, uses the lowest and highest values in the 120 cities for any category weightings as provided in last year’s given indicator. The normalised value is then Index, that is, categories that were not measured transformed into a positive number on a scale of 0- in this version of the Index will still impact the 100 to make it directly comparable with other 2012 scores. indicators. 29 © The Economist Intelligence Unit Limited 2013

31 Hot Spots 2025 Benchmarking the future competitiveness of cities City selection The 120 cities in the Index were selected based on regional diversity, economic importance and size of population, as described previously. They are: South and Central Asia Pacifi Europe Middle East Africa North America c America Belo Horizonte Ahmedabad Amsterdam Atlanta Alexandria Abu Dhabi Boston Almaty Ankara Beirut Cairo Bogotá Buenos Aires Auckland Athens Doha Cape Town Chicago Dallas Guadalajara Bandung Barcelona Dubai Durban Houston Lima Berlin Kuwait City Johannesburg Bangalore Los Angeles Bangkok Birmingham Muscat Lagos Medellín Miami Mexico City Beijing Brussels Riyadh Nairobi Montréal Monterrey Busan Bucharest Tehran New York Panama City Chengdu Budapest Tel Aviv Philadelphia Copenhagen Porto Alegre Chennai San Francisco Rio de Janeiro Dublin Chongqing Santiago Colombo Seattle Frankfurt Dalian São Paulo Toronto Geneva Vancouver Delhi Hamburg Dhaka Istanbul Washington Kiev Fukuoka Kraków Guangzhou Hangzhou Lisbon Hanoi London Ho Chi Minh City Madrid Hong Kong Milan Hyderabad Monaco Incheon Moscow Oslo Jakarta Paris Karachi Kolkata Prague Kuala Lumpur Rome Manila Saint Petersburg Melbourne Stockholm Mumbai Vienna Nagoya Warsaw Osaka Zurich Pune Qingdao Seoul Shanghai Shenzhen Singapore Surabaya Suzhou (Jiangsu) Sydney Taipei Tianjin Tokyo 30 © The Economist Intelligence Unit Limited 2013

32 Hot Spots 2025 Benchmarking the future competitiveness of cities Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper. Cover images: Shutterstock 31 © The Economist Intelligence Unit Limited 2013

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