adb-caf regional competitiveness of cities in asia and latin america

7/30/2019 ADB-CAF Regional Competitiveness of Cities in Asia and Latin America

1/40

Regional Competitiveness of Cities

in Asia and Latin America

May 2013

Preliminary Summary Report


2/40

Printed on recycled paper.

2013 Asian Development Bank and CAF, Development Bank of Latin America

All rights reserved. Published in 2013.Printed in the Philippines.

Publication Stock No.

The views expressed in this publication are those of the authors and do not necessarily reflect theviews and policies of the Asian Development Bank (ADB) or its Board of Governors or thegovernments they represent and of the CAF, Development Bank of Latin America.

Note:In this publication, $ refers to US dollars.

Ave. Luis Roche, Torre CAFAltamira, Caracas VenezuelaPhone:+58 (212) 209-2111Fax: +58 (212) 209-2444www.caf.com

6 ADB Avenue, Mandaluyong City1550 Metro Manila, PhilippinesTel +63 2 632 4444Fax +63 2 636 2444www.adb.org

For orders, please contact:Department of External RelationsFax +63 2 636 [email protected]


3/40

iii

Contents

Acknowledgments iv

Introduction 1

The Regional Comparison of Cities Study 2

Analyzing the Competitiveness of City and Industry Clusters 3

Findings of the Study 4

Asian Cities: Case Study Summaries 6

Dhaka, Bangladesh 6

Nanning, Peoples Republic of China 9

Ho Chi Minh City, Viet Nam 12

Seoul, Republic of Korea 15

Latin American Cities: Case Study Summaries 18

Bogot, Colombia 18

Curitiba, Brazil 21

Guayaquil, Ecuador 24

Lima, Peru 26

Trade Corridors of Asia and Latin America 29

Preliminary Findings 31Asian Cities Case Studies 31

Latin American Cities Case Studies 33

Next Steps 35


4/40

iv

Acknowledgments

This joint study is implemented within the framework of the memorandum of understanding signed

between the Asian Development Bank (ADB) and the Corporacin Andina de Fomento (CAF) on20 January 2011 and cofinanced by both organizations.

At ADB, this joint study was implemented as a subproject of the regional technical assistance EnhancingKnowledge Sharing and SouthSouth Cooperation between Asia and Latin America under the Strategyand Policy Department. The operation of this joint study was led at ADB by the Regional and SustainableDevelopment Department in conjunction with the Strategy and Policy Department. Five consultants wereinvolved in the four Asian country case studies while regional departments in ADB contributed to thestudy by providing peer reviews and facilitating coordination with their counterparts in these countries.

At CAF, this study was implemented by the Direction of Public Policy and Competitiveness, under theVice Presidency of Development Strategies and Public Policies. Five institutions worked on the consultancyreports in Latin America, and a network of different stakeholders in the region provided support and

peer review.

Coordination was provided by Jinsu Mun, Gil-Hong Kim, Kiyoshi Nakamitsu, and Indu Bhushan at ADB;and by Marco Kamiya and Michael Penfold at CAF. Technical support to the project has been provided bythe international consultant, Brian Roberts of Land Equity International Australia, along with inputs fromnational consultants involved in preparing case studies from Bangladesh, the Peoples Republic of China,the Republic of Korea, and Viet Nam in Asia; and Colombia, Brazil, Ecuador, and Peru in Latin America.The contribution of Lloyd Wright and Ko Sakamoto in providing photos; and Carolyn D. Cabrera andCarina Arciaga for proofreading is also acknowledged.


5/40

1

Introducon

are to develop and grow, they must take steps toenhance their competitiveness.

The common interest to find ways to enhancethe competitiveness of cities and the strategicinfrastructure needed to support theirdevelopment has brought together the AsianDevelopment Bank (ADB) and CorporacinAndina de Fomento (CAF)the DevelopmentBank of Latin Americato collaborate on aresearch project involving a regional comparisonof cities (RCC) in Asia and Latin America. Thereis also a growing interest by governments in thetwo regions to improve the competitiveness oftheir cities and to develop trade and investmentin areas along national and international trade

corridors between cities.

Improving the competitiveness and sustainabilityof development of cities in Asia and LatinAmerica is important if their standards of livingare to improve and the problems associated withpoverty, urbanization, low income, and wealthdisparity are to be overcome. Governments willhave a key role in shaping these policies, alongwith the regional development banks thatwill be funding the development of strategicinfrastructure and providing the capital neededto support the development initiatives.

ADB is supporting the City Cluster EconomicDevelopment (CCED) initiatives in several Asiancities. The CCED enables cities to develop adeeper understanding of the factors that canmake them more competitive, recognize thekey role industry clusters can play in enhancingthe development of local economies, andundertake initiatives in attracting investment and

In an age of increasing global competition fortrade, investment, knowledge, and human capital,there is growing interest among governments and

business on how to make cities more competitive.An estimated 80% of gross domestic product (GDP)is produced in cities, of which 14% come frommegacities. Firms and companies actively seekto locate in cities that offer them competitiveadvantage in terms of production and access tomarkets. There is, thus, greater competition amongcities to develop smart infrastructure and systems toattract investment, expand trade, and create jobs.Competitive cities are those with good economicgovernance, human capital, infrastructure, logistics,and dynamic business systems. Governments inmany cities around the world have begun working

closely with local business and communities toidentify what makes their city competitive and thestrategic infrastructure necessary to ensure that theymaintain their competitive advantage.

For most of the worlds cities, especially those indeveloping countries and regions, the struggle tobecome more competitive is a significant challenge.Many acknowledge the importance of becomingmore competitive but are not sure how to go aboutachieving it. The need to improve the competitivenessof their cities has never been more apparent andacutely recognized than in the two fastest-growingregions of the world: Asia and Latin America. Manycities in these regions are struggling to overcomeproblems of providing basic infrastructure andservices, and to deal with pollution and poorgovernance problems. Despite these problems, ina few decades, both regions especially Asia, havebecome manufacturing powerhousessupplying awide range of products to global markets. However,cities in these two regions recognize that if they


6/40

2

Regional Competitiveness of Cities in Asia and Latin America

creating jobs. ADB uses CCED to help improve thedesign, targeting, integration, packaging, anddelivery of urban sector projects. ADB is alsoconducting studies to help support investment,development, and competitiveness in cities locatedalong trade corridors.

CAF is implementing the initiative Citieswith Future where an integrated approachcombining infrastructure, social development, andcompetitiveness is proposed for selected cities.Assessments and a tool kit are applied to identifythe needs of the cities in the medium and long term.On the competitiveness component of Cities withFuture, two tasks are included, first, an institutionalcapacity to assess the strength of the public sector todesign and monitor business development services,and second, a quantitative value-chain analysis tosupport productive transformation.

In Latin America, there is a growing interest inthe competitiveness of cities, with several studiesshowing the region lagging Asian cities andeconomies. The weaknesses in the drivers ofcompetitiveness in Latin American cities are lowlabor productivity, weak business dynamics, andpoor interregional infrastructure. This situationis dampening trade development and economicgrowth opportunities among countries in the region.The economic development of Latin American citiesis being driven by the expansion of resources andagriculture products, whereas the development

of Asian cities is being driven by export-orientedmanufacturing and services. Consequently, thegrowth rate of many large cities in Latin Americais falling below national growth rates, whereas inAsia, it is the other way round.

There is a growing interest in Asia and Latin Americato develop trade corridors and city-to-city linkagesto support the development of cities among thetwo regions. Much of the international trade in thetwo regions still occurs through shipping, but thereis increasing interconnectedness of countries alongthe road and rail corridors. There are significantopportunities to leverage the development oftrade corridors to support the growth of secondarycities and towns, which could become importantsubcenters or logistic hubs for the collection anddistribution of goods, or as value-adding centersintegrated into industry supply chain systemsthat are dependent on land or river transportsystems connecting large cities across countriesand continents.

This preliminary report provides a brief overviewof the Asia and Latin America RCC project, todate. The study aims to learn more about thefactors that make cities competitive and drive theirdevelopment. The results will be used to informthe two organizationsADB and CAFon howthey could improve their lending operations inthe two regions to enhance the competitivenessand development of cities. Many opportunitiesexist for cross-learning and sharing of ideas fromthe findings of this research and how these canbe shared among the cities of the two regions.

The Regional Comparisonof Cies Study

There are many studies on the competitivenessof Asian and Latin American countries and cities.Most show they are falling behind in critical areasof infrastructure, human capital development,and quality of life. For cities in these two regionsto become more competitive, more in-depthstudies are needed to identify specific deficienciesin strategic infrastructure, governance, businessdynamics, and supply chain systems that underpinthe development and performance of cityeconomies. These studies need to investigate therole of industry clusters and how governmentsand businesses can work collaboratively to reduce

externality costs for firms in clusters, and how toadd value to local industry supply chains.

The new urban operational plan of ADBrecognizes that the development of sustainablecities will require ADB to focus on strategiesand initiatives that support the developmentof competitive, green, and inclusive cities. CAFhas a similar goalto promote the sustainabledevelopment of cities and regional integrationprograms for cities. These important themesare addressed in the case studies of the selectedcities commissioned by national consultants in

both regions. The findings will be used to directfuture economic policy and development plansto enhance city competitiveness and sustainabledevelopment. The study will also enable thetwo organizations to learn from each other,which could lead to improvements in projectidentification, design, and lending operations,and to future opportunities for collaboration.


7/40

3

Introduction

The RCC study is the first of its kind to undertake acomparative study of cities in the two continents.To provide a common platform for the comparativeanalysis, a common methodology was developedfor the research teams undertaking case studiesin both regions. The ADB and CAF researchteams in different countries have been workingcollaboratively to develop the framework for thestudy and its objective outcomes.

This study aims to understand the process of birth,growth, and consolidation of regional competitivecities. The four Asian cities are Dhaka, Bangladesh;Nanning, Peoples Republic of China (PRC); Seoul,Republic of Korea; and Ho Chi Minh City, Viet Nam.The four Latin American cities are Curitiba, Brazil;Bogot, Colombia; Guayaquil, Ecuador; and Lima,Peru. The study will have a particular focus onproductivity, development, and competitive policies

in the eight selected cities. This study will also reviewexisting practices on competitiveness, focusing onthe design and delivery of policies for enterprisedevelopment analyzing institutional arrangements,historical evolution and background, and policydesign and policy instruments. This will be done witha standard methodology. The cities were selected byADB and CAF operations management as these citieshave past or developing associations with the twoorganizations, and they showed a keen interest inparticipating in the research program.

The study involves a combination of primary and

secondary research, drawing on findings from theeight city cases and two regional trade corridorstudies. In the context of the research, the reportexplores the importance of cities as drivers ofeconomic growth and development. The study raisesand addresses the following questions:

(i) How can cities make a difference in thedevelopment of nations?

(ii) What justifies a larger role for cities in localeconomic development?

(iii) What kind of market failures and coordinationproblems can local governments address?

(iv) What policy areas and instruments for promotingeconomic development (e.g., innovation, clusterdevelopment, investment promotion, small andmedium-sized enterprise (SME) business support,business-related infrastructure, and others) areimportant for nations and the two regionsto develop?

Analyzing theCompeveness of Cityand Industry Clusters

Most studies on the competitiveness of

cities used an analytical framework andtools to evaluate attributes of key drivers ofcompetitiveness in the development of cities andindustry clusters. The basic framework used forthe RCC study was developed by ADB for theCCED work on South Asian cities in 2009. Thiswork is documented in the book CompetitiveCities in the 21st Century: Cluster-Based Local

Economic Development, published by ADBin 2011.

Two sets of analyses were used to measure the

drivers of competitiveness underpinning thedevelopment of cities. The first is a citywideanalysis of competitiveness. This involved the useof qualitative analysis to measure 56 attributes ofcompetitiveness listed under six key competitivenessdrivers. The analysis was undertaken by expertreference groups and panels comprisinggovernment officials, industry experts, academics,and members of professional associations. Thepanels were asked to evaluateon a scale of15the strength of the 56 attributes for the sixkey drivers of competitiveness listed below:

Cost of doing business (taxes, informal fees,utilities, labor costs, and property rentals).

Dynamics of local economy (growth andperformance, innovation, and access to finance).

Human resources and training (ski l ls,competences, and personnel).

Infrastructure (transport, logistics, utilities, andenvironmental waste management),

Responsiveness of government to business needs(transparency, governance, and regulations).

Quality of life (health, peace and order,and environment).

The second analysis was a competitive gap analysisof two industry clusters in each city studied. Theanalysis used Michael Porters diamond techniqueto evaluate the competitiveness of the clusters.Some 40 attributes of competitiveness weremeasured for the following five drivers in thePorter model:


8/40

4


Factor conditions (labor, infrastructure,resources, and social environment).

Demand conditions (markets, new products,and business practices).

Strategy of a firm and rivalry (industry structureand collaboration)

Related supporting industries (supply chains andvalue adding).

Government (regulations, incentives, andresearch and development).

The framework used to prepare the case studiesinvolved a seven-step process. It is designedto examine a citys competitiveness from aholistic perspective, using tools and techniquesdesigned to identify deficiencies in attributesof competitiveness, which require attention,to improve the performance of city clusters.The process intends to provide an outline of a

framework of international and global policiesthat shapes the economy of the country and thecity under analysis. Some factors, such as worldheritage listing or special economic zone status,can have a significant impact on the developmentof city economies.

A range of statistical and qualitative techniques isused to gather information and to build a profileof the citys economy and its dynamics. Thecompetitiveness of the citys economy is analyzedusing the city competitiveness analytical tools,as described earlier. The patterns of industry

agglomeration and the spatial nature of industryclusters are mapped using geographic informationsystem and other techniques. The analysis is usedto identify two industry clusters that demonstratethe strongest growth prospects for the economythat are then analyzed using the second of thecompetitive techniques described earlier. Strategiesand actions to enhance the competitiveness of theindustry clusters are described in each case study.This report includes summaries of the initial findingsof the eight case studies.

The study includes research on the competitivenessof trade corridors and the development of citiesalong these corridors. It examines the emergenceof these cities and corridors in the context of thetwo regions. Case studies are being undertakenfor the Ho Chi MinhBangkok, MumbaiDelhi,Kuala LumpurSingapore, and the Pearl River

Delta1 economic development corridors. Thestudy explores the potential of the developmentproposals in these corridors aimed at encouragingand stimulating the development, growth,and competitiveness of secondary city growthpoles. In Latin America, the case studies willinclude the trans-Andean Highways, includingthe Trans-Oceanic corridor from Brazil to Peru,the MERCOSURChile corridor, and the MxicoUnited States corridor.

Findings of the Study

This preliminary report outlines some initialfindings and lessons from the study, which is stillin progress. The learning outcomes from the finalstudy report will be used to develop more detailed

strategic directions for the future operations,especially to enhance the formulation of urbansector projects and activities funded by the twodevelopment banks. Opportunities to advancecross-learning and information-sharing initiativesbetween cities and development banks in the tworegions will be outlined in the final report. Thefinal report will cover the following:

Cities, Competitiveness, and ProductiveTransformation

Comparative Framework for Analyzing CityCompetitiveness in Asia and Latin American

Countries (LAC) Competitiveness of Cities and Clusters in

Asian Cities Competitiveness of Cities and Clusters in Latin

American Cities Trade Corridors and Development of Competitive

Cities in Asia and LAC Cities in Asia and LAC: Lessons and the

Road Ahead

The final report will present the results of asubstantial research effort done by a team ofdedicated researchers from institutions and

1 The Pearl River Delta Corridor, a megalopolis with 100 millionpopulation, is an increasingly integrated urban clustercomprising the PRCs densely populated urban areas coveringShenzhen and Guangzhou in the north and Zhuhai andMacao, China in the west.


9/40

5

Introduction

organizations from 10 countries. It will make animportant contribution to the partnership betweenADB and CAF in improving the knowledge aboutcities in the two regions, and in ways to improvethe targeting of their investment and technicalsupport to enhance the competitiveness of citiesto stimulate investment, economic development,and job creation. The lessons and insights gainedfrom the study are expected go well beyondADB and CAF, and will have wider application inthe way international development finance cancontribute more to creating competitive andsustainable cities.

The summaries are presented here to providesome details on the eight case studies, includinginitial findings on the competitiveness of citiesand selected industry clusters. Informative detailsprovide readers some learning on the investmentneeds in strategic infrastructure to enhance thecompetitiveness and development of the citiesstudied. A brief summary is also given on tradecorridors, and the initial findings and lessonsgained from the research to date. An outlineof the next steps is given at the end of thesummary report.


10/40

6

Asian Cies: Case Study Summaries

Dhaka, Bangladesh

Basic Facts

National population 150 millionDCR* population 23.5 million

Metropolitan population 8.9 million

DCR area 7,440 km2

Metropolitan area 360 km2

DCR 2,688 people

Metropolitan 24,722 people

GDP (2011) Bangladesh $118 billion

GDP (2011) Dhaka City $36 billion

GDP/per capita (2011)Bangladesh

$735

GDP/per capita (2011)DCR

$1,800

Urban Employment Structure

Total employment 12 million (Est.)

Primary 4.5%

Manufacturing 40.0%

Services 55.5%

Main export industries Ready-madegarments,manpower

World Banks Doing

Business Indicator

45th

DCR = Dhaka Capital Region, GDP = gross domestic product,km2 = square kilometer.

Source: World Bank. 2012. World Development Indicators.

Rapid urbanization is an important contributorto growth and development of Bangladesh,but it has also put enormous strain on existingservices and the ability of authorities to protect thenatural environment. About 25% of the countryspopulation live in urban areas, and these areascontribute more than 60% to GDP. However,

there are significant geographic differences inthe levels of development, wealth, and povertyoccurring among cities and rural districts inthe country.

In recent years, Bangladesh has experienced rapideconomic growth and development, with a GDPgrowth rate of around 6% per annum. Muchof this is due to the rapid development of theDhaka Capital Region (DCR), the largest urban

agglomeration in the country with a populationof over 23.5 million. It drives the development ofthe national and export economies of Bangladesh.


11/40

Asian Cities: Case Study Summaries

7

The DCR is a major generator of jobs and is oneof the largest textile and garments manufacturingcenters in the world. It also plays a key rolein supporting health, higher education, andsocial welfare in the country. The DCR has manycompetitive advantages over cities in other parts ofthe country.

The study undertaken for ADB on the DCR showsthere are high levels of firm agglomerationoccurring in the manufacturing and service sectors.A new form of economic geography is emerging inthe region with many firms and factories movingand expanding to the periphery of Dhaka whereland is cheaper, services better, and with lesstraffic congestion. Export firms in the DCR arealso experiencing greater competition in trade,local business, and labor. As figures in Table 1show, the DCR is a dynamic place, especially for

micro business, but it has many deficiencies interms of infrastructure, on the responsiveness ofgovernment to business needs, and the quality oflife it offers to residents and investors. The responseof the government and development authorities,and much of the business sector to these issuesleave much to be desired. The important questionis how to encourage the government and thebusiness sector to initiate the necessary changesespecially on ways to boost productivity andresolve inefficiencies in the economy to makethe DCR a more competitive place for businessand investment.

The current study identifies the need for the DCR toadopt best practices and embrace innovative ideasto deliver a vision and urban infrastructure servicesto the region. Policies and key infrastructureneeded to create stronger business and enablingenvironments to support investment and jobs inthe DCR are also required.

Iniaves to Enhance

Compeveness

The government has taken measures to enhancethe competitiveness of the city by supportingan ADB project to strengthen regional planningand governance. At the empirical level, there isa lack of coherent policy measures to raise thecompetitiveness of the DCR. Opportunities for the

further expansion of export processing zones areextremely limited, there is no gas supply for newindustrial units, and connectivity to Chittagongseaport is fragile. In addition, there are no integratedenvironmental and land development policies,which led to livelihood degradation.

The following are required to enhance the cityscompetitiveness:

Develop export processing zones. Implement policies supportive to textile and

garment manufacturing.

Upgrade major arterial road network from theinternational airport to the city center.

Improve industrial gas supplies to the DCR tosupport industrial development.

Facilitate industrial, commercial, and residentialland development and public housing.

Set up a textile and fashion design university.

Cluster Development

Two industry clusters selected by the study have

strong potential to attract investment and createjobs in the DCR.

Texle and Ready-Made Garment (RMG)

Cluster

The textile and ready-made garment sector isthe largest export industry in the DCR and in

Table 1. Key Drivers of Compeveness:

Dhaka Capital Region

Key DriversRanking

15

Cost of doing business 2.33

Dynamics of local economy 4.13

Human resources and training 2.25

Infrastructure 1.65

Responsiveness of government tobusiness needs

1.43

Quality of life 1.73

Overall average index ranking 2.25

1= Very low level of competitiveness, 5 = Very competitive.

Source: ADB. 2011. Competitiveness of Cities in the 21stCentury. Manila.


12/40


8

the country. It employs over 1.77 million peoplein the DCR (2010 data). The sector gains itscompetitiveness from the large pool of cheap labor,low transport costs, and generous governmentsubsidies to the sector. However, high land cost,lack of land for site expansion, high rents, andtraffic congestion are making the cluster lesscompetitive. To make the sector more sustainableand globally competitive, the study of Dhaka byan ADB national consultant identifies the need toremove bottlenecks in the supply chains, reducetransaction costs, encourage innovation and newideas, and design and diversify products in thesector. Poor compliance to implementing policies,plans, regulations, and quality assurance are majorconstraints to development, productivity, andmanagement of a sustainable environment. Betterspatial development plans and new special zonesfor garment factories are needed. Government

needs to work more closely with the business sectorfor planned industrialurbanization initiatives inthe DCR that will address problems as a result ofan overloaded transport and logistics system.

Knowledge Industry Cluster

The knowledge industry cluster in Dhaka,made up of higher education, informationand research institutions, and businesses, isbeginning to flourish. This is in response to thedemand for increased knowledge-based andtechnology-driven services needed to support thedevelopment and improve the competitivenessof the citys economy. The DCR is the hub of theknowledge industry for the country and generates140,000 jobs annually. The knowledge industrycluster study is attempting to map the elementsof supply chains in this cluster and to outline aknowledge-based development framework forthe DCR. For these two goals, the first step is tocreate a demand-based understanding of thelevels of scientific manpower and skills needed tomaintain the development of the DCR economy.

This is expected to lead to the development of aprogram of hard and soft infrastructure needed todevelop the knowledge industryespecially thehigher education and industry research sectors.


13/40


9

Nanning, Peoples Republic of China

Basic Facts

Metropolitan population 7,073,000

Metropolitan area 22,112 km2

Urban density 319 people/km2

GDP (2010) PeoplesRepublic of China (PRC)

$6.04 trillion

GDP (2010) Nanning $27.3 billion

GDP per capita (2010) PRC $4,514

GDP per capita (2010)Nanning

$3,869

GDP per hectare $12,346

GDP structure

Total GDP $27.3 billion

Primary 13.58%

Secondary 36.26%

Tertiary 50.16%

Total rural employment 3,030,000


Total employment 705,500

Primary 2.18%

Secondary 31.85%

Tertiary 65.97%

Main export industries Earphone, earplug,ADPE accessory,rosin, frozen tilapiafillets, and chemicalproducts

World Banks DoingBusiness Indicator 91th

GDP = gross domestic product, km2 = square kilometer,ADPE = Auxiliary Data Processing Equipment.


Nanning is the capital and the center ofgovernment, economy, and culture of the GuangxiZhuang Autonomous Region in the PeoplesRepublic of China (PRC). It is the largest city inGuangxi Zhuang Autonomous Region with apopulation of more than 7 million people. Knownas a Green City, it has been listed as one of the

Ten Livable Cities in [the Peoples Republic of]China. Its environmental assets are a significantfactor in attracting an increasing the number oftourists to the city.

With the reforms and opening up of the PRCeconomy over the past 2 decades, Nanninghas sought to capitalize on these changes andhas undergone significant structural changesto modernize the citys economy. Its GDP hasincreased over 10% annually since 2000, withGuangxi Zhuang Autonomous Region rankedas one of the better-performing regions in the

PRC. It has come to be established as a majorregional center of southwest PRC, with many newtechnology-based industries developing in the city.

Compeveness of the City

The ADB study on Nannings competitiveness isstill in progress. The study seeks to measure thekey drivers and attributes of competitiveness thatunderpin the development of the citys economy.According to the research done by the Chinese

Academy of Social Sciences (CASS), Nanning,in 2011, ranked 57 out of 294 cities in the PRCin terms of city competitiveness. Factors thatadd to the citys competitiveness are the qualityof its environment, good local government,and low labor costs compared to the largercities in the coastal provinces. The weaknessesidentified include inadequacy and cost of strategicinfrastructure, low skills development of the cityslabor force, poor access to working capital to

support new industry development, and the needto further streamline local business regulationsand approval processes. The city has worked hard


14/40


10

to develop its trade and networks internationallyto attract business and investment, but becauseof geographic location, transport costs, accessto markets, and links to major transport logisticscenters and ports along the south coast of the PRCand Viet Nam are proving to be hindrances.

Iniaves to Enhance the

Citys Compeveness

The Government of Nanning City has supported arange of policy and project initiatives to enhancethe development and competitiveness of thecity. ADB and the World Bank have supportedimportant urban development and infrastructureprojects including the Guangxi Nanning UrbanInfrastructure Development Project (2004),

Guangxi Nanning Urban EnvironmentalUpgrading Project (2006), Guangxi NanningYunnan Kunming Railway Project (2007), GuangxiSouthwestern Cities Development Project (2010),and Guangxi Beibu Gulf Cities Development Project(2011), which are boosting the development ofthe Nanning and Guangxi economies.

In 2009, the World Bank and the Governmentof the PRC entered into a loan agreementto construct a railway project and an urbanenvironment improvement program for Nanning.The amount of $300 million is allocated for the

NanningGuangzhou railway project, which aimsto enhance transport capacity and reduce traveltime between the less-developed southwesternregion and the relatively more developed PearlRiver Delta region. As the capital city of theGuangxi Zhuang Autonomous Region, Nanninghas expanded its area three times since 2001.As part of the 11th Five-Year Development Plan,Nanning has focused on urban area improvements,built several new urban districts, and extendedurban infrastructure.

Instuonal Iniaves

In 2000, the Guangxi Zhuang AutonomousRegion received special policy support under thegovernments Go West Western DevelopmentStrategy. In 2008, the State Council approvedthe Beibu Gulf Economic Rim, also known asGulf of Tonkin Economic Belt, as part of aneconomic region around the PRCs southwestern

coastal region and cities on the Gulf of Tonkin.This economic belt covers Guangdong, Hainanand the Guangxi Zhuang Autonomous Region,and northern and central Viet Nam. Theimplementation of the initiative has resulted inmany new construction projects in cities aroundthe Beibu Gulf Rim, especially Nanning. Nanninghas also benefited from the new PRCASEANcooperation agreement, with Viet Nam, which iscooperating in the development of this economiczone. Since the establishment of the Beibu GulfEconomic Rim initiative, Nanning, as the capitalof the Guangxi Zhuang Autonomous Region,has received strong fiscal support and directinvestment from the Government of the GuangxiZhuang Autonomous Region to develop criticalinfrastructure projects to develop the city and theprovince. Since 2004, Nanning has hosted manyevents that attracted investors from within the PRC

and overseas, including hosting the PRCASEANBusiness and Investment Summit.

Industry Cluster Development

There are a several industry clusters that aredeveloping in Nanning. Two clusters that havesignificance and have development potential arefood processing and tourism.

Food Industry Cluster

Nanning is a major food processing center in thePRC, forming an important export-driven foodindustry cluster in the PRC. Since the beginning of2012, the NanningASEAN Economic DevelopmentZone has actively expanded the development ofthe food processing industry. The goal is to buildan industry-supported satellite city suitable forindustry, commerce, and a settlement that will forma new town in Nanning to support the developmentof the food industry. Two large international foodconglomerates have established food processing

plants in the industrial park cluster, the largestfood processing place in the Guangxi ZhuangAutonomous Region, which further promoted thedevelopment of the food industry cluster. In total,there are over 40 well-known companies investingin the food industrial park. The ADB study of thefood industry cluster in Nanning will identify andmap critical drivers of competitiveness, with a viewto identifying strategic investments required to


15/40


11

support further the development of a competitivefood industry cluster in this city.

Tourism Industry Cluster

Inland cities in the PRC, especially Nanning,are becoming increasingly popular destinationfor domestic and foreign tourists. In 2010, theGuangxi Zhuang Autonomous Region reaped atotal revenue of CNY95.3 billion ($15.3 billion)from tourism, increased revenue by 36% per

annum, contributing over 10% of the citys GDP.New international flights are expected to bringabout a significant expansion of the industry, so itis necessary to develop competitive infrastructure,services, and tourism products, and improve thelabor skills and management capabilities to develop

the tourism cluster in Nanning. The study of thetourism industry cluster in Nanning will identifythe critical drivers of competitiveness that needimprovement to support the further developmentof the tourism industry cluster, especially focusingon the hotel and catering services.


16/40

12

Ho Chi Minh City, Viet Nam

Ho Chi Minh City (HCMC) is one of the fastest-growing cities in Southeast Asia. Forming part ofthe Southern Focal Economic Zone, it has becomea large commercial and manufacturing center of

almost 8 million people. It is the southern gatewayof Viet Nam to the outside the world.

HCMCs development since the Doi Moi reformsof 1986 have been remarkable, spurred on bysubstantial foreign direct investments (FDI) intothe manufacturing, tourism, and offshore oil andgas sectors. The GDP per capita of $3,260 (2011)is more than double that of the nation. The cityscontribution to the GDP of the national economy isequivalent to 21.1%, 30.0% in terms of exports, and35.2% in terms of budget revenue.

In recent years, the service sector has grown,accounting for its increasing share in the GDP ofthe citys economy. Tourism is a major industry forthe city. There has also been a steady increase inthe proportion of GDP that is generated by theprivate and foreign investment sectors. This hashelped to improve the competitiveness of businessin the global marketplace, but the city still ranksbehind other cities in the region. About 70% of

Basic Facts


Urban population 6,250,963

Urban area 494 km2

Urban density 12,449 people/km2

GDP (2011) Viet Nam $121.3 billion

GDP (2011) HCMC $24.4 billion

GDP per capita (2011)

Viet Nam

$1,400

GDP (2011) HCMC $3,260

GDP per hectare $117,100


Total employment (HCMC) 3,950,000

Primary 2.3%

Manufacturing 43.3%

Service 54.4%

GDP = gross domestic product, HCMC = Ho Chi Minh City,km2 = square kilometer.


inputs used in industry production in HCMC areimported. Most industry activities involve assemblyresulting in lost opportunities to add value to localindustry supply chains.

Compeveness of the city

The survey of city competitiveness shows that HCMCis weak relative to other Asian cities. This is confirmedby other independent surveys. Infrastructure,dynamics of the local human capital development, andquality of life are average and require improvement.Economic governance in terms of responsiveness tobusiness needs and cost of doing business causedby administrative issues, traffic congestion, and lowproductivity require improvement to enhance thecitys competitiveness (Table 2).


17/40


13

Iniaves to Improve City

Compeveness

Urban Development

Under the policy of modernization, HCMC hasplanned and delivered new large-scale urbandevelopment projects such as the Sai Gon South,Thu Thiem, Northwest, and Hiep Phuoc Port UrbanArea. The Phu My Hung New Urban Area of SaigonSouth has been developed in partnership with aforeign investor. Thu Thiem New Urban Area isplanned as a major financial and business center ofSoutheast Asia. Transport and telecommunicationin the HCMC expanded rapidly over the last 5 years.Since individual means of transport (especiallymotorbike) leads to severe traffic congestiontheuse of public transport is low and accounts for only7.8% of total transport usagethe city authorityplans to invest in seven lines of a metropolitan railtransport system.

Instuonal Reforms

HCMC is in the process of streamlining itsmanagement system with a new administrativemodel to strengthen the authority of the PeopleCouncil and to streamline decision making inthe city. The central government has introducedmany decentralization policies designed to giveHCMC and other cities more authority, clarity,and responsibility in functions between the

Table 2. Ranking of Key Drivers of

Compeveness: Ho Chi Minh City

Key DriversRanking

15




Infrastructure 3.12

Responsiveness of governmentto business needs

2.97




Source: ADB. 2013. National Consultant Study ofHo Chi Minh City. Manila.

central and local government. To capture anddiversify investment resources, national reformshave facilitated more private investments underthe publicprivate partnership (PPP) model. Thelegal framework of PPP implementation has beengradually improved by the central government tosupport infrastructure investment in HCMC. SeveralPPP projects have been completed under the HCMCInvestment Fund for urban development.

Cluster Development

Opportunies

Tourism Industry Cluster

The tourism industry cluster in HCMC plays animportant role in the citys economy, contributing

10.0% to the citys GDP (2011), and accountingfor 42.5% of the national annual tourism revenue.Tourism is a sector that offers potential foremployment and income generation in HCMC,especially if it is linked more closely with theindustry in surrounding provinces. The study of thetourism industry cluster shows the need for moreinvestments in infrastructure and the upgrading ofsome tourist destinations. Support to strengthenthe HCMC Tourist Associationespeciallycollaboration with other domestic, regional, andworld tourist associationsis essential. It is alsoessential to focus on improving the integration

of industry supply chains and addressing thelanguage barrier.

Garment and Texle Industry Cluster

The textile and garment industry cluster consistsof two main activities, the (i) fiber, textile, anddyeing industry; and (ii) garment industry. Thiscluster contributes about 12%13% of totalmanufacturing production value to the city andis a high generator of employment and exports.

The competitiveness study of the industryindicates that HCMC needs to develop a strategyfor better integration of the supply chains and toimprove the operations and development of thecluster. Currently, inner-city land and transactioncosts are rising and production plants are beingtransferred or developed at the outskirts of thecity or surrounding provinces. The beneficialeffects of spatial agglomeration are being lost as


18/40


14

the industry becomes more dispersed spatially.This is adding to business transaction costs andundermining the industrys competitiveness.A technical fashion training center is needed in

HCMC to enhance design techniques and theskills of the labor force. Government supportis needed for modernizing production andproviding tax breaks for new investment.


19/40

15

Seoul, Republic of KoreaBasic Facts

Metropolitan population(2010)

10,312,545

Urban growth rate(20002010)

0.01%

Urban area 605.25 km2

GDP (2010) Korea $1,080 billion

GDP (2010) Seoul $250.18 billion

GDP per capita (2010) Korea $21,381

GDP per capita (2010) Seoul $24,261

GDP/hectare $41,336


Total employment 4,487,357

Primary 0.02%

Manufacturing 6.06%

Services 84.99%

Others 8.91%

Main export industries Transportequipment,machinery, and

chemicals

World Banks DoingBusiness Indicator

8th

GDP = gross domestic product, km2 = square kilometer.


Seoul, as the capital of the Republic of Korea, hasbeen the primary driver of national development.The city, with a population of over 10 million(21% of national population) contributesroughly a quarter of the national GDP. The total

employment of Seoul is roughly a quarter ofnational employment. Economic, cultural, andpolitical activities have been disproportionatelyconcentrated in Seoul.

The economies of the Republic of Korea andSeoul have undergone significant transformationsin recent years, with the employment structureof Seoul shifting toward growth in the tertiary

sectors. The primary and secondary sectorshave steadily declined, while the tertiary sectorhas grown predominantly. In particular, theGDP shares of information and communicationindustries and finance and insurance activities haveincreased remarkably. However, Seouls transportequipment, machinery, and chemical industriesstill play a significant role as major export sectorsof the country.

Compeveness of the Economy

Seoul is one of the most competitive cities inthe world. However, as a manufacturing center,

it is losing competitiveness as rising wages andoperational costs are forcing Korean companiesto move offshore. The survey on Seouls six keydrivers of city competitiveness indicates thatinfrastructure, quality of life, human resourcedevelopment, and the dynamics of the localeconomy ranked well, but identifies a gap inbusiness, hence, the need to strengthen humandevelopment and the governments responsiveness


20/40


16

to business to enhance the overall competitivenessof the economy. The cost of doing business andresponsiveness of government to business needsare below average, requiring attention, such asinitiating regulation reforms, improving planningfor development, offering investment incentives,improving productivity, and stabilizing rentaland land costs, which have become expensivecompared to other capital cities in the region(Table 3).

Iniaves to Improve City

Compeveness

Governments have undertaken several measuresto develop and improve the citys competitiveness.

Urban Development

Seoul has a comprehensive strategy to develop theeconomy and minimize negative externalities tosurrounding regions. To deal with these challenges,Seouls policies have targeted three goals:(i) developing knowledge-intensive industries,(ii) shaping an innovative business environment,and (iii) attracting FDI. Seoul has designated thefollowing as 6 New Growth Engine Industries:(i) digital content, (ii) information andcommunication technology (ICT), (iii) bio/nano

technology, (iv) financial services, (v) designand fashion, and (vi) tourism and conventions.To promote these, areas were designated as

Table 3. Ranking of Key Drivers of Compeveness: Seoul

Key Competitiveness Drivers Current Status Desired Status

Competitiveness

Gap

Cost of doing business 2.68 3.33 (0.65)

Dynamics of local economy 3.31 4.11 (0.80)Human resources and training 3.38 4.33 (0.95)

Infrastructure 3.71 4.33 (0.62)

Responsiveness of government to businessneeds

2.96 3.93 (0.97)

Quality of life 3.54 4.00 (0.46)

Overall average index ranking 3.26 4.00 (0.74)

1= Very low level of competitiveness, 5 = Very competitive, ( ) = negative figure.

Source: ADB. 2013. National Consultants Study on Korea. Manila.

special districts with deregulatory measures andinfrastructure, such as the downtown area forbusiness services, Yeoido for financial services, andTeheran Road in Gangnam for ICT.

Seoul has developed new business parks andresearch and development centers to boostknowledge-based industries and provide enablingbusiness-friendly environments. The Digital MediaCity is a high-technology digital media andentertainment cluster under construction in theSangam District. The Seoul International FinancialCenter in Yeouido was constructed for thedevelopment and expansion of the financial district.Magok area, in the southwestern part of Seoul, isbeing developed as a high-technology industryR&D cluster for ICT and bio/nano technology thatwill cater to international businesses.

Instuonal Framework

The Presidential Council on National Competitivenesswas established in 2008. The council was a publicprivate regulatory reform task force set up tomonitor and resolve difficulties in doing businesses.The Seoul Business Agency (SBA) was establishedto support innovation and entrepreneurship. TheSBA has encouraged the development of strategicindustries, including the Seoul Fashion Center andthe Animation and Game Center. It also operatesthe Seoul Trade Exhibition & Convention and the

convention centers, exhibition stores for smalland medium-sized enterprises, and facilitatestheir participation in domestic and international


21/40


17

exhibitions. The SBA supports international trading,and attracts overseas investments by organizingtrade delegations and market pioneering teams,and managing the Promotion Gallery and the SeoulTrade Center in Beijing.

Cluster Development

Informaon and Communicaon

Technology Cluster

ICT was the most significant contributor to Seoulseconomic growth during the period 20002010.Employment in ITC grew 663% during the period,with its gross regional domestic product (GRDP)contribution increasing near 80%. The Seoulcompetitiveness survey reveals that government-

driven ICT infrastructure investment, coupled withimproved access to various finances, played a pivotal

role in its growth surge, along with well-trainedhuman resources, reduced informal fees, and thedevelopment of the Sangam Digital Media City.

Financial and Insurance Cluster

One of the fastest-growing sectors of Seoulseconomy has been the financial and insurancecluster. It accounted for over 15% of Seouls GRDPin 2010, growing over 127% during 20002010.Its increasing importance to Seoul is associatedwith the changing dynamics of the local economy,as access to bank finance and venture capital hasbecame vital to Seouls competitiveness. Takingadvantage of the Cheonggyecheon restorationin downtown area, the city designated this as aFinance Development Promotion District, providingsoftware and hardware support, includingmitigating building regulation and offeringprofessional management consultancy.


22/40

18

Lan American Cies:Case Study Summaries

Bogot, Colombia

Bogot, the largest city, is the countrys capitaland is the economic, political, educational,and cultural center of Colombia. Such anagglomeration has led to the dynamism of the city,evidenced by its inclusion in the league of global

cities.2

Most companies operating in the countryare based or have representations in Bogot,and these generate a quarter of ColombiasGDP and account for 15% of its FDI. Bogot is

2 Economist Intelligence Unit (2012) andAmericaEconoma (2011).

Basic Facts


Urban area 384 km2

Urban density 19,531 people/ km2

GDP (2011) Colombia $328.42 billion

GDP (2011) Bogota $74.25 billion

GDP/per capita (2011)Colombia

$7,131

GDP/per capita (2011)Bogota

$9,943

GDP/hectare $2,876.5Urban Employment Structure


Primary 0.7%

Manufacturing 21.5%

Services 76.5%

Main export industries Planes and aircrafts,coffee, flowers,medicines


45th

GDP= gross domestic product, km2 = square kilometer.Source: World Bank. 2012. World Development Indicators.

also an attractive location for people from otherregions seeking job opportunities or for startinga business. Although the city is known for itsindustrial production, it is gradually transforminginto a service-oriented economy.


23/40

Latin American Cities: Case Study Summaries

19

City Compeveness

The main challenge for Bogot is its transformationfrom a manufacturing to services economy, whichis underway. The government formulates a strategytoward a more technology-intensive economy,

and this needs more skilled labor, require bettertraining and education, and a framework forinnovation. In the key drivers of competitiveness,the cost of doing business indicator is weak at2.90 because of high cost of public services. Asto the responsiveness of government to businessneeds, based on qualitative indicators, the indexis poor at 2.55, with public sector affecting ratherthan promoting business environment (Table 4).

Urban Development

Bogot has in place a plan to increase the density ofthe city; consequently, land is scarce and becomingmore expensive. Residential and commercialprojects are taking up most available urban land,to the detriment of industry. In addition, poor roadinfrastructure and fleet growth is increasing trafficcongestion in the city, especially in industrial areas.This trend is also transforming the citys suburbanpopulations into urban conglomerates boostingtheir development in different areas.

Poor urban planning is one of the critical problems

of the city, which requires a reform focusedon improved access of goods, the provision ofefficient and affordable public transport, and theavailability of housing and recreation facilities.

A revamped governance model for Bogotaemphasizing strategic planning and long-termdevelopment goals is needed. It should result inan inclusive growth and collective commitmentto attain sustainability, good quality of life,and enhanced competitiveness; and one thatattracts investment.

Instuonal Framework

Bogot is the capital district of the countrythat is administratively equivalent to a statewithin a federation, which provides flexibility andpriority on fiscal, budgetary, and administrativematters.


Compeveness: Bogot

Key DriversRanking

15




Infrastructure 2.70


2.55




Source: CAF. 2012. National Consultants Study of Colombia.Caracas.

The local government has made significant effortsto attract investments by creating an agency Investin Bolgot to promote international investment,restructuring the Chamber of Commerce topromote the competitiveness of the citysentrepreneurs, and commissioning the BogotConnect to promote technology entrepreneurship.

The Commission of Regional Competitiveness (CRC)is predominantly a technical organization thatincludes public, private, and civil sector players.It has managed to achieve stability regardless ofthe political situation, making a region particularly

attractive for investment and ensuring the useof effective approaches for large-scale strategicinitiatives. While the CRC has high potential tomobilize influences and resources, it faces thechallenges of formalizing and strengtheningits governance system. The Bogot Chamber ofCommerce serves as the technical secretariatof the CRC, which aims to strengthen businessskills to enhance competitiveness and to createshared business values among companies in theregion. The creation and consolidation of industryclusters is now a priority for the Bogot Chamberof Commerce.

Although other initiatives of publicprivate sectorintegration exist, relations between the two sectorsare not particularly strong. In general, the privatesector sees the city as a client, rather than as acollaborating partner with whom to develop jointprojects.


24/40


20

Industry Clusters

Soware Cluster

The software cluster in Bogot is composed mainlyof micro and small enterprises (95%) devotedto the development of business personnel andentertainment applications, custom software, andthe provision of services related to informationtechnology and related fields. Companies ingeneral are highly technical, equipped withcompetent human resources, and have a goodreputation abroad. Bogot offers advantageousconditions for this clusters development in termsof costs, infrastructure, and business environment.

Fashion Cluster

Bogot is host to approximately half of all clothing,footwear, leather goods, and jewelry manufacturersin Colombia. The products are exported mainly toSouth and North American markets. The fashioncluster is likely to develop leadership in the sectorat the regional level, although it is recognizedthat Brazil and Peru are also major competitors.The overall competitiveness analysis of thecluster identifies the strengths as (i) sophisticateddemand, (ii) large market size around Bogot,(iii) availability of skilled labor, and (iv) productioncapacity. The clusters main weakness is the limitedsophistication of the garment, mostly focused onproducing generic items.


25/40

21

Curiba, Brazil

Curitiba is one of the most vibrant cities in Brazil. Itperforms well above the national average in most

social and economic factors and its environment isconducive to sustainable economic development.The citys GDP has grown very rapidly during the lastdecade, coinciding with a gradual transformationinto a services-oriented economy. Its logisticalconditions are conducive for exporting activitiesas it benefits from infrastructure such as majorhighways, ports, and airports that connect the city

Basic Facts


Urban growth rate 10.36%(20002010)

Urban area 43,527 hectares

Urban density 40.24

GDP (2009) Brazil $1.62 trillion

GDP (2009) Curitiba $18.98 billion

GDP/capita (Brazil) $8,472

GDP/capita (Curitiba) $12,379

GDP/hectare $435,960.28


Total employment 833.585

Primary 0.2%

Manufacturing andbuilding

17%

Services and trade 82.8%

Main export industries Cars and tractors(including partsand components),

agriculturalmachinery,integrated circuits


130th

GDP = gross domestic product, km2 = square kilometer.


to the other economic centers of Brazil and to themost relevant MERCOSUL3 countries, a SouthernCommon Marketan economic and politicalagreement that promotes free trade and the fluid

movement of goods, people, and currency.

City Compeveness

Curitiba ranks well in most of the key driverindicators of competitiveness with an overall indexscore of 2.96. The indicators that scored lowerthan expected were human resources and training,with companies perceived to lack adequatemanagement, skilled technical labor force, andweak ability to perform in other languages aside

from Portuguese. In all the other key drivers ofcompetitiveness, however, the city performed highwhen compared with other cities in Latin America(Table 5).

3 MERCOSUR, a free trade agreement among Argentina,Brazil, Paraguay, and Uruguay.


26/40


22

Development Iniaves

Urban Development

Curitiba has prioritized programs to fostertechnology-based industries, and has designedpolicies to attract and support the creation of thesetypes of companies. These policies complementthe federal programs that promote prioritysectors, such as semiconductors, pharmaceuticals,software, and capital assets, in order to offer them

more favorable conditions in terms of regulation,investment, financing, higher and technicaleducation, infrastructure, and others.

The strategies and actions used to develop localcompetitiveness at the state level are stated inthe Multi-Year Planning of the State Government,which covers a 4-year period. The plan establishesguidelines, objectives, targets, programs,and projects focused on state administration,equalization of territorial differences, and thesocialization of opportunities. In the Multi-YearPlanning of the State Government, 20122015,

two programs of special interest that focuson the development of local capabilities andon competitive advantages are the (i) ParanCompetitive Program, which aims to attractinvestment in industrial establishments alreadybased or that may settle in the territory ofParan, and (ii) Paran Innovative Program, whichintends to allocate approximately $27 million

in 2012 for strategic projects of research andinnovation through the TECPAR company and theAraucaria Foundation.

Instuonal Framework

At the state level, the actions of the Departmentof Industry, Trade and MERCOSUL Affairs seekto encourage the creation of companies andexport promotion firms to transform the cities,which comprise the Metropolitan Region ofCuritiba (RMC, in its Portuguese acronym), intothe main hub of Brazilian companies exportingproducts to member countries of the LACeconomic bloc.

At the municipal level, the Curitiba DevelopmentAgency aims to promote economic activitythrough the development of infrastructure,business networks, and science and technologywith emphasis on PPP. The agency advisesinvestors and companies interested in installingor expanding their activities in the city, offeringtechnical, socioeconomic, and environmentalinformation, among others. The main programs ofthe agency are related to tax incentive, such thatTecnoparque is for the exemption and reduction oftaxes, municipal fees, and contributions in orderto stimulate the development of high-technologyindustries; and ISS Tecnolgico is for enterprises

and service providers that promote research,scientific, and technological development in thecity, allowing the deduction of service tax.

The regional innovation system of Curitiba iscomposed of 157 institutions (laboratories,associations, institutes, agencies, and incubators)attached to the Ministry of Science, Technologyand Innovation that provide institutional supportand infrastructure for developing research anddevelopment, and support for innovation andquality assurance. While there are many strongacademic and research institutions in the city and

its surrounding areas, they are quite detached fromthe production sector. This could be easily changedif they work in a more coordinated manner. Figuresdemonstrate the importance of higher educationand research and development activities to thecitys economy. It is worth noting that the leadinguniversities of Curitiba are responsible for theincubation of a significant number of technology


Compeveness: Curiba

Key DriversRanking

15




Infrastructure 2.72


2.69




Source: CAF. 2012. National Consultants Study on Brazil.Caracas.


27/40


23

firms in the region, as in the case of Bematech.

Curitiba has a set of actors that are focused ondeveloping the business environment, includingseveral agencies and two trade federations,Fecomrcio and Faciap, which are also based in thecity. The Brazilian Service of Support for Micro andSmall Enterprises (Sebrae)a nonprofit institutionthat assists entrepreneurs in opening, planning,and in the maintenance of their companiesofferssolutions, lectures, and trainings at its Paran chapter.

Cluster Developments

Medical, Hospital, and Dental

Products Cluster

Curitiba manufactures and markets a wide range

of high technology products that are offeredmainly by micro and small enterprises. Linksbetween companies could be strengthened so

they could engage in joint ventures more often.Since export capacity is still fragile, production isaimed at meeting domestic demand by both theprivate and public sectors.

Soware Cluster

This cluster is composed of small businesses witha more mature level of articulation, with frequent

joint venture activities and a network of diversifiedsupporters. Its main competitive strengths are(i) the conditions of infrastructure and environment;(ii) the strategy, structure, and rivalry of companies;and (iii) support industries related to the cluster.Its main weaknesses are (i) shortage of skilledlabor, (ii) demand conditions composed of firmsrequiring these products or services (especiallythose related to new products), (iii) proceduresand rules set by the government, and (iv) inability

to enter international market due to its relativelysmall scale.


28/40

24

Guayaquil, Ecuador

Guayaquil City has been an important tradecenter for centuries, in part because it houses thecountrys main port, which accounts for 65% of thegoods traded in Ecuador. The city is the economic

capital of the country, accounting for about 30%of national GDP. It is home to 40% of the countryslargest firms. It has the largest population and percapita income in the country. The city is currentlyundergoing a period of strong economic growth,which is being driven by construction, tourism,and agriculture. Over 20% of the citys businessesexport products to international markets.

City Compeveness

The city has competitive advantages in its transportinfrastructure and in some areas of business suchas business dynamics. However, some aspects ofadministration and economic governance, such asconstraints in registering a business, and high costof labor, undermine the citys competitiveness.In general, however, the key drivers of citycompetitiveness (Table 6) rank above other LatinAmerican cities.

Basic Facts


Urban growth rate 2%

Urban area 344.5 km2

Urban density 7,227/km2

Real gross production(2010) Ecuador per capita

$1,101.28

Real gross production(2010) Guayaquil per capita

$2,536.71

Real gross production/hectare $8,757.67


Total employment 780,000

Primary 15.7%

Manufacturing 18.4%

Services 65.9%

Main export industries Banana, seafood,fish, and cocoa


139th

km2 = square kilometer.



Compeveness: Guayaquil

Key DriversRanking

15




Infrastructure 3.63


3.16




Source: CAF. 2012. National Consultants Study on Ecuador.Caracas.


29/40


25

In the last decade, the number of new firmestablishments has been twice than in the rest ofEcuador. Most of the indicators are higher thanin other cities in Ecuador, except security; thoughperception is that it is not worse than in urbanareas in Latin America, it is a major concern inGuayaquil.

Development Iniaves

Urban Development

The city boasts of a well-developed infrastructurein transport (ports and roads), tourism, leisure,education, and others, which contribute to arelatively high standard of living.

In the last few years, residential areas (including

social housing) have grown more than industrialareas. Large investments have been made toregenerate the downtown area, which has createdbusiness opportunities and attracted more visitorsto this area.

Urban planning and housing programs aremanaged by the city administration. Guayaquilshould establish a planning strategy for long-term development involving the private and publicsectors to achieve a more efficient use of resourcesand increase the attractiveness of the city for

business people, tourists, and its citizens.

Instuonal Framework

The subnational government has been primarilyresponsible for the citys positioning as a regionalreference for doing business. It has soughtto encourage foreign investment (either forlarge projects or large companies to settle in)by, among other actions, establishing a properlegal framework.

The city government requested the transfer of thepowers of public goods that were not adequately

provided or administered by national and stateinstitutions. Guayaquil is known for its successfulprivatization of most public services, which madethese services more efficient and economical.

The city competitiveness is hindered by the weakperformance of Ecuador in almost all categoriesof Doing Business Index, as the country is amongthose Latin American countries whose regulationis less conducive to encouraging investment. Forexample, the tax structure is rigid, centralized,and prevents cities and regions from choosingmore competitive systems (although they mayexempt businesses from paying municipal taxes).It is suggested that the city, which is noted forits transparency and accountability, should movetoward greater decentralization of powers.

Industry Clusters

Commercial Services Cluster

This cluster was included because of the intensityof commercial activity in Guayaquil, coupledwith the importance given to it by the chamberof commerce and business associations. Localauthorities keep their intervention in markets to aminimum, allowing this to be a strong and dynamicactivity. Nevertheless, there is a need to conducttraining for lower-skilled workers, reduce the level

of informal employment, and improve workingconditions (as many workers are immigrants frompoorer regions).

Cocoa Products Cluster

The produce in the Guayas region has a superiorquality due to the unique characteristics of its landand climate. Cocoa-related exports generate agreat deal of economic activity in rural areas andbring dollars to the country. The government is wellaware of the competitive advantage of Ecuadorin this sector and has supported producers (with

subsidies and equipment) and scientific research(with seeds, varieties, growing techniques,and others).


30/40

26

Lima, Peru

The citys economy reflects the sound Peruvianmacroeconomic conditions, as the country hasgrown steadily over the last 15 years as a resultof the deep structural reforms undertaken. Lima

is the center of economic, political, and culturallife in Peru since colonial times. The city is host tomost of the countrys economic activity (accountsfor approximately 45% of GDP), although Limasrelative importance has declined in recent years dueto the growth of other cities. Most relevant activitiesare related to services (trade, restaurants and hotels,government services, and others). The importanceof manufacture has declined in recent years dueto the decentralization process that the country isexperiencing and to the dynamism of other regions.Lima accounts for a third of the countrys exports,partly due to its better infrastructures vis--vis other

Peruvian regions.

City Compeveness

The Peruvian economy has been growing forthe last decade, ranking 21st in the index ofmacroeconomic stability according to WorldEconomic Forum (WEF). However, its key drivers

Basic Facts


Urban growth rate 2.1%

Urban area 2,670.4 km2

Real gross product(2011) Peru

$157.05 billion

Real gross product(2011) Lima

$69.54 billion

Real gross product/hectare $1,998.00



Primary 3.9%

Manufacturing 16.3%

Services 54.0%

Main export industries Traditional mining,oil, and gas, textiles

km2 = square kilometer.


for competitiveness are weak. Though thedynamics of the local economy is relatively strong,all other indicators are below 1. In terms of thegovernments capacity to support business, rulesand regulations represent a heavy burden onbusinesses and the public sector does not promotethe local economy as it should (Table 7).

Development Iniaves

Urban Development

The municipality is organized into gerencias(boards) with specific mandates, and all theserequire intensive coordination. Major projectsare not directly addressed by these gerencias,but by supporting institutes dependent on theMunicipal Council. For example, the MetropolitanPlanning Institute is responsible for defining the


31/40


27

Coordinated Regional Development Plan, 20122025, which includes the set of actions to increasethe citys competitiveness, to be implemented bysomegerencias.

The Business Development Gerencia is responsiblefor the development and promotion of clustersof micro and small enterprises in the city (whichconstitute 52% of the small and medium enterprisesin Peru) and for the establishment of trainingprograms for human resources. The Promotion

of Private InvestmentGerencia

is responsible forpromoting high-impact projects located withinits territorial jurisdiction. Projects are handledthrough PPP in two forms: self-sustaining (whichcomprise mainly highway concessions and arefunded solely by private capital), and cofinanced(requiring additional counterpart from the city).

While Lima is the center of Perus highway system,the city has few expressways relative to its size andthere are major bottlenecks. It also has a limitedpublic transport system.

Instuonal Framework

National reforms have prioritized the facilitationof private investments. These entailed redesigningthe legal framework to provide a set of incentivesthat would attract investors, especially onnatural resources and public services. A set of

guidelines and principles was even added to thecountrys Constitution. Proinversin is a nationalagency created with the objective of promotingprivate investment, competitiveness, sustainabledevelopment, and social welfare.

The city has a special administrative regimethat allows the city to exercise its duties whilesimultaneously fulfilling the functions of theregional government. To facilitate coordinationbetween the city of Lima and the othermunicipalities, meetings are arranged withDevelopment Gerencias to set priorities. Throughthe so-called Participatory Budgeting, funds areallocated for research and innovation projectsthrough the Peru Innova program. These fundsfinance universities that address specific problemsof the city, although this is a pilot program withsmall amounts of budget. Coordination channels

between the city and the private sector are stillincipient. While there have been contacts with somebusiness associations on specific issues (such as theuse of city resources), there is no institutionalizedmechanism for a formal collaboration.

Industry Clusters

Culinary Cluster

The competitiveness of this cluster is determined

by the rich Peruvian culinary traditions andthe availability of a wide range of high-qualitydomestic products. The capital is full of restaurantsof different styles that cater to the growing localdemand (which expects good quality and service)and culinary tourism. This sector accounts formore than $1.5 billion annually and has becomea vehicle to promote local entrepreneurship andPeruvian investment abroad. It is a dynamic clusterbecause it is based on collective efficiency, and isbased on constant innovation with technologicalcomponents.

Gamarra Areas Texle Cluster

The textile cluster known as the Gamarra areaconsists of a traditional industrial agglomerationof businesses engaged in the production anddistribution of clothing located in La Victoriadistrict. The cluster is considered underdevelopedbecause there are no institutions that will help


Compeveness: Lima

Key DriversRanking

15




Infrastructure 2.93


2.86




Source: CAF. 2012. National Consultants Study on Peru.Caracas.


32/40


28

it grow sustainably. In order to reach a maturitystage, it should focus on improving joint action,cooperative competition, technological innovation,

social capital, and developing stronger formalprocedures and institutions. The government haslaunched an initiative to promote this cluster.


33/40

29

Trade Corridors of Asiaand Lan America

As cities develop, trade and communications alongthe major land, sea, and river transport corridorsconnecting them also grow. In recent years, this

phenomenon has given rise to a growing interestin the emergence of economic or trade corridors,some of which transit across many countries. Afeature of trade corridors is they geographicallylink two or more large cities, but there are oftenmany smaller secondary city nodes that havedeveloped along transport corridors, whichbenefit from the flow of freight and passengersalong them. Improving the connectivity of firmsand industries between secondary and primarycities along trade corridors offers opportunities forsmaller primary production in secondary cities tocapitalize on the increasing trade flows occurring

along land and river transport corridors. However,the poor level of connectivity at the nodes meansmany opportunities for local businesses locatedin secondary cities to feed into the supply chainsof firms located at either end of the corridor arebeing lost.

The ADBCAF Asia and Latin America RegionalCompetitiveness of Cities study examines severalexisting and emerging trade corridors in thetwo regions. Trade corridors have at least threecharacteristics that distinguish them from simplegroupings of cities and surrounding areas with orwithout roads or rail connections to the nearestseaport. Trade corridors have (i) productionfunctions that make available basic goods andservices, (ii) transformation functions that addvalue to the basic goods and services, and(iii) logistical functions that provide opportunitiesfor firms to have access to national andinternational markets.

A feature of trade corridors is they aretransnational, or in larger countries they aretrans-subnational corridors of economic trade,

cooperation, and development. The abilityto unlock the competitiveness of cities alongtrade corridors is crucial in supporting regionaleconomic development and helping to diversifythe economies of secondary cities. Developingnew infrastructure, linkages, and transformationcomponents is critical to supporting the supplychain development and tapping markets of largecities located along trade corridors.

Two studies, also by ADBCAF, are being conductedto identify what could be done to develop thepotential of cities along economic development

corridors in Asia and Latin America. These studiesaim to find out how to enhance the citiescompetitiveness to attract investment, create newemployment, and take advantage of investmentopportunities. A key component of these studiesis to identify key factors of competitiveness thatunderpinned the economic development of tradecorridor cities, and why some cities in these corridorsare more successful than others in capitalizing ontrade and economic development opportunitiesthe corridors create. The study will include vignettecase studies of corridors development to identifywhat is necessary to improve the formulation ofpolicies to the development the corridors.

Several case studies of economic developmentcorridors are being undertaken in Asia by ADB.These case studies cover the Ho Chi MinhBangkok, Kuala LumpurSingapore, MumbaiDelhi, TianjinBeijing, and Pearl River Deltaeconomic development corridors. These studies


34/40


30

will describe policies and incentives agreed uponby governments to develop the trade corridorsand an indication of the benefits that may begained from promoting and supporting this typeof development.

The case studies selected for Latin Americainclude (i) MERCOSUL (Brazil, Paraguay, Uruguay,

and Argentina) and Chile; (ii) the Central Inter-Ocean from Brazil to Peru; and (iii) the MxicoUnited States corridor. These studies willemphasize the role that cities and urban andindustrial agglomeration have to accomplish toachieve physical integration and supply chainstrengthening in the region.


35/40

31

Preliminary Findings

Asian Cies Case Studies

Compeveness of Cies

The preliminary findings of the research for Asiashow significant differences in the strength ofdrivers of competitiveness for the cities andclusters studied between the developed anddeveloping parts of the region. Other studies onthe competitiveness of cities in the region confirmsimilar findings.

SeoulA Transforming Economywith Many New Challenges

Seoul is the most advanced economy of the fourcity case studies. As an advanced economy, it islosing competitiveness. The global financial crisishas had a significant impact on the developmentof the export sector of Seoul and on other citiesof the Republic of Korea. The rising cost ofdoing business, especially labor, land, and utilitycostsas the country imports much of its energyneedsare significant factors undermining

competitiveness. This has forced structural changesto the citys economy by moving away fromheavier manufacturing to ICT; finance; and newservice sector industries. In response to this move,the national and local governments have focusedtheir efforts on building human capital, developingstrategic infrastructure, enhancing businessdynamics and regulation reforms to enable thecity to compete for new global services business.Seouls quality of life is high, which remains

a factor in pulling in skills and investment intothe economy.

Dhaka, Ho Chi Minh, Nanning

Beer Infrastructure, Human

Capital, and Business Dynamics

The case studies of Dhaka, Ho Chi Minh, andNanning cities show economies at various stagesof development. Nanning has the relativelyadvanced economy, with recent initiatives todevelop infrastructure being supported bythe three levels of government, adding to the

competitiveness of the citys economy. Thestudies on the competitiveness of the drivers ofeconomic development in the three cities showclearly that infrastructure shortfalls are addingto the direct and indirect costs of business.However, poor development of human capital,the lack of responsiveness of government instreamlining economic governance, and businessapproval systems are significant factors thatconstrain investment and job creation. Quality oflife is also an important indicator as these citieshave a wide range of community, education,and health services attractive to investment and

skilled labor.

Environmental Issues and Inner

Area Revitalizaon

Environmental risks associated with climate change,air and water pollution, environmental wastes,and reduced quality in the built environment in


36/40


32

urban areas are issues of concern in all four cities.Seoul and Nanning, and to a lesser extent Ho ChiMinh City, are giving attention to addressing theseissues. How to revitalize inner-city areas is a majorchallenge. These areas are experiencing high levelsof congestion, rising land and rental costs, poorquality housing, and a decline in investment and

jobs. Collectively, these factors have caused manyfirms to expand their businesses on the peripheryof cities or offshore, as in the case of Seoul. Thereis a need for substantial reinvestment in inner cityrevitalization projects to enhance the quality ofthe urban fabric and generate new types of jobsconducive to endogenous economic growth.

Industry Clusters

The case studies have identified several industry

clusters in each city that are important driversof economic activity and employment. Industryclusters comprise spatial agglomeration offirms, which help foster competition; reduceexternalization and business transaction costs;and stimulate local innovation, colla

adb-caf regional competitiveness of cities in asia and latin america

Documents