Europe’s leading cities – models for Munich in the competition to attract business?!

NOVEMBER 2005

INTRODUCTIONEconomic activity is more and morefocused in the major urban centres.At the same time, these cities are in acompetition with one another. AcrossEurope they are struggling to attractinvestors and look for the most successful path to a dynamic econo-mic future.

But which cities in Europe have madethe greatest economic progress in the past? What are the factors which have made these cities more successful than others? And whataction can cities take to achieve gre-ater economic growth in the future? A study called »Europe’s best –models for German cities in the com-petition to attract business?!«1) tries tofind answers to these and other ques-tions. HypoVereinsbank is thepublisher of this study, from whichexcerpts are included below, in colla-boration with HWWA, the HamburgInstitute of International Economics.

In this study, those European citieswho have recorded outstanding eco-nomic success are identified, andtheir development and the underlyingfactors responsible for their successare compared with the situation inGermany’s four biggest cities (Berlin,Hamburg, Munich and Cologne). Theaims of the study were to trace themost likely ways in which to achieveabove-average economic growth and point out regional choices avai-lable. The summary given belowfocuses particularly on an analysis of Munich’s situation.

IDENTIFICATION OF THE MOSTSUCCESSFUL MAJOR CITIES

To be particularly successful in thesense of this study, cities must haverecorded distinctly more positive eco-nomic development than their respec-tive national economies. The criteriontaken to judge this success is thegrowth in the number of people injobs. The size of the workforce is adeclared key target figure in theLisbon strategy pursued by the EU.

The extent to which the developmentof the 32 cities included in the studyvaries with respect to macroeconomicgrowth in their respective countries(cf. Fig. 1), from which we may con-clude that location-specific factorsplay a role of varying importance ineach city's development.

Judged by the above-mentioned criterion, Helsinki, London andAmsterdam, but also Cologne havebeen particularly successful. Not onlyhave these cities been able to gene-rate a large net increase in thenumber of new jobs, but they havealso been markedly more successfulthan the rest of their respective coun-tries (cf. Fig. 1 and Fig. 2). We maythus conclude that these cities havedeveloped their location-specific fac-tors so well that they have been ableto benefit from national success to adisproportionately high degree. Thisis the reason why in this study theeconomic concepts adopted by Hel-sinki, London and Amsterdam aretaken as examples for comparisonwith what is being done in Germancities and in particular in Munich.

Of course, economic success is easierto achieve in a dynamic economy thanin a stagnating one. Thus it is no sur-

prise that Dublin has been the mostsuccessful European city over the lastfew years. At the same time, however,Dublin’s level of economic growthhardly deviates from the macroeco-nomic growth for Ireland as a whole.Dublin as a city has therefore beenunable to create the economic condi-tions required to attract a thicker-than-average slice of the Irish pie.This means that Dublin has not beenabnormally successful from the study's point of view, because the par-ticular focus of the study is on theprevailing local and regional condi-tions that may have been decisive inbringing a given city markedly moregrowth than can be seen in the rest of the economy.

THE THREE »GOODY-GOODIES«

Despite the success they have all had,Helsinki, London and Amsterdam arevery different cities. Amsterdam andHelsinki are two of the EU’s smallercapitals, while London is – along withParis – the only megalopolis in theregion. What is common to all three is the fact that the macroeconomicframework is very advantageous –they all have, for example a low regu-lation density. Furthermore, all threecities are situated in economies whichshowed a high growth rate togetherwith a relatively low unemploymentrate in the period under study (1995 –2001).

Amsterdam and London may have even more local conditions incommon which have contributed totheir success in creating jobs. Amongthem are:

0 5 10 15 20 25-5-10-15

Share of in %

30 35 40-20

-10

0

10

20

30

40

Town

Country

Share of in %

AmsterdamBerlinDublinHamburgHelsinkiCologneLondonMunich

Sources:Eurostat (2005a),our own figures

12345678

1

2

3

4

5

6

78

GROWTH IN THE NUMBER OF PEOPLE IN WORK IN EUROPE'S MAJOR CITIES(X-AXIS) AND IN THEIR RESPECTIVE COUNTRIES (Y-AXIS) 1995–2001 (F IG. 1)

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1) Authors of the study: Dr. Michael Bräu-ninger, Dr. Silvia Stiller, Hamburg Insti-tute of International Economics (HWWA),Neuer Jungfernstieg 21, 20347 Hamburg,Germany.

• high internationality (high interna-tional integration of their economy,attractiveness as a tourist destina-tion, good integration in interna-tional traffic flows, etc.);

• the role of the city as a nationalmainport with international airportsof outstanding importance withinEurope;

• a far higher-than-average impor-tance of the services sector for acity's economic performance andemployment record (cf. Fig. 3);

• the important role played by thefinance, transport, commerce andcommunications sectors as well astourist industry play in a city’s eco-nomic performance;

• the outstanding national (in Amster-dam) and international (in London)relevance of their stock markets;

• the high proportion of foreign nationals in the population, and

• continual population growth.

Not only in London, but also inAmsterdam, however, one can seelocation disadvantages which resultfrom the geographical concentrationof economic activity and populationwithin these cities. Both cities haveabove-average living costs and pro-perty prices as well as an overloadedtraffic infrastructure. On the other

hand, a positive consequence of thisagglomeration of economic activity isthe ready availability of labour andspecialised services.

In Helsinki, however, other factorshave been crucial in the city's eco-nomic success and its generation of jobs. Indeed, Helsinki – likeAmsterdam and London – is thecapital and mainport, but while about 90 % of national business life in Amsterdam and London revolvesaround the service sector, Helsinki(still) has a relatively broad industrialbasis and industries which are crucialto development in this area of eco-nomic activity (cf. Fig. 3). As inLondon and Amsterdam, however,trade and freight transport are alsoexpanding in the Finnish capital.

As far as other factors in its successare concerned, however, Helsinki hasa number of idiosyncrasies comparedwith Amsterdam and London. UnlikeHelsinki, the British and the Dutchcapitals are not among the top inno-vation locations in the EU. There is aclose correlation between Helsinki’seconomic success and the city’s structural change towards a know-ledge-based economy and society.Education, science, research anddevelopment (R&D) as well as newtechnologies form the basis of the economic success of the Finnish

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AmsterdamLondon

Sources:Eurostat,our own figures

CologneHelsinki

HamburgMunich

0

Berlin

3 6 9 12 15-3-6-9

Deviation from the national average in percentage points

GROWTH IN THE SIZE OF THE WORKING POPULATION, 1995-2001 (F IG. 2)

Share of in %

0 10 20 30 40 50 60 70 80 90 100

ServicesIndustryAgriculture andforestry

Sources:Eurostat (2005a),our own figures

Munich 79.5 20.4 0.1

Helsinki 77.6 21.9 0.4

Cologne 75.2 24.7 0.1

Hamburg 81.2 18.7 0.2

Berlin 82.4 17.4 0.2

Amsterdam 87.7 11.5 0.8

86.2 13.7 0.1London

SHARE BY SECTOR OF GROSS VALUE ADDED IN 2002 (F IG. 3)

metropolis. The conditions prevailingin Helsinki as a business locationinclude

• its good record on R&D and humanresources expenditure withinEurope;

• its high ranking in Europe withregard to the population’s level ofeducation and the level of qualifica-tion among the working population;

• the well-advanced specialisation ofthe economy in knowledge-intensiveservices and industries, and

• the agglomeration of R&D facilitiesand users of new technologies suchthat the »critical mass« for the development of clusters has beenreached and proximity and informa-tion spillovers can be profited fromparticularly well.

All in all, it can be ascertained thatwhile Amsterdam, Helsinki andLondon are large cities with differentstructures, they show some decisivesimilarities. Common to all is theirprominent status as economic hubsand mainports within their respectiveeconomies. In addition, they havestock markets and universities. Fur-thermore, the studies have shownthat not only relatively small cities likeAmsterdam but also relatively largecities such as London were able torecord above-average growth duringthe period under scrutiny.

The fact that the structural changetowards a service society in Amster-dam and London is already welladvanced could have a positive effecton the future development of thesecities. A relatively high proportion offoreign nationals is also a characte-ristic attribute of Amsterdam andLondon. The participation of foreignworkers in economic life has potenti-ally positive economic effects on thedevelopment of a city. City dwellersfrom abroad can promote innovative-ness, productivity and urban growthwhere they complement the home-grown workforce, i.e., when they canoffer skills and knowledge which complement the qualifications of theindigenous population.

These cities’ success also seems toderive from their pursuit of similarfundamental policies. In their urbandevelopment concepts, Amsterdam,Helsinki and London emphasize thereduction of disadvantages derivingfrom agglomeration, and qualitativegrowth, which they hope to achieve byexpanding their transport infrastruc-ture and, for example, by giving over

new inner-city areas to residential andcommercial use. Simultaneously, thequality of life in these cities is to bepromoted, for example by cultivatinggreenfield sites and expanding culturalprogrammes.

GERMAN METROPOLITAN AREAS PUT TO THE TEST

Taking these successful European citiesas a benchmark, the study investigatesthe situation in Germany’s four biggest cities. The local conditions inAmsterdam serve as the referencepoint for the assessment of location-related factors. In the field of innova-tiveness, Helsinki is cited for the pur-poses of comparison as an outstandinglocation in Europe for research anddevelopment. Amsterdam is suitable asa reference point for this comparisonbecause no other city in the study is sostrongly influenced by location-relatedfactors. Unlike Hamburg, Cologne andMunich, of course, the cities selectedfor comparison are all capitals. In acapital, there are location peculiaritiessuch as a high concentration of publicsector workers. In terms of per capitaincome (measured as GDP per capita)and productivity, however, the major

German cities – with the exception ofBerlin – and the European cities usedfor comparison are on a similar level(cf. chart 1).

Chart 2 shows that the influence ofseveral location-related factors on thedevelopment of the German cities has been relatively less advantageouscompared to the case in Amsterdam.Among other things, the structuralchange towards a service-based societyin all German cities is not as faradvanced, the percentage of highly-qualified workers in the working popu-lation is lower and they generally haveless international character.

On the other hand, there are also areasin which clear location-related advan-tages can be identified, especially inregard to agglomeration density. AllGerman cities are relatively thinlypopulated. In Hamburg and Cologne,the population density is approxima-tely half as high as Amsterdam’s. Pro-perty prices in Berlin are on average30 % lower than those in Amsterdam.Moreover, the cost of living in Berlinand Munich is about 6 % (and in Ham-burg as much as 9 %) lower than theyare in Amsterdam.

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CITIES AT A GLANCE (CHART 1)

Inhabitants Working population* GDP GDP (PPS**) per Productivity***

in 1000s, 2001, in 1000, 2001, in Pm, 2000, inh. in P, 2002, in P, 2002,

Metropolitan Metropolitan

City City City Area Area

Amsterdam 735 616 28,509 39,943 79,188

Berlin 3,388 1,469 74,947 20,454 49,202

Hamburg 1,726 985 71,884 39,766 70,778

Helsinki 560 371 22,670 33,420 64,000

Köln 968 598 38,807 32,397 63,349

London 2,772 2,565 193,112 40,068 68,806

München 1,228 903 62,693 49,771 75,532

*working locally, ** PPS = purchasing power standard, ***GDP per person in gainful employmentSources: Eurostat; our own figures

Amsterdam has not yet turned itsattention to innovation. Apart fromHamburg, all German cities rankhigher on the European InnovationScoreboard and register noticeablymore patents.

When Munich is compared to Helsinkiwith regard to R&D indicators (cf. Chart3), it is clear that Munich, ranked thirdafter Stockholm and Helsinki on the2003 European Innovation Scoreboard,is perfectly capable of competing withHelsinki. In 2003, in the city of Munichis invested more in R&D and are regis-tered more patents. Moreover, a largerproportion of the working populationin Munich and Cologne is employed inknowledge-intensive industries andservices, these being important eco-nomic sectors in terms of creating aknowledge-based society, because theydeploy new technologies and newknowledge. But compared to Helsinki,there are huge deficits in the educationand training of people of working agein all the German cities included in thisstudy.

Many more workers in Helsinki have auniversity degree than is the case inGermany’s major cities. Furthermore,according to forecasts, the percentageof jobs requiring good skills and quali-fications will continue to rise. This isanother reason why German cities willhave to go through a comparativelysevere structural change. The averagelevel of education of the inhabitants of Germany’s major cities is also farbelow that of their counterparts in Helsinki.

Although a comparison of locational-quality indicators certainly highlightsdifferences, a straight comparison oflocation-related factors does not sufficeto identify which local conditions arethe decisive factor in improvingemployment levels in European cities.Many factors have an influence on therise in the number of jobs in a city,including its political and financial set-up. What can be said is that thecomparatively low average level ofeducation in Germany’s major cities, a sub-average level of internationalityand certain deficits in respect of acces-sibility represent hindrances to loca-tion development in Germany.

MUNICH – A BUSINESS LOCA-TION WITH MANY STRENGTHS

With its 1.2m inhabitants, Munich isGermany’s third biggest city and theeconomic hub of Bavaria. Munichgenerated 4.4 % of Germany’s GDP in2002, more than any other Germancity. Per capita income and productivityare higher than anywhere else in Germany. On a European level, Munichranks 3rd according to these indica-tors, behind Paris and Brussels andParis and Amsterdam respectively.

In the period under study, productivity(at + 11.6 %) and population growth (at+ 1.5 %) are below the European cityaverage though still above the averagefor purely German cities. The numberof wage and salary earners (+ 9.8 %)and per capita income have shownabove-average growth in both Germanand European terms. At 23.7 %, Munich’s proportion of foreign inhabi-tants is relatively large in comparisonto other German cities.

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SELECTED IMPORTANT LOCATION-RELATED FACTORS IN GERMANY'S PRINCIPAL CITIES (CHART 2)

Berlin Hamburg Cologne Munich

Working population growth rate, 1995–2001 in % (Amsterdam: +23,2) –3.6 +3.6 +11.9 +9.8

Deviation from national average, 1995–2001in percentage points (Amsterdam: +6,8) –7.7 –0.5 +7.8 +5.7

International ranking (Amsterdam: ranked 3rd) rank 6 rank 23 rank 14 rank 11

Amsterdam=100

Share of gross value added services, 2002 94 93 93 88

Share of working population in knowledge-intensiveindustries and services, 2002 190 183 254 331

Tourism intensity, 2003 133 57 35 92

Public accessibility by road, 2003 91 97 136 105

Public accessibility by air, 2003 94 89 91 80

Public accessibility by rail, 2003 83 87 131 89

Share of working population with university degree, 2002 98 74 77 83

Share of foreigners, 2003 27 30 36 49

Population density, built-up areas, 2001 85 51 54 89

Home prices, 2001 68 84 104 119

Commercial rents, 2003 n.a. 80 n.a. 126

Cost of living, 2004 94 91 n.a. 94

Patent intensity, 2002 141 236 276 980

n.a. = not availableSources: Eurostat, European Commission, Mercer Human Resource Consulting, TourMis, Rozenblat/Cicille, CB Richard Ellis, our own figures

RANKING INDICATORS FOR RESEARCH AND DEVELOPMENT (CHART 3)

Indicator Berlin Hamburg Cologne Munich Helsinki

European Innovation Scoreboard ranking, 2003 16 55 25 3 2

R&D spending (share of GDP in %), 2001 4.2 1.5 3.2 4.7 3.6

R&D workers as a proportion of

total working population, in %, 2001 2.7 1.6 2.3 3.5 3.4

Proportion of knowledge-intensive industry andservice employment of working population in %, 2003 10.6 10.8 14.5 17.9 12.6

Patents per 100,000 inhabitants, 2002 19.9 23.6 27.6 98.3 54.6

Share of total population with university degreein %, 2001 21.4 15.2 16.0 21.5 28.3

Share of working population with university degree in %, 2001 31.5 24.6 24.0 26.0 34.5

Sources: Eurostat, European Commission, our own figures

The industrial sector is of particularimportance to Munich. Industry’s contribution to gross value added(22.8 %) is double Amsterdam’s figure(11.5 %). The number of people wor-king in knowledge-intensive sectors isthe highest of all the European citieslooked at in this survey while the proportion of workers in knowledge-intensive services jobs is fairly average.

Munich is marked by its specializationin the of broadcasting and informa-tion technology sectors, vehicle con-struction and publishing. This canpartly be seen from patent applica-tions – there are more patent applications in the fields of electricalengineering, electronics and commu-nications engineering filed in Munichthan in the German average. Munich’ssuccess in the hi-tech sector derivesnot only from dedicated public fun-ding but especially from networkingpublic R&D facilities and businessusers. The huge innovatory success inMunich is also due to the comparati-vely harmonious correlation betweenpublic research departments’ remitand the specialisation of the city’sknowledge-intensive industries andservice companies.

3.5 % of Munich’s working populationare in research and development,more than in any other of the citiesstudied. Of all these cities Munich hasthe highest R&D spending as a propor-tion of GDP at 4.7 %. The number ofpatent applications per inhabitant is

the highest in Europe. Munich ranksalongside Helsinki and Stockholm as aleading innovation location as its thirdplace on the European InnovationsScoreboard shows. In terms of inter-nationality, Munich ranks second inGermany – behind Berlin – and eleventh out of 180 European metro-politan areas.

The replacement of Riem Airport withFranz-Joseph Strauß Airport in 1992put Munich on the right course for thefuture just in time. By 2004, MunichAirport had become Germany’ssecond-largest international air traffichub behind Frankfurt, with 26.7m passengers. Its constantly high growthrates have proved to be an major boostfor the city. The relatively low ratingfor public accessibility by air (cf. Chart2) is mainly the result of the poorpublic transport connections betweenthe city and the airport. However, thisproblem is to be addressed by wide-ning the motorway. Investment ininfrastructure is also planned for thesuburban transport network in orderto guarantee better connectivity forMunich’s fast-growing suburban areaand to deal with the resultant increasein commuter numbers.

The downside of Munich as a businesslocation Munich features the cost of living, which is the highest in Germany. Due to the relatively densepopulation, rents and home prices arehigher in Munich than anywhere elsein Germany. Among the cities coveredin our survey, only London has higherhome prices.

RECIPES FOR SUCCESS FOREUROPEAN METROPOLITANAREAS

Analysing Europe’s successful citiesmakes clear that there is no patentrecipe for success, as basic factorssuch as historical and local precondi-tions differ so greatly from city to city.Furthermore, a strong dependency onnational economic trends is in mostcases also a factor. Nevertheless, thereare identifiable »main roads« thatcould lead to above-average growth for cities. They can make themselves fitfor their economic future by continuingto concentrate on providing interna-tional service functions. Cities such asLondon and Amsterdam are rolemodels for such success. Both citiesare writing impressive success storiesby having adjusted to internationaldemands and linking up to a globali-sing economy by offering highly specia-lised services. And technical inno-vations and outstanding scientificachievements are ingredients of greatimportance in this recipe for success.Their way may be a source of inspira-tion for Hamburg and – to an extent –Berlin.

Another recipe for success lies in innovative production. Building on astrong, internationally competitive andresearch-intensive industrial sector,business locations have becomestrongly linked to the complex globalproduction chain. Helsinki and Munichare good examples for such an eco-nomic integration.

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Cologne is an example of a mixture ofboth models, combining innovativeproduction with international servicefunctions. Cologne’s job creation success results particularly from itsspecific mixture of sectors. Thismelange consists of a strong know-ledge-intensive industrial base speciali-sing in vehicle construction and chemi-cals combined with fast-advancingservice sectors such media services.Another advantage is Cologne’s favou-rable geographical position withinEurope and its good accessibility.

Of course, no successful city with itspeculiar local recipe can serve as aone-on-one standard model for anyother city. However, the decision for a city about where to focus infrastruc-tural development should be madeactively with regard to successfulneighbours or examples. The choice of focus enables a city to set a clearcourse accordingly and thus avoid poor investments. Every city needs toanalyse the make-up of its presentbusiness and regional structure, andthus identify the ideal point at which to dock on to the global economy.

However, there is little scope for poli-tical initiatives at regional level. Manyfactors, such as a city’s geographicalposition or its role as a capital, whichare relevant for urban development,can hardly be influenced – if at all – bypolitical intervention. Other importantfactors, such as the economic anddemographic structure can only bechanged in the long term. What ismore, change cannot be made in iso-lation. Regional policy is always insome way a function of fundamentalnational parameters which either slowor accelerate economic developmentand decisively influence the inter-national competitiveness of urban centres. In the federal system in Ger-many, provincial politics is not unim-portant in urban development – educa-tion policy is one example. National-and state-level reforms are thus vital to improving the future prospects ofMunich and the other cities analysed inthe study. But despite these constric-tions, the cities have room to improvetheir locational conditions, perhaps asin Munich’s case by collaborating withBavaria’s state government.

MUNICH’S OPTIONSThe study’s findings emphasize thatthere is no patent recipe for the success of a city’s urban developmentpolicy. It is rather a question of imple-menting specific policies tailored tothat particular city which take accountof the surrounding region’s advantagesin terms of locational specialisation inresearch, production and services, thespecific composition of local factors ofproduction and especially the skills ofits labour force.

Munich has always been successful in creating new jobs by virtue of itsspecific sector mix. The city has bene-fited from its prominent position insectors such as vehicle constructionand electrical engineering which havedeveloped better than many otherindustrial sectors as a result of beinghighly export-oriented and research-intensive in recent years. There hasalso been a highly diversified characterto its service sector. It is imperativethat this successful course be consis-tently pursued and the city’s good position maintained. In this regard, itis of vital importance to keep an eye onboth pillars – industry and services andon their needs. With respect to urbandevelopment, this means for examplenot only focusing on new office, com-mercial or residential building but alsobeing sure not to neglect zoning andthe supply of adequate new tradingestates for the production sector.

Even though trade tax revenues haverecently been brimming over again,Munich’s financial situation remainsdifficult, with the city’s debts amoun-ting at the end of 2004 to about 3.4bn,(not counting municipal enterprises).This means that it will not in the foreseeable future be possible for thecity to invest sufficiently in each sectorto combat locational deficits to anymeaningful extent or to build on thearea’s advantages.

Thus, on the one hand it is necessaryto select carefully which sectors toinvest in. On the other hand, thoroughgoing budget consolidation is needed inorder to widen the financial scope forgreater investment again in the future. This can be achieved by debtreduction, for example by selling offMunich’s considerable stock of valuable municipal real estate and shareholdings. In addition, currentexpenditures can, for example, be

reduced by public authorities focusingtheir attention on their core responsi-bilities. To this end the provision ofservices should be hived off as soon aspossible to private enterprises whe-rever greater efficiency can thus beachieved.

Along with budget consolidation, poli-tical measures are most likely to bearfruit if they are aimed at creating ormaintaining favourable frameworkconditions for business activity in thecity. The principal measures include:

• cutting bureaucracy and establishingan efficient and pro-business muni-cipal administration;

• a higher degree of internationality;

• investment in education, science andresearch, and

• influencing demographic change andattracting people and talents.

A high-ranking urban centre in termsof internationality demonstrates amongother things its ability to attract labourand capital from abroad. The interna-tional functions of a city – comprisingservices associated with internationaleconomic relations such as trade, tou-rism and logistics – are becoming moreand more important for locationaldevelopment as worldwide integrationproceeds. Those international func-tions can be strengthened by packagesof measures which improve a city'saccessibility by expanding its infra-structure and at the same timeincrease the city's international eco-nomic integration.

This being the case, it is essential topress ahead further with airportimprovement. In the medium term,this primarily means better connec-tivity with the airport. In the long term,a further enlargement of the airportitself will be necessary to account forthe expected growth in passengervolume. In view of the long periodsrequired for the realisation of large-scale projects in Germany, it is goodthat the planned third runway wasgiven the go-ahead this summer.

Concomitant with continuing structuralchange towards a knowledge-basedeconomy, the role of education, scienceand research is becoming more andmore important for the economic deve-

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lopment and competitiveness of Euro-pe’s major cities. This holds true espe-cially for a hi-tech region like Munich.Today, Munich is one of Europe’s mostinnovative regions. There is no otherEuropean city with a higher proportionof its population working in researchand development. However, taking allfields into consideration, Munich has arelatively small proportion of highly-qualified workers compared to someother European metropolitan areas.

For Munich to maintain its leadingposition as an innovative location,investment in education and research,together with political measures aimedat turning out a better-qualified work-force and generating new knowledgemust remain particularly important inlocational policy. All regional economicpolicy must make it a priority toexpand quantitatively and qualitativelyeducational and research facilities andknowledge transfer of from the scienceto the business world. Of course, in theareas of education and science, theBavarian state government is largelyresponsible for maintaining and impro-ving hitherto favourable frameworkconditions and generating necessaryinvestment. But the municipal govern-ment should also, as far as it can, givetop priority to this aim and make addi-tional investments to support it.

It will be of central relevance to thefuture development of all cities, regardless of their specific economicstructures to have a skilled labourforce. Like Germany as a whole,Munich and other German urban centres will face demographic changesin whose course the age profile andsize of the labour force will shift. Although population forecasts suggestthat the population might grow by theyear 2020 by a good 5% from its 2003size, the number of people of workingage will decline due to the fact thatMunich’s population structure will haveincreasingly shifted at the expense ofthe young generation.

These changes in the labour force’s ageprofile can have negative economicconsequences for Munich’s develop-ment. Given that the proportion ofskilled workers is already lower in Munich than in Europe’s most successful urban centres, Munich and Germany’s other big cities willincreasingly need to promote the influxof well-qualified people, including fromabroad, more than before. Appropriatestrategies are indispensable in order tocombat the expected shortage of quali-fied staff resulting from the demogra-phic shift and the continuing structuralshift to a knowledge- and service-based society.

It can generally be said that, comparedto the situation in Europe’s top cities,labour from abroad is at present ofrelatively little importance for the economic development of Germany’smajor cities. There is thus room inGermany’s urban centres to enhancetheir economic capacity by greaterintegration of the specific know-howand skills of their foreign workers intotheir economies. The integration into acity's economic life of immigrant affluxas employees or employers can be pro-moted through dedicated municipalimmigration policies. Cities havenumerous options in this area, inclu-ding being able to grant work permitsand provide educational and trainingfacilities for first- and second-genera-tion immigrants.

Urban development benefits from loca-tional policies that make people’s livingconditions more inviting than in othercities whatever the prevailing demo-graphic shift. Further improving softlocational factors and city’s economicsituation could be a possible way toenhance its attractiveness to outsidersand to hinder an exodus by growingsuburbanisation. In this regard, a city’shousing policy is perhaps of majorimportance, as the increased availabi-lity and affordability of residential pro-perty in a city’s hinterland catchmentarea are often the main reasons forpeople drifting out of urban centres.

Imprint:

Publisher in charge of the content ofthis abridged version of the study:HypoVereinsbank, GPR4, German Public Relations Hamburg,Neuer Wall 64, 20354 Hamburg

www.hvb.de

For further information, please contact: Dr. Ulf Teubel, Tel.: +49 (40) 36 92-48 25, E-Mail: ulf.teubel@hvb.de

The full German version of the study»Europe’s best – models for Germancities in the competition to attractbusiness?!« can be obtained from thepublisher.

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