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urban policy

How urban start-up ecosystems help cities adapt to economic transformations

Victor Mulas's picture

Entrepreneurs at mLab East Africa, Nairobi, Kenya. Supported by the World Bank’s infoDev program, this business incubation center provides knowledge and networking opportunities to local digital start-ups. © infoDev / World Bank 



Start-up ecosystems are emerging in urban areas across the world. Today, a technology-based start-up develops a functioning prototype with as little as $3,000, six weeks of work, and a working Internet connection.
 
Entrepreneurs are not seeking large investments in hardware or office space. Rather, they look for access to professional networks, mentors, interdisciplinary learning, and diverse talent. Cities are best suited to meet their needs, as they provide diversity and allow for constant interaction and collaboration. Thus, the shift caused by the so-called “fourth industrial revolution” makes cities the new ground for organic innovation.
 
The urban innovation model can be applied in cities in both developed and developing countries. The same trends are driving the urbanization of organic innovation ecosystems in New York City, London, Stockholm, Mumbai, Buenos Aires and Nairobi. This presents a great opportunity for developing countries to build innovation ecosystems in cities and create communities of entrepreneurs to support the creation of new sectors and businesses.
 
But while some cities have organically developed urban innovation ecosystems, nurturing a sustainable and scalable ecosystem usually requires determined action. Moreover, not all cities are building their innovation ecosystems at the same pace.
 
To support a local innovation ecosystem and accelerate its growth cities can promote collaboration through creative spaces and support networks, while also hosting competitions to solve local problems. 

‘Smartest Places’ via smarter strategies: Sharpening competitiveness requires ingenuity, not inertia

Christopher Colford's picture

Defeatist demagoguery marred the 2016 election season, and it continues to resonate with many beleaguered voters in advanced Western economies, who dread the gloom-and-doom scenarios sketched by narrow-minded nationalists. For reassurance about positive strategies for economic renewal, try a dose of optimism about urban “hotspot hustle and cutting-edge cool” – thanks to a book that champions smart public policies, delivered through an activist approach to Competitiveness Strategy.

Gazing into the rear-view mirror is a mighty reckless way to try to drive an economy forward. Yet backward-looking nostalgia for a supposedly safer economic past – with voters' anxiety being stoked by snide sloganeering about “taking back our sovereignty” and “making the country great again” – infected the policy debate throughout the dispiriting 2016 election year, and its defeatist aftermath, in many of the world’s advanced economies.

Scapegoating globalization and inflaming fears of job losses and wage stagnation, populists have harangued all too many voters into a state of paralysis or passivity. Lamenting the loss of a long-ago era (if ever it actually existed) of economic simplicity, nativists and nationalists have been conjuring up illusions about an era when inward-looking economies were (allegedly) somehow insulated from global competition.

Optimism has been in short supply lately, but an energetic new book – co-authored by a prominent World Bank Group alumnus – offers a hopeful perspective on how imaginative economies can become pacesetters in the fast-forward Knowledge Economy. Advanced industries are thriving and productivity is strengthening, argue Antoine Van Agtmael and Fred Bakker, now that many once-declining manufacturing regions have reinvented their industries and reawakened their entrepreneurial energies.

Welcome to the brainbelt,” declares “The Smartest Places On Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation” (published by Public Affairs books). Now that brainpower has replaced muscle-power as the basis of prosperity in an ever-more-competitive global economy, the key factor for success is "the sharing of knowledge." Longlisted for the Financial Times/McKinsey Business Book of the Year Award, “Smartest Places” is receiving well-deserved attention among corporate leaders and financial strategists – and it ought to be required reading for every would-be policymaker.

The era of “making things smart” has replaced the era of “making things cheap” – meaning that industries no longer face a “race to the bottom” of competing on costs but a “race to the top” of competing on creativity. Knowledge-intensive industries, and the innovation ecosystems that generate them, create the “Smartest Places” that combine hotspot hustle and cutting-edge cool.





Those optimistic themes may sound unusual to election-year audiences in struggling regions, which are easy prey for demagogues manipulating populist fears. Yet those ideas are certainly familiar to readers at the World Bank Group, where teams working on innovation, entrepreneurship and competitiveness have long helped their clients shape innovation ecosystems through well-targeted policy interventions that strengthen growth and job creation.

“Smartest Places,” it strikes me, reads like an evidence-filled validation of the Bank Group’s recent research on “Competitive Cities for Jobs and Growth.” That report, published last year, offers policymakers (especially at the city and metropolitan levels) an array of practical and proven steps that can help jump-start job creation by spurring productivity growth.
 

Competitive Cities: Changsha, China – coordination, competition, construction and cars

Z. Joe Kulenovic's picture

Cites are the heartbeat of the global economy. More than half the world’s population now resides in metropolitan areas, making a disproportionate contribution to their respective countries’ prosperity. The opportunities and challenges associated with urbanization are quite evident in the world’s most populous country, whose cities are among the largest and most dynamic on Earth. To better understand what a thriving metropolitan economy looks like in the Chinese context, our Competitive Cities team selected Changsha, the capital of Hunan Province, for inclusion among our six case studies of economically successful cities, as the representative of the East Asia Pacific Region.  
 
As recently as the turn of the millennium, Changsha’s economy was still dominated by low-value-added, non-tradable services (e.g. restaurants and hair salons) – an economic structure commonly seen today in many low- to lower-middle-income cities. Since then, Changsha has achieved consistently high, double-digit annual growth in output and employment, despite its landlocked location and few natural or inherited advantages, such as proximity to trade routes or mineral wealth. With per capita GDP surging from US $3,500 in 2000 to more than US $15,000 in 2012, Changsha has accomplished a feat so many other World Bank clients can only dream of: leapfrogging from lower-middle-income to high-income status in barely a decade, and an economy now comprised of much more sophisticated, capital-intensive industries. 

  

Photos via Google Maps

We took a closer look at the success factors behind this city’s dramatic growth story, and what lessons its experience may hold for cities elsewhere, especially in terms of (1) how to overcome coordination failures and bureaucrats working in silos and (2) how to ensure a level playing field for all firms in the city (that is to say, competition neutrality), even in industries with a strong SOE presence – something still not commonly seen in China these days.
 
Changsha’s (and Hunan’s) growth has clearly benefitted from a highly conducive national macroeconomic and policy framework, including a plan entitled The Rise of Central China, aimed at spurring development in areas beyond the country’s booming coastal regions. This and other initiatives provided for the removal of investment restrictions, more favorable tax treatment, and enhanced infrastructure and connectivity to coastal commercial gateways. China’s massive stimulus plan in 2009 (in response to the global financial crisis and recession) jump-started construction activity in the country, providing further impetus to one of Changsha’s principal industries, construction machinery and equipment manufacturing. And national government interventions in earlier decades – especially the establishment of dedicated research institutes – provided a critical contribution to Changsha’s accumulation of expertise in such disciplines as machinery or metallurgy.
 
Notwithstanding these national initiatives, responsibility for local economic development in China is highly decentralized, with municipal government leaders directly tasked with achieving GDP growth and tax revenue targets. Municipal governments also have rights over almost all land in cities, which can be leased or used as collateral to fund local infrastructure. In Changsha, municipal authorities used these prerogatives to improve their city’s economic competitiveness.

Effective city competitiveness: 10 lessons learned in the Philippines

Hans Shrader's picture



Maybe it's just easier to think that the keys to economic growth lie at the national level of governance – where monetary and fiscal policies, national law and development strategies are conceived and debated. Certainly national policy is important, but it is rarely where entrepreneurs have their first experience interacting with law and policy.

The city is where people’s ideas create business, where people work and where the bustle of the economy comes alive. The city is where an entrepreneur will first interact with systems that are ostensibly created to attract and support business investment and growth.

Cities can and do engage in reforms to help improve their economic competitiveness. Often this includes the identification of a business sector deemed competitive and some strategy on how to do it better. Improved competitiveness also can include investment in more efficient transportation systems, better access to utilities and services, improved tax policies, better zoning, infrastructure investment and investment in skilled labor. While working on these complex policy and investment opportunities is rational, it often takes time to do the analysis necessary to identify the best opportunities – and it takes much longer to actually see the rewards. 

Fortunately, there is a reform that cities can do almost immeduiately, and at low cost, to help support business development and improve the business environment: business entry simplification. 

The Philippine Experience & Lessons Learned

In decentralized economies like the Philippines, cities play an important role in business registration. In fact, almost of one-third of the country’s business registration steps fall under the responsibility of city-level leadership.

In working with Philippine cities to reform dated, cumbersome, and confusing business registration requirements, a World Bank Group team was able to help its clients reduce registration steps from an average of 41 to just three. Cities also saw an average spike in new business registration of around 20 percent in the first year after the implementation of reform.

Play the 'Competitive Cities' game: See whether you're a guru of urban competitiveness

Juni Tingting Zhu's picture

To start the new year, I've designed a 10-question game to recap some of the major findings of our flagship report, “Competitive Cities for Jobs and Growth: What, Who and How.”

The report, which was launched at at a World Bank conference in Washington on December 10, 2015, has been gaining wide recognition in the news media. Positive coverage has included analyses in Citylab (edited by urbanologist Richard Florida) and in Citiscope (edited by urbanologist Neal Peirce), as well as an essay in The Huffington Post by Marcelo Giugale, senior economic advisor in the World Bank Group's practice group on Equitable Growth, Finance and Institutions (EFI).

This short 3-minute game features many of the central themes of the Competitive Cities initiative.  Please click on  this link – http://sgiz.mobi/s3/The-Competitive-Cities-Game – to start the game.





For more information about the Competitive Cities initiative at the World Bank, please visit: http://www.worldbank.org/en/topic/trade/publication/competitive-cities-a...  

What’s next for the Competitive Cities initiative: 'To travel far, let's travel together'

Ceci Sager's picture



“I wish that I had had this [report] when I started. . . . It has some great things that we found out over a long period time 
–  in many cases, through trial and error. And so, when I read it, I said, 'Wow, we are doing these things, but it did take us awhile to buy into these things.' It is going to be very informative to cities around the worlld.” 
– Tracey A. Nichols, Director of Economic Development, City of Cleveland


The World Bank Group launched the Competitive Cities report on December 10 – “Competitive Cities for Jobs and Growth: What, Who and How,” which represents almost two years of research and analysis to put together a reliable, comprehensive and unified body of work. It is aimed primarily to help cities formulate and implement economic development strategies, and it is intended to be used by city leaders  themselves.
 
The report was launched jointly by the senior directors of two Global Practices at the Bank Group: the Trade and Competitiveness and the Social, Urban, Rural and Resilience practices. The roundtable discussion included academics, policymakers, senior World Bank advisors, and representatives from the private sector. The Bank Group's stately Old Board Room was filled to overflowing, and the audience was particularly appreciative of the video animation summarizing the central ideas within the Competitive Cities report. The twitter feed associated with the event (#competitivecities) was inundated with live tweets. Supportive analyses in the news media – for instance, in the Huffington Post by Marcelo Giugale and at CityLab by Richard Florida – focused supportive news coverage on the event.

The launch of the report is much more than a flash in the pan. The report itself is only the start: What follows is the rollout, the active dissemination to regional task teams and city leaders, and the setting-in-motion of the findings of the report, which focuses on sub-national growth and job creation. These are some of the events we have planned:

  • Events in the various World Bank Group regions, to share the general framework and also to customize the findings of relevance to each specific region.  So far, we are considering events in Singapore, Sydney, Dar Es Salaam and potentially cities in the Middle East, North and West Africa, and in the Caribbean. If your city is interested in hosting a regional event, we would be pleased to hear from you.
  • A three-day interactive executive training course on competitive cities, which is aimed at city mayors and economic development advisors to cities.
  • An operational guide to help configure competitive cities into World Bank lending projects and advisory services, including deep dives for regional and country task teams. Let us know if you’re particularly interested in hosting such a training session in your region.

A good diagnosis for the city economy?

Dmitry Sivaev's picture



One walks into a doctor’s office knowing what hurts but with little knowledge of what should be done to fix it. Identifying proper treatment requires sophisticated tests, participation of experts and, often, second opinions.

Cities, arguably, are as complicated as human bodies. Our knowledge of diagnosing cities, however, is far less advanced than in human biology and medicine.  Most mayors know very clearly what they want for their cities – jobs, economic growth, high incomes and a good quality of life for the people. But it is very difficult to identify what prevents private-sector firms, the agents that create jobs and provide incomes, from growing and delivering these benefits to a city. And we have no X-ray machine to aid in the effort.
 
As a part of the World Bank Group's Competitive Cities project, we thought hard about ways to help cities identify the roots of their problems and design interventions to address them. We set out on a journey to put together methodologies and guidelines for cities that want to figure out what they can do to help firms thrive and create jobs.  We learned from our own experience of working with cities, and from other urban practitioners. We reviewed many methodological and appraisal materials, and we trial-tested our ideas.

So what have we achieved? We certainly didn’t invent an X-ray machine, but we have developed “Growth Pathways” – a methodology and a decision-support system to help guide cities and practitioners through diagnostic exercises.

Competitive Cities: Bucaramanga, Colombia – An Andean Achiever

Z. Joe Kulenovic's picture


Modern business facilities, tourist attractions, and an expanding skyline: Bucaramanga, Colombia. 

When the World Bank’s Competitive Cities team set out to analyze what some of the world’s most successful cities have done to spur economic growth and job creation, the first one we visited was Bucaramanga, capital of Colombia’s Santander Department. Nestled in the country’s rugged Eastern Cordillera, landlocked and without railroad links, this metropolitan area of just over 1 million people has consistently had one of Latin America’s best-performing economies. Bucaramanga, with Colombia’s lowest unemployment rate and with per capita income at 170 percent of the national average, is on the threshold of attaining high-income status as defined by the World Bank.  

Bucaramanga and its surrounding region are rife with contrasts. On the one hand, it has a relatively less export-intensive economy and higher rates of informal business establishments and workers than Colombia as a whole. Indeed, informality has often been cited as a key constraint to firms’ ability to access support programs and to scale up. On the other, Santander’s rates of poverty and income inequality, and its gender gap in labor-force participation, are all better than the national average, and it has consistently led the country on a number of measures of economic growth, including aggregate output, job creation and consumption.   
 
But the numbers tell only part of the story. A qualitative transformation of Bucaramanga’s economy is under way. Once dominated by lower-value-added industries like clothing, footwear and poultry production, the city is now home to knowledge-intensive activities such as precision manufacturing, logistics, biomedical, R&D labs and business process outsourcing, as well as an ascendant tourism sector. Meanwhile, Santander’s oil industry, long a major employer in the region, has been a catalyst for developing and commercializing innovative technologies, rather than just drilling for, refining and shipping petroleum.

All these achievements are neither random nor accidental: They are the result of local stakeholders successfully working together to respond to the challenges of globalization and external competitive pressures.