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Competitive Industries

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

Christopher Colford's picture

Seeking an antidote to the gloom-and-doom bombast of this election year? Try a dose of optimism about urban“hotspot hustle and cutting-edge cool” – with a book that champions smart public policy, delivered through a shrewd 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” – has infected the policy debate throughout this dispiriting election year, 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 passivity, lamenting the loss of a long-ago era (if ever it actually existed) when inward-looking economies were, allegedly, 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.

Olympic-sized ambition: Halt the Games' economic excess by building a permanent site for the Olympics — in Greece, their historic home

Christopher Colford's picture

Build it well, build it wisely, and build it only once — How investing to create a permanent site for the Olympic Games, ideally in their historic home of Greece, could reduce waste, deliver economic stimulus, and avoid "white elephant" monuments to extravagance.

The jeering of angry taxpayers and frustrated favela-dwellers may drown out some of the cheering of sports enthusiasts this weekend, as the 2016 Olympic Games begin in Rio de Janeiro. The government of Brazil and local officials in Rio have certainly done their best to stage the Games successfully, addressing a range of challenges that include the Zika virus outbreak, the doping scandal among athletes and the country’s prolonged economic slump and political traumas. Yet an enduring scandal in international finance — the chronic design flaw in the way that the Games are planned for and paid for — has again imposed an enormous economic burden on the Olympic host city. Struggling economies can ill afford the extravagance of repeatedly building use-once-throw-away sports facilities.

It was surely startling to see the deep degree of scorn and sarcasm with which many workaday Brazilians, who are now enduring a deep economic downturn, hurled derision at the arrival of the Olympic torch in Rio this week. They evidently saw that Olympic arrival ceremony as a symbol, not just of athletic ambition, but of financial folly.

The anxieties that Brazil has endured on the road to Rio 2016 should underscore a longer-term, Olympic-sized concern: Mismanagement by the Games' promoters has now been thoroughly documented, underscoring the abusive way that the International Olympic Committee (IOC) and the global sports-industrial complex have habitually foisted reckless costs on the taxpayers of hapless host cities.

By goading Olympic-wannabe cities to make ever-more-extravagant financial commitments – stoking their dreams of a media moment of purchased publicity – the mega-event industry has helped shatter the finances of one host city after another. No wonder that so many cities are now shunning the IOC’s bidding process, dreading the deadweight losses that are almost certain to burden any Olympic host.

Welcome as the IOC’s recent “Olympic Agenda 2020” reform proposals may be, it’s long past time to rein in the financial excesses of mega-event promoters. With a claque of financiers and flacks who are ready to manipulate the gullibility of the would-be hosts, the Olympic spirit has fallen victim to the self-interest of construction firms, property developers and publicists who seek to profit from host cities’ overspending.

An invaluable book documenting this Olympic-scale threat – discussed in detail at a World Bank’s InfoShop book-and-author seminar in June 2015 – should be top-of-mind for Olympics-watchers this week, as Rio de Janeiro enjoys its moment in the spotlight. “Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup” — by Andrew Zimbalist, a professor of economics at Smith College — can help other cities avoid an impulsive rush for momentary Olympic notoriety. A video of Zimbalist’s InfoShop presentation is archived at,,contentMDK:20289125~pagePK:162350~piPK:165575~theSitePK:225714,00.html 

The essentials of a manufacturing ecosystem

Aref Adamali's picture

Value addition through manufacturing has been a major focus of economic policymakers across the world, and at times with remarkable success, most famously in East Asia. Initial ‘Asian miracles’ in places like South Korea have since been eclipsed by the meteoric rise of manufacturing in China, which has grown its exports in manufactures by 18 percent a year over the past 10 years, compared to a global average of 7 percent (ITC Trade Map data).

'Flying geese'
Most countries generally seemed to follow a basic pattern, initially establishing manufacturing credentials in light manufacturing, such as in textile and apparel, but then in time moving on from such products to higher-value-added and more complex products. As they moved on and up, they opened space for other countries to move into the initial entry products, following the so-called ‘flying geese’ model of division of labor.

There have been noticeable absences though, with not all regions having moved into manufacturing. This is partially the case with Central and South America, but most strikingly with Sub-Saharan Africa.  
What can be done to support countries in their quest to deepen their manufacturing sectors, and extract the jobs and technological development that this can offer? How can they develop the kinds of deep and comprehensive manufacturing ecosystems that have enabled China to maintain investment despite fast-rising labor costs?

Small states in search of big solutions: How the Caribbean Growth Forum is accelerating pro-growth reforms

Steve Utterwulghe's picture

Grenada – Photo by Steve Utterwulghe

Many Caribbean States have long been trapped in a vicious cycle of low growth, high debt and limited fiscal space. The impact of the 2008 financial crisis, as well as recurrent natural disasters, has made the situation even more acute in the region.

To address the structural and policy obstacles to development and growth, a multi-stakeholder dialogue platform on growth in the Caribbean was launched in 2012 by policymakers, the private sector and civil society from 12 states in the region. The Caribbean Growth Forum (CGF) was championed by the states’ prime ministers, and focal points were appointed in the respective Ministries of Finance. The World Bank, acting as the CGF Secretariat, has been behind this initiative from the onset, in collaboration with other regional development banks and various development partners active in the region.
Using a conceptual framework of reform identification, tracking and reporting, CFG’s stakeholders have made 495 reform recommendations so far – 40 percent of them actionable in the three pre-identified thematic areas: investment climate, connectivity and logistics, and productivity and skills. The World Bank in 2015 undertook a stocktaking exercise, which identified the CGF’s positive impacts and the areas of improvement.

The benefits of the CGF are unanimously recognized: the generation and dissemination of knowledge to support the reform implementation in the three thematic areas; support for the prioritization of government reforms; the strengthening of stakeholders’ accountability; the creation of social capital by giving a voice to a range of stakeholders; peer-to-peer exchanges and pressure; and the fostering of a culture of dialogue in the policy reform agenda.

Along with Cecile Fruman, Director of the Trade and Competitiveness Global Practice of the World Bank Group, I was honored to participate and speak at the launch of the Second Phase of the CGF in Belize on March 1 and 2. The objective of the event was twofold: to share and discuss the lessons learned so far, and to have the finance ministers of 12 Caribbean countries endorse a Joint Communiqué.

That communiqué, according to Sophie Sirtaine, the World Bank’s Country Director for the Caribbean, “signals the renewed commitments of these Caribbean nations to accelerate growth enhancing reform implementation, while strengthening public accountability through strengthened public-private dialogue (PPD) mechanisms.”

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.

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 – – to start the game.

For more information about the Competitive Cities initiative at the World Bank, please visit:  

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.

Does competition create or kill jobs?

Klaus Tilmes's picture

Greater competition is crucial for creating better jobs, although there may be short term tradeoffs.

Job creation on a massive scale is crucial for sustainably ending extreme poverty and building shared prosperity in every economy. And robust and competitive markets are crucial for creating jobs. Yet the question of whether competition boosts or destroys jobs is one that policymakers often shy away from.

It was thus valuable to have that question as a central point of discussion for competition authorities and policymakers from almost 100 countries – from both developed and developing economies – who recently gathered in Paris for the 14th OECD Global Forum on Competition (GFC).

According to World Bank Group estimates the global economy must create 600 million new jobs by the year 2027 – with 90 percent of those jobs being created in the private sector – just to hold employment rates constant, given current demographic trends.
Yet the need goes further than simply the creation of jobs: to promote shared prosperity, one of the urgent priorities – for economies large and small – is the creation of better jobs. This is where competition policy can play a critical role.
Competition helps drive labor toward more productive employment: first, by improving firm-level productivity, and second, by driving the allocation of labor to more productive firms within an industry.
Moreover: Making markets more open to foreign competition drives labor to sectors with higher productivity – or, at least, with higher productivity growth. Making jobs more productive, in turn, generally increases the wages they command.
That’s in addition to cross-country evidence on the impact of competition policy on the growth of Total Factor Productivity and GDP, and the fact that growth tends not to occur without creating jobs. Thus there’s compelling evidence that – far from being a job killer, as skeptics might fear – competition (over the long term) has the potential to create both more jobs and better jobs.

The key question then becomes whether such long-term benefits must be achieved at the expense of short-term negative shocks to employment – especially in sectors of the economy that may experience sudden increases in the level of competition.
Progress toward better jobs is driven partly by the disappearance of low-productivity jobs, as well as the creation of more productive jobs in the short run. Competition encourages that dynamic through firm entry and exit, along with a reduction in “labor hoarding” in firms that have previously enjoyed strong market power.

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.