Transcript Post-Industrial East Asian Cities Shahid Yusuf

Post-Industrial
East Asian
Cities
Shahid Yusuf
World Bank
January 30, 2007
Urban Transition
East Asia is urbanizing rapidly. Simultaneously, the pace
of urban structural change in its major cities is
accelerating: The displacement of key manufacturing
industries by other activities is occurring in decades as
against centuries.
East Asia’s mega-cities need to find new engines of
growth and new ways of financing ‘imports’ as their
traditional manufactured exports diminish. Over the
medium term, a city’s ‘current account’ (i.e. its
transactions via trade and capital transfers with the rest
of the world) must balance.
What is Accelerating Change
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Rapidly rising wages and overheads in major cities are affecting
competitiveness of labor intensive manufacturing industries.
Global market integration, modularization and disintegration of
the production process, and more efficient logistics are
exacerbating pressures from lower cost producers.
Technological advances are reducing the labor coefficients of
manufacturing. Less labor is required and production is more skill
intensive.
Terms of trade are shifting against manufactured goods because of
relatively higher productivity and because the changing
composition of demand favors services.
Why Focus on Urban Economies
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Salience of the urban economy: Share of population and GDP is
rising steeply.
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85% of GDP is urban in high income countries, 55% in low
income countries.
Importance of city size for agglomeration and scale economies which
can contribute importantly to urban productivity.
Major cities which are nodes of global urban network attractive for
tradable business services (e.g. finance, legal, and accounting) and
foreign direct investment.
Demographic patterns: currently a high percentage of the population
is of working age; source of human resources, dynamism, and
entrepreneurship.
Impact of cities on the environment, resource use, and health. In the
United States, buildings account for 65% of electricity use, 36% of
energy consumption and 30% of greenhouse gases.
Which Cities Matter and Why
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The Asian industrial miracle was and is an urban
phenomenon. Key players are a small number of
cities, which over time have grown into mega-urban
centers. Asia’s future linked to economic dynamism
of these cities.
Among the principal foci of Asian growth are: Tokyo,
Osaka, Nagoya, Seoul, Shanghai, Yangtze Delta
Region, Bohai Region, the Pearl River Delta, Hong
Kong, Bangkok, Taipei, Singapore, Jakarta,
KL/Klang Valley.
Share of National GDP
City
1985
1990
1995
2000
2003
Bangkok
35.94
40.5
39.08
36.31
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Beijing
2.1
2.7
2.4
2.8
3.1
Seoul
24.9
25.3
24.9
24
24.1
Shanghai
5.2
4.1
4.2
5.1
5.3
Singapore
100
100
100
100
100
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17.6
16.1
16.6
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Tokyo
City GDP in 2003 (US$ billions)
City
Bangkok
Beijing
Seoul
GDP
4.46
44.26
146.9
Shanghai Singapore
75.52
94.61
Tokyo
764.17
What Brings New Industrial
Engines to Life
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National/subnational policies:
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Investment in tertiary level skills (especially science
and technology manpower), measures to raise quality
of skills, funding for research.
Local incentives regime for industry: fiscal (e.g., tax
incentives and grants), labor market institutions
which induce skill formation and efficient allocation,
financial (ease of raising funds from local sources,
e.g. from angel investors), and government purchases
of goods and services (e.g. IT).
Investment in and maintenance of high quality
physical and IT infrastructure.
What Brings New Industrial
Engines to Life
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Coalition of supporting private interests, e.g.
financiers, urban developers, NGOs, and industrial
and professional bodies
Industrial organization: mix of large and small firms;
R&D, organizational and marketing capabilities of
large firms; and innovativeness of small firms
Open innovation systems and links with universities
and research institutes
Urban environment: quality of amenities and public
services and safety nets to minimize
poverty/inequality and emergence of slums
How are Cities Pursuing Industrial
Opportunities
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The Tokyo case: developing multifunctional robotic
technologies
The Singapore case: creating a biotech sector through FDI and
investment in R&D infrastructure
The Seoul case: grooming an online videogames industry
The Beijing case: cultivating the electronics sector through
FDI, skill development, R&D and start-ups
The Bangkok case: developing the fashion and jewelry sector
through investment in design and marketing
The Shanghai Case: enlarging the capabilities and export
potential of the construction and engineering services sector
How to Measure Impact and Potential
of Emergent Leading Sectors
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Growth and contribution to urban economic
performance
Industrial linkages
Employment, skill intensity
Technological dynamism: Links with universities and
research institutes
Corporate capability
International market penetration
Future demand prospects: Local and global
Growing New Urban Industries: Singapore’s
Biotech Sector
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In 2004, biomedical manufacturing (including pharmaceuticals and
medical technology) accounted for 2.6% of employment, 9.1% of
output, and 21.3% of value-added in manufacturing.
Singapore creating biotech cluster following the US model:
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Universities, and linkages with businesses
Star scientists as inventors and entrepreneurs
Role of risk capital
Large pharmaceutical firms
Clusters around key hospitals, universities, government
labs
Urban amenities
Singapore’s Biotech Sector
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The creation of Biopolis
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Investment of US$286 million
Houses five public institutes
Close to NUS Hospital
Place where researchers can “work, live, play, and
learn”
Attracting MNCs through FDI incentives (first for
manufacturing, then gradually shifting to research activities).
Global linkages to make Singapore as a cost-efficient clinical
trial site.
Singapore’s Biotech Sector
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Attracting star scientists from abroad
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Jackie Ying, Alan Coleman, Bernat Soria, Axel Ulrich,
Sydney Brenner, Edison Liu, David Lane, Yoshiaki Ito.
Taking advantage of English being the official language
which facilitates communication among researchers
from around the world.
Investment in domestic human capital
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Establishment of specialized degree programs in
Singapore.
(bonded) Scholarship programs to provide overseas
training.
Modification of curriculum at tertiary and secondary
school to include subjects on life sciences and
entrepreneurship.
Singapore’s Biotech Sector
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Venture funds backed by government
Improving the quality of research at
universities
Stimulating University-Industry Linkages
Teaching entrepreneurship
Singapore’s Biotech Sector
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Competition: Korea, Taiwan (China), China, and India.
The growth opportunity is large but uncertain.
 US spends 16% of GDP on health care
 Other countries spend close to 6%
 With aging and rising incomes in other countries, the opportunities
for biotech sector is large, especially for medicine
However,
 Rising costs of new product development, yet fewer blockbuster
drugs in the pipeline.
 Possible backlash against rising medical costs in advanced
countries and scandals with major drugs.
 Whether Singapore has enough scale.
 Heavy reliance on foreign firms and talents.
Fashion Industry in Thailand
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Long history of sericulture, production of silk products, and of gemcraft.
Often done by farming households to supplement their incomes.
Establishment of Department of Silk Craftsmen in 1903 marked the
beginning of the modern sericulture in Thailand.
Modern silk industry emerged in post-war period. The establishment of
the Thai Silk Company by Jim Thompson, an important step.
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Introduced artificial dyes from Switzerland and Germany and printed
silk fabric.
Encouraged creation of indigenous designs.
Marketed to tourists and overseas.
Sorting, heat treatment, cutting, and setting of gemstones, local and
imported has grown steadily.
Cutting, polishing, and setting of imported diamonds started in 1990s.
Fashion Industry in Thailand
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Fashion sector generates $12 billion in sales, employs 2 million
workers, mainly in 20,000 SMEs.
Garment sector employs 81,000 people, accounting for 3% of
GDP, 7% of exports.
But global share is less than 2%.
Textile and garment industry invested $12.5 billion between
2001 and 2004 to upgrade dyeing, finishing, weaving, knitting,
and spinning facilities.
Bangkok the dominant player in the fashion industry accounting
for 74% of jewelry, 48% of garments, and 41% of leather goods.
Fashion Industry in Thailand
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Gem and jewelry industry’s output is about $500 million, employs 32,000, export
ratio is about 80%.
Headquarters of gem and jewelry firms mostly located in Bangkok.
Strength in heat treatment (to enhance color and quality of gem stones) and
synthetic gems.
Silver jewelry, major export: competes against high-end products from Italy and
low-end from India and China.
New technology (such as computerized sorting of gem stones) promises gains in
productivity but threatens livelihood of rural workers.
Gemopolis Industrial Estate to promote the jewelry industry in Thailand
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a complete supply-chain cluster.
50 manufacturers, more than 10,000 employed, exports of $500 million in 2003
Fiscal incentives (exemption from corporate income taxes, import duties, valueadded tax).
Fashion Industry in Thailand
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Fashion Centers around the world
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Upgrading and adding value to garment and jewelry sector
products becoming necessary because of:
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Paris, New York, London, Tokyo, Milan
Rising local costs.
Increased competition from China, India, and other countries.
The push by the Thai government to develop the fashion
industry
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The Bangkok Fashion City initiative.
Gemopolis Industrial Estate.
Investment in technology and training.
Fashion Industry in Thailand
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Favorable conditions
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Rising incomes in East Asia – big middle class.
Younger demographics in East Asia (70% of the
population working age, average age less than 40).
Geographic shift of manufacturing to East Asia.
Unfavorable conditions
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Consolidation of global brands.
Absence of major firms and of local brands with
regional or global recognition.
Uncertainty over the global acceptance of local styles
and motifs.
Fashion Industry in Thailand
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Adding value and enlarging global market share requires:
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Advances in design through development of local skills and
outsourcing services.
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Links with famous fashion designers.
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Local and overseas exhibitions.
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Strong marketing efforts aided by publications/advertising
industries.
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Strengthening of skills of workers.
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Advances in technology for designing, cutting, making, and
finishing garments and in sorting/cutting gems and working
with metals.
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Use of e-business for selling upscale clothing and jewelry.
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Creating viable urban clusters with the help of local
governments, developers, and industry associations.
Key Points
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Successful post-industrial cities will be ones that:
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Fully develop and mobilize knowledge capabilities
and capital from national and international sources;
Are globally linked and maintain open innovation
systems;
Attract and retain dynamic and research-oriented
firms;
And sustain an attractive physical and stable as well
as creative social environment.
Table of Contents
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Chapter 1 Emerging
Cityscapes
Chapter 2 Megacity
Profiles
Chapter 3 Disappearing
Manufacturing
Chapter 4 Deciphering
the DNA of the
Biotechnology Industry
Chapter 5 Meet Astro
Boy and Friends
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Chapter 6 Fun, Movies,
and Videogames
Chapter 7 Silk and Gems
Chapter 8 Sculpting the
Urban Skyline
Chapter 9 Gold in Silicon
Chapter 10 Summing Up
Thank You