Features

Emerging business cities: Destination next

29 Jan 2015 by GrahamSmith

Only 3 per cent of the world’s surface is urban – but cities are growing fast, and most of us want to live in them. Jenny Southan reveals the business destinations of tomorrow By 2050, the UN predicts that two-thirds of the world’s population will be living in cities – twice the amount in 1950. In Africa and Asia, more than half of people still live in the countryside – but over the next 35 years, the exodus of migrants flooding to built-up areas in search of work means India, for example, will have to accommodate another 400 million urbanites, China 300 million and Nigeria 200 million. Archana Amarnath, research manager for global growth consultancy Frost and Sullivan, was involved in a study that revealed that by 2025 there would be 35 “mega cities” around the world. Based on forecast data from the UN, these are defined as urban areas with populations of at least eight million and annual GDPs in excess of US$250 billion. Obvious rankings include New York, Paris, Moscow, London and Sao Paulo, but places such as Bogota and Tehran are also on the list. China will have no less than 13 mega cities – including Guangzhou, Harbin, Hangzhou, Hoshan, Shenzhen and Wuhan. “The BRICS are the talk of this decade but countries such as Poland, Mexico, the Philippines, Thailand, Vietnam and Malaysia could be the economic hubs of the future,” Amarnath says. She highlights that these countries’ capitals would be the primary breadwinners. “Some of these cities have the potential to contribute 30-50 per cent of the country’s GDP. Seoul, for example, is expected to contribute 40 per cent of South Korea’s GDP.” (It’s currently 24 per cent.) According to the Global Financial Centres Index, published in September by London-based think-tank Z/Yen Group, New York, London, Hong Kong and Singapore are the top four business cities in the world, ahead of San Francisco, Tokyo, Zurich and Seoul. Centres tipped to gain significance in the coming years include Gibraltar, Dalian in China, Luxembourg and, at the top, Casablanca. The report reads: “[With its] stability and rising economic power, Morocco has ambitions to be the leading business and financial gateway to Africa, offering unique access to the continent’s untapped potential.” When it comes to forging successful business cities, what ingredients are necessary? Scott Cain, executive director of strategy, business development and communications for Future Cities Catapult – a UK government-supported innovation agency – says: “Quality of life is ever more important to entrepreneurs.” He adds that the eco-system of start-ups that develops from a number of individuals launching businesses in one place enables people to learn from each other. “In some ways it’s about knowing what you are good at [as a city] – perhaps high tech or the ‘internet of things’ or robotics,” he says. “Abu Dhabi is doing a lot of work on diabetes, which is a big problem in that part of the world. Boulder, Colorado [see overleaf] is one of the top places for clean tech business, and Israel is seeing a lot of innovation in water.” Martyn Briggs, a mobility, automotive and transport industry principal for Frost and Sullivan, says business travel to emerging destinations will be reliant on connectivity in the form of airline routes and high-speed rail. But he also notes that it helps when cities are “appealing from a tourism point of view”. He says: “We see that in places such as Barcelona, which has invested in conferencing technology and facilities but also has a thriving tourist industry. A lot of people are combining business and leisure – the ‘bleisure’ trend. This is something cities are getting more clever about promoting and will drive business travel.” Based on research, data and expert opinion, we have chosen, in no particular order, six cities that we think you will be travelling to in the future, and that are examples of the changing landscape of urban development. 1. HAVANA, Cuba Cuba made the news at the end of last year when US president Barack Obama began taking steps to ease the country’s 55-year trade embargo with the Communist island – estimated to have cost the Cuban economy US$1.1 trillion since its implementation. Chilean foreign minister Heraldo Munoz was quoted as saying it was “the beginning of the end of the Cold War in the Americas”, although Cuban leader Raul Castro said there were still “profound differences” between the two nations. In the first half of the 20th century, Cuba was a wealthy, highly advanced nation built on sugar trade with the US. Havana was like a tropical Las Vegas, with Americans regularly flying in to drink rum, gamble and holiday in its glamorous resorts. In 1959, after the revolution, this all changed when it was declared a Socialist state by Fidel Castro. Tourism dropped from 350,000 people in 1957 to 4,000 four years later. In 1960, the US introduced its embargo, putting an end to the riches that once poured in. These days, Havana’s beautiful Spanish colonial architecture has gone to ruin, while 1950s Chevrolets and Pontiacs still roll along the roads, giving it the feeling of another era. The number of people living in the capital is just over two million. While almost everyone has a job (unemployment is about 2 per cent), with most people earning only US$20 a month, productivity is among the poorest in the world, at 3 per cent. “The state pretends to pay us and we pretend to work,” is a popular saying. Now, Havana is opening up again. Since 2009, the US has been relaxing restrictions for Americans travelling to the island – in 2014 three million visitors came from around the world – but it’s freeing up trade that will really make a difference. Major exports include nickel, coffee, citrus fruit, fish, sugar and tobacco, which will soon be arriving (legally) on US soil in the form of Cuba’s famous cigars. According to UK Trade and Investment, opportunities also lie in deep-sea oil drilling in the Gulf of Mexico, renewable energy, mineral mining and infrastructure. Not so long ago, everyone was paid the same, but last year the government increased the salaries of doctors to US$67 a month in light of the fact it was earning so much from sending them to work in countries such as Brazil, Venezuela and Ebola hotspots in Africa (health workers are paid by the World Health Organisation but the Cuban leadership takes the majority of their earnings). Last year, WHO said the country’s national health system was an example for all. Obama will also allow family members living in the US to quadruple the remittances they pay to those living in their homeland to US$2,000 per quarter. Since Raul Castro came to power in 2006, strict Socialist laws are being relaxed, giving way to economic liberalisation. He has legalised small private businesses, the purchasing of new mobile phones, computers, TVs and cars, and even allowed citizens to build, buy and sell their own houses. In October 2013, he announced his intention to end the dual currency system. 2. BOULDER, Colorado Over the past few years, this small US city has become one of the most popular places in the country to launch high-tech start-ups. With a youthful population of just over 100,000 people, it has more infant companies popping up per capita than anywhere else in the country. When successful, they tend to expand rapidly, generating thousands of jobs. Established firms located here include Google – Boulder has the highest concentration of software engineers in the US – and start-up accelerator Tech Stars. Situated in a basin at the feet of the Rocky Mountains, Boulder holds particular appeal for entrepreneurs because of its good quality of life, sunny climate and masses of outdoor space. The city has relatively low living costs, a top-class university and dozens of research institutes. A liberal, counter-culture vibe that’s a legacy of the 1960s hippy era is conducive to creativity and free-thinking. Marijuana is also legal, with pot shops selling the drug for recreational purposes. The annual Gallup-Healthways Well-Being Index has regularly ranked Boulder as one of the happiest cities in the country. Apart from technology, which employs almost 18 per cent of the population, main industries include aerospace, defence and education. Natural food companies also do well, with a number of farms and businesses dedicated to organic and eco-friendly products. A 2013 report on US start-ups by entrepreneurship research association the Ewing Marion Kauffman Foundation and technology policy coalition Engine revealed that three other destinations in Colorado were ranked among the top ten – Fort Collins-Loveland (in second place), Denver (sixth) and Colorado Springs (ninth). The closest airport is Denver International, 45 minutes’ drive away. 3. AHMEDABAD, India The biggest city in the state of Gujarat, Ahmedabad is also the fifth-largest in India, with an estimated seven million people, and has been ranked the third fastest-growing city in the world by Forbes. In the 1940s, only 500,000 people lived here – by 2025, the UN expects there to be 7.6 million. Per capita income is twice the national average (US$1,214, with GDP in 2014 at US$64 billion), and the 2014 Annual Survey of India’s City Systems ranked Ahmedabad the country’s tenth-best city to live in, ahead of Bengaluru, Chennai and Hyderabad. The Sabarmati River divides the urban agglomeration into eastern and western parts, connected by nine bridges. Sardar Vallabhbhai Patel International airport is 9km north-east of the city centre. Plans have been approved for the country’s first high-speed rail line between Mumbai and Ahmedabad, which will halve travel time thanks to a 320km/ph bullet train. It is expected to be unveiled in 2021. Ahmedabad is one of India’s biggest cotton producers – Arvind Mills manufactures more denim than almost every other mill in the world. Jewellery-making, automobile manufacturing, chemical and pharmaceuticals are also big – Ford, Suzuki and Peugeot have factories here, as do home-grown drug giants Zydus Cadila and Torrent Pharmaceuticals. IT is a sector that is on the rise, and the city’s economy is set for another boost thanks to the discovery of oil in the nearby Cambay Basin in October. 4. WUXI, China Last year, Bloomberg’s Best Emerging Markets Index ranked China number one, with average GDP growth for 2014-15 expected to be 7.35 per cent. Along with economic giants Shanghai, Beijing and Hong Kong, second-tier business cities such as Wuhan, Tianjin, Chongqing, Xian and Chengdu have been attracting attention, with airlines such as BA and Finnair launching direct flights from Europe. Wuxi, in the south-easterly province of wealthy Jiangsu, has yet to garner the same amount of interest, but it’s only a matter of time before it does. Positioned on the banks of Taihu Lake, the city’s Grand Theatre (pictured), which was built by Finland’s PES Architects in 2012, has become a futuristic landmark. For a city not known by many outsiders, Wuxi deserves a surprising amount of kudos. In the early days, it was built on tin, and then rice and silk. While textile manufacturing continues to be big business here, it has more recently become a hub for solar technology, software development, measuring instruments and biopharmaceuticals. There have been negative side-effects to its industrialisation, however, namely its badly polluted lake, which used to be a source of fresh drinking water for millions of residents. Now, work is under way to clean it up. Sunan Shuofang International airport is located 15km from the city centre, and a two-line metro system was completed last year. Big hotel brands with a presence include Intercontinental, Doubletree by Hilton, Pullman, Kempinski, Radisson Blu and Ramada. 5. DHAKA, Bangladesh The Bangladeshi capital is a noisy, overcrowded, unplanned metropolis of 15 million people and rising, with 44,000 inhabitants crammed into every square kilometre, making it one of the most densely populated cities in the world. In ten years, there could be 25 million living here. About 90 per cent of locals are on low to middle incomes, with a humble per-capita GDP of US$3,100 a year. Almost one-fifth are unemployed. Last year, Dhaka was ranked the second-worst city for liveability in the world by the Economist Intelligence Unit. However, there is a burgeoning middle class and a wealth of business opportunities. It’s the heart of banking in the country and home to numerous multinationals, such as British American Tobacco, Chevron and Unilever. It is also a major manufacturer of textiles, electronics, building materials and clothing – the last generates more than US$20 billion annually. Worth 80 per cent of its export revenue, the country’s ready-made garment industry is the second-largest in the world (behind China), but has a long way to go in terms of health and safety in the workplace. In April 2013, the collapse of a factory near the capital killed 1,100 people and made world headlines. But its rock-bottom minimum wage – US$38 a month – attracts many big brands who take advantage of cheap labour. Despite some Western companies looking to other countries for less risky conditions, Bangladesh’s textile industry is expected to quadruple in size over the next two decades, according to The Economist. In the face of low credit card penetration and trust issues with online payment systems, Dhaka is also one of the fastest-growing destinations for tech start-ups. In a 2013 documentary called Startup Dhaka, Fayaz Taher, serial entrepreneur and investor in Empty Ventures, said: “This community that is brewing is amazing. There are so many fantastic people here and they’ve got this energy, this openness, they’re collaborative – it just gives me goosebumps. The potential as I see it is big.” 6. ADDIS ABABA, Ethiopia In 2013, the World Bank ranked Ethiopia the tenth fastest-growing economy in the world. From 2007 to 2013, its GDP grew by 93 per cent, and there emerged 1,400 new US-dollar millionaires (2,700 in total), an increase of 108 per cent. However, GDP per capita remains painfully low on average, at just US$470 annually, meaning there is a chasm between rich and poor, with little in between. That said, it has come a long way since the famine the country endured in the 1980s, which claimed the lives of one million people. At the time, it had a population of about 45 million – now there are 90 million, with roughly half under the age of 18. About two-thirds of people can’t read or write and a quarter are unemployed, but GDP growth is expected to continue to rise to 11 per cent and life expectancy has doubled in the past 30 years. Ethiopia has a subsistence economy. Agriculture accounts for almost half of its GDP and 80 per cent of employment, but successful harvests depend on rain (among other factors) and droughts are commonplace. This means there is a food deficit, which is why it still receives aid from the UN World Food Programme (2.7 million people are facing crisis and emergency food security conditions). The state owns all the land, so individuals can’t make a profit, although there are reforms taking place to privatise it. Coffee is a major cash crop, worth US$1 billion a year and employing almost 25 per cent of the population. Other exports include flowers and oil seeds, as well as gold, textiles and leather. Manufacturing is also growing, with overseas companies such as China’s Huajian Shoes and Buffalo Bicycles from the US setting up production hubs. Swedish clothing brand H&M started buying Ethiopian-made garments last year. Global consultancy AT Kearney ranked Addis Ababa, the capital, number three in its Emerging Cities Outlook 2014 – the “African Lion” is planning to become a middle-income nation by 2025. Africa’s biggest hydroelectric power stations, the controversial Grand Ethiopian Renaissance Dam, is expected to be completed in the north-west of the country in 2017. In December 2013, Mark Lowcock, permanent secretary for the UK’s Department for International Development, said: “We’re starting with new support on land certification, access to finance and helping to make the leather, textile and horticulture sectors in Ethiopia truly world class. But we want to go beyond this. We want to help Ethiopia attract the private capital, technology and know-how it needs to achieve its ambitious growth targets.” Addis Ababa is experiencing a construction boom, with the building of new roads, apartments, malls, offices, bridges and railways. Hotel openings include Marriott Executive Apartments, Ramada and Best Western Plus this year, and Courtyard and Best Western next year. Accor is planning a Pullman property for 2017, while Intercontinental Hotels Group signed a deal in the autumn to develop a Crowne Plaza. National carrier Ethiopian Airlines, based in the capital’s Bole International airport, which serves 20 million passengers a year, was the world’s second airline to receive the B787 Dreamliner in 2012 – last October, it received its tenth. With an expanding network, it serves more than 80 destinations across five continents. TOP TEN EMERGING CITIES