Copenhagen's Position in the GFCI 5 Copenhagen's Position ... - CFIR

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Copenhagen's Position in the GFCI 5 Copenhagen's Position ... - CFIR

Copenhagen’s Position in the GFCI 5continuously to keep the GFCI up-to-date with people’s changing perceptions. 26,629assessments from 1,455 respondents are used in the GFCI 5 model.The instrumental factors and the financial centre assessments are used to build a predictivemodel of centre competitiveness using statistical techniques that classify and model complexdata in order to make predictions. The model predicts how respondents would have assessedcentres they are not familiar with, by answering questions such as:If an investment banker gives Copenhagen and Stockholm certain assessmentsthen, based on the relevant data for Copenhagen, Stockholm and Amsterdam,how would that person assess Amsterdam?This approach does not suffer many of the disadvantages of more traditional techniques and itdoes not involve weighting or averaging either the instrumental factors or the financial centreassessments.CopenhagenIn GFCI 5, Copenhagen is in 38 th position with a score of 532 on a scale with a theoreticalmaximum of 1,000. Copenhagen’s position in the GFCI has remained constant in the lastthree editions of the GFCI:GFCI Rank RatingGFCI 1 (March 2007) 34 525GFCI 2 (September 2007) 44 502GFCI 3 (March 2008) 38 488GFCI 4 (September 2008) 38 548GFCI 5 (March 2009) 38 532The scores and assessment details of other competitive centres 1 in the region are shownbelow:CentreGFCI 5RankGFCI 5RatingNumber ofAssessmentsMean ofAssessmentsStandardDeviation ofAssessmentsAmsterdam 24 575 538 605 201Stockholm 30 556 373 556 224Copenhagen 38 532 332 506 235Oslo 39 523 279 485 239Helsinki 44 512 284 490 2341 These centres together with Hamburg which is not included within the GFCI form the ‘peer group’Executive summary Page 3


Copenhagen’s Position in the GFCI 5Instrumental Factor 2 Source Country/CityBasedWorld CompetitivenessScoreboardIMD, WorldCompetitivenessYearbookR 2 withGFCICopenhagen’sComparativePerformanceInfluenceabilityCountry 0.555 Very Strong MidGlobal Competitiveness IndexWorld EconomicForumCountry 0.547 Very Strong HighFinancial Markets Index Maplecroft Country 0.534 Weak LowPrivate Equity Environment EIU & Appax Partners Country 0.524 Very Strong MidBusiness EnvironmentEconomist IntelligenceUnit (EIU)Country 0.480 Very Strong HighCapital Access Index Milken Institute Country 0.452 WeakIndex of Economic FreedomThe HeritageFoundationMid -HighCountry 0.449 Very Strong HighEconomic Freedom of theWorldFraser Institute Country 0.423 Very Strong MidGlobal Office OccupancyCostsDTZ City 0.405 Very Strong LowEuropean Cities Monitor Cushman & Wakefield City 0.401 Weak LowAccess Opportunities Index SRI International Country 0.396 Very Strong MidE - Readiness Score EIU Country 0.381 Very Strong HighEase of Doing Business Index World Bank Country 0.373 Very Strong HighCity Brands Index Anholt City 0.369 Strong MidExecutive MBA GlobalRankingsFinancial Times City 0.367 - LowCorruption Perception IndexTransparencyInternationalCountry 0.362 Very Strong LowOpacity Index Milken Institute Country 0.332 Strong HighReal Estate Transparency Index Jones Lang LaSalle Country 0.297 WeakMid -HighWage Comparison Index UBS City 0.274 Very Strong LowBusiness Trip Index EIU City 0.141 Very Strong LowOffice Space Around the World Cushman & Wakefield City 0.133 Strong LowTop Tourism Destinations Euromonitor Archive City 0.083 Strong LowAirport Satisfaction Skytraxx City 0.039 Very Strong LowCost of Living Mercer HR City 0.014 Very Strong Low2 The table excludes “Competitive Alternatives Survey” by KPMG and “Super Growth Companies” by GrantThornton as these do not rank Copenhagen.Executive summary Page 6


Copenhagen’s Position in the GFCI 5Quality of Living Mercer HR City 0.001 Very Strong LowPersonal Safety Index Mercer HR City 0.001 Weak MidMastercard Centres ofCommerceMaster Card City 0.001 Strong HighThe table below shows a summary of Copenhagen’s performance in the main instrumentalfactors in comparison with the other major North European financial centres. For simplicity,this summary shows ranks amongst the North European centres examined (because thestatistical model used to build the GFCI treats blanks differently from zeros, we have ignoredblank values in this summary):Instrumental Factor Copenhagen Amsterdam Hamburg Helsinki Oslo StockholmWorld Competitiveness Scoreboard 1 st 3 rd 6 th 5 th 4 th 2 ndGlobal Competitiveness Index 1 st 5 th 4 th 3 rd 6 th 2 ndFinancial Markets Index 4 th 5 th 6 th 3 rd 1 st 2 ndPrivate Equity Environment =1 st =3 rd 5 th =3 rd 6 th =1 stBusiness Environment 1 st 3 rd 5 th 2 nd 6 th 4 thCapital Access Index 4 th 5 th 6 th =2 nd =2 nd 1 stIndex of Economic Freedom 1 st 2 nd 4 th 3 rd 6 th 5 thEconomic Freedom of the World 1 st 3 rd 4 th 2 nd 5 th 6 thGlobal Office Occupancy Costs 1 st 2 nd 3 rd 4 th 6 th 5 thEuropean Cities Monitor 4 th 1 st 2 nd =5 th =5 th 3 rdAccess Opportunities Index 1 st =4 th =4 th 3 rd 6 th 2 ndE - Readiness Score 2 nd 3 rd 6 th 5 th 4 th 1 stEase of Doing Business Index 1 st 6 th 5 th 3 rd 2 nd 4 thCity Brands Index 2 nd 1 st - 5 th 4 th 3 rdExecutive MBA Global Rankings - - - - - 1 stCorruption Perception Index =1 st 4 th =5 th 3 rd =5 th =1 stOpacity Index 3 rd 5 th 4 th 1 st - 2 ndReal Estate Transparency Index 5 th 1 st 4 th 3 rd 6 th 2 ndWage Comparison Index 1 st 5 th - 3 rd 2 nd 4 thBusiness Trip Index =1 st 6 th 4 th 3 rd 5 th =1 stOffice Space Around the World 2 nd 4 th 3 rd 1 st 6 th 5 thTop Tourism Destinations 2 nd 1 st 5 th 4 th 6 th 3 rdAirport Satisfaction 1 st =2 nd - =2 nd - -Cost of Living 1 st 4 th - 3 rd 2 nd 5 thQuality of Living 1 st 2 nd 5 th 6 th 4 th 3 rdPersonal Safety Index 4 th 5 th 6 th 1 st =2 nd =2 ndMastercard Centres of Commerce 2 nd 1 st 4 th - - 3 rdExecutive summary Page 7


Copenhagen’s Position in the GFCI 5Of the 62 centres in the GFCI, Copenhagen is in 61 st place in order of reputational advantage– 60 centres have a stronger reputational advantage (the only centre below Copenhagen isactually Oslo).This determines one key strategic priority. The reputation of Copenhagen as a financial centremust be enhanced. This needs to be achieved through marketing and PR – building the brandof Copenhagen by highlighting and developing its strengths and aiming to minimise itsweaknesses.Strengths and WeaknessesThe key strengths are demonstrated by Copenhagen’s high rankings in several of the mostimportant GFCI instrumental factors including:♦ World Competitiveness Scoreboard;♦ Global Competitiveness Index;♦ Business Environment;♦ Index of Economic Freedom;♦ Economic Freedom of the World;♦ E-Readiness Score;♦ Ease of Doing Business Index;♦ Corruption Perception Index;♦ Quality of Living.One index worth noting in particular is the E- Readiness Score by the Economist IntelligenceUnit. Denmark is ranked high in this index, just behind Sweden but well ahead of any otherEuropean centre.The focus of CFIR is both finance and ICT. It should be noted that the GFCI examines thecompetitiveness of cities as financial centres rather than well developed cities in terms ofICT. The GFCI will show a bias in favour of strong financial centres rather than cities withhighly developed ICT usage and infrastructure. The financial services industry has anincreasing reliance on ICT. The strong standing of Denmark in this area indicates that therecould be a strong potential for Copenhagen to increase its standing in financial services.The E-readiness score is published annually and ranks countries according to the state of theirICT development and the capability of its businesses, governments and consumers to utiliseit. The index evaluates the way a country influences its information and communicationsinfrastructure through political, economic, technological and social means. The index iscomprised of nearly 100 criteria with different weightings that are grouped in 6 maincategories♦ connectivity – the ability for companies and people to access digital networks (mobile andthe Internet) and services (through credit and identity cards). Denmark is ranked belowSweden and the Netherlands but is still strong in this area;Executive summary Page 9


Copenhagen’s Position in the GFCI 5♦ business environment – this is the Business Environment Index created by the EIU;♦ social and cultural environment – e-literacy and technical skills of the workforce.Denmark performs very well in this index;♦ legal environment –the laws governing Internet use and the legal frameworks influencingthe use of technology in business for transactions, communications and information.Denmark, Sweden and the Netherlands are ranked within the top ten in this measure;♦ consumer and business adoption – the amount of time businesses and consumers spendaccessing ICT services, their adoption levels of e-commerce and the availability of digitalchannels for government services. Denmark is in 15 th place in this measure, well behindNorway, Sweden and Germany;♦ government and policy vision - how committed the country’s government is. Denmark isa leader ahead of all others in the peer group.Copenhagen also has some relative weaknesses. Studying the instrumental factors whereCopenhagen scores lower than its main competitors:♦ Financial Market Index;♦ Capital Access Index;♦ European Cities Index;♦ Real Estate Transparency Index.By examining the factors where Copenhagen’s relative performance is weakest and looking atthose which are ‘influenceable’ by policy-makers one can by further analysis suggest anumber of possible strategic priorities for Copenhagen. This is however not the scope of thisanalysis.One should also notice, that these indices might have shortcomings – fx is the Capital AccessIndex low for Denmark partly due to the low penetration of credit cards which is due to thelarge coverage of the “Dankort”.In addition to these factors, one of the features of Denmark is that it has a large public sectoras a percentage of its GDP. A large public sector generally results in high levels of taxationand this is generally the case in Denmark. Denmark has a payroll tax for financial servicesemployees and it is argued that this is detracting from the Copenhagen’s competitiveness forfinancial services.The influence that the different industry sectors have on Copenhagen’s GFCI rating is showngraphically below. It will be noted that Copenhagen is viewed highly by bankers (3 rd amongstits peers in the Banking sector index) and by the professional services sector:Executive summary Page 10


Copenhagen’s Position in the GFCI 5Professional ServicesGovernment & RegulatoryInsuranceAsset ManagementBanking-50 -30 -10 10 30 50 70GFCI Rating PointsThreatsThere are a number of potential threats to Denmark. Firstly, other European centres areconcentrating their efforts on becoming more competitive. Centres have realised that vibrant,competitive financial centres give cities economic advantages in information, knowledge andaccess to capital. Several of the leading centres in Europe are attempting to gain recently lostground and re-examining the factors of competitiveness where they are weakest. Specialist orniche centres including Zurich & Geneva are trying to consolidate their positions in theirspecialist sectors such as asset management. Zurich & Geneva are popular with the assetmanagement community and continue to prosper.Scandinavian and Northern European centres are also examining the factors ofcompetitiveness. Stockholm and Amsterdam are currently ahead of Copenhagen and havealready invested in raising the awareness and image of their financial sectors.The global financial crisis and resulting economic slowdown is also a threat to Copenhagen.It would appear from the GFCI results that there is a ‘flight to safety’ during this crisis withpeople in financial services putting their faith (and business) in the quality of the most wellestablished financial centres. This might make in harder for Copenhagen to makeimprovements in its competitive position in the short term.One of the features of Denmark is that it has a large public sector as a percentage of its GDP.This feature is not one that is particularly valued by many financial services professionalswho favour a more free market approach. A large public sector generally results in highlevels of taxation. Denmark had relatively high taxation and taxation levels are becomingExecutive summary Page 11


Copenhagen’s Position in the GFCI 5increasingly important to financial services professionals. The Danish payroll tax forfinancial services employees is surely detracting from the competitiveness of financialservices. As one GFCI respondent puts it:“It is noticeable that financial centres with low tax environments aregaining ground. The off-shore and Swiss centres are taking business fromhigh tax environments and I think this will continue”.A London Based Fund ManagerPrioritiesOur analysis demonstrates that in many of the fundamental measures, Denmark is verycompetitive. This competitiveness is not reflected in Copenhagen’s standing in the GFCI.We believe that PR campaigns to raise awareness of Copenhagen as a financial centre shouldbe the main priority for CFIR.Although Z/Yen have used the instrumental factors in the GFCI model, we are not theoriginators of these. If you feel that Denmark or Copenhagen has been treated ‘unfairly’ inany of the indices then a very valid, useful and effective form of marketing is for someonefrom Copenhagen to take this up with the organisations concerned. These organisations havecontact details on their websites and are usually very receptive to feedback. In the past somehave altered their methodologies to reflect certain factors they did not fully appreciate. Thisform of direct feedback benefits all parties – the originators get a better and more authoritativeindex, Copenhagen is more ’front of mind’ with these organisations, Copenhagen’sperformance might well rise in the indices and this will have a knock-on effect in the GFCI.In conclusion, our research suggests that in order to fulfil its objectives, a top priority forCopenhagen should be to promote itself as a competitive centre for financial services and ICTactivity.The link to the survey is: http://www.fm2x.com/gfciExecutive summary Page 12

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