STATE OF THE WORLD'S CITIES 2012/2013 Prosperity

cities, the business environment is bogged down by the
labyrinth of bureaucracy. For instance, it takes an average
of 119 days and 13 procedures to register a business. 35
Anyone wishing to start a business will require approval
from no less than 12 different government agencies. 36
As one store owner lamented: “You need a document.
But to have that document, you need to hand in seven
documents. And to get each of these seven, there’s a
different demand.” 37
Poorly developed human capital
Education is essential not just for nurturing, but also
for attracting talents, and bolstering innovation. The
development of Boston, Silicon Valley, Oxford and
Cambridge (UK) clearly benefited from the presence of
reputed universities. 39 Availability of highly-skilled human
capital in turn attracts and generates innovative and
knowledge-based industries.
Within the OECD, the productivity of some
metropolitan areas has been attributed to human resource
endowments. For instance in Montreal, the relatively low
productivity of high value-added sectors has been linked to
lower educational attainment and inadequate investment,
particularly in small and medium-sized enterprises. 40
Similarly, in Istanbul and Mexico City, productivity and
hence, prosperity, is hampered by low skills, as well as the
extent of the informal sector, where adult education and
skill upgrading are difficult to provide. 41
Attracting and
cultivating talents has
FACT
The myriad
of laws, taxes
and regulations and
bureaucracy involved in
registering or running
a business has been
cited as one of the
main reasons why
40 per cent of Brazilian
startup businesses
hardly survive for more
than two years. The
cost of bureaucracy
is staggering; in 2010
bureaucracy cost the
Brazilian economy
46.3 billion reals. 38 This
has implications for the
prosperity of cities in
Brazil.
become common practice
for cities in the pursuit
of prosperity. From New
York, to Boston, London
to Vienna, Dubai to
Singapore, or Bangalore to
Shenzhen, many cities can
illustrate this phenomenon.
Munich’s experience with
vocational education can
be particularly inspiring.
The capital of Bavaria
as well as the economic,
cultural, technological and
transportation centre of
South Germany, Munich
is one of Europe’s most
prosperous cities. It ranked
101
FACT
From Comparative Advantage to Urban Prosperity
Just as a favourable business environment enhances the
prosperity of urban areas, the high cost of doing business
can serve as an impediment to cities becoming more prosperous.
A high cost of doing business has obvious implications for
investment, productivity, employment, income, taxation and
poverty reduction – all of which impact on the prosperity of cities.
8th for technological
innovation (as measured
by international patent
applications), among
the 500 sample cities in
the 2010 Global Urban
Competitiveness Ranking;
its GDP per capita was
USD 58,197 in 2007 with
three per cent economic
growth on an annual
average basis in 2001-2007. 42 Low levels of
POLICy human capital
or labour can hinder urban
prosperity. When it fails to
develop and nurture human
resources, a city will be less
likely to be prosperous than
those with highly educated
labour forces.
Munich’s manufactured
products enjoy a good international reputation and export
competitiveness. The city’s large proportion of high-skilled
workers, nurtured through its vocational education system,
has been crucial to the city’s prosperity.
High crime rates
Crime is a major deterrent to domestic and foreign
investment and can cause capital flight. In Africa, more
than 29 per cent of business people report that crime was
a significant investment constraint. 43 Investors generally
worry about violent crime for fear of direct losses to
business and lack of security for staff.
High crime rates can have a crippling effect on the
prosperity of cities. In Lusaka, for instance, fear of crime in
the poverty-stricken community of Chawama can prevent
teachers from showing up
at work. 45 In South Africa,
a survey of major cities
showed that over a quarter
of respondents would not
consider opening a business
due to fear of crime, with
more than 25 per cent
saying they were reluctant
to allow their children to
walk to school, while 30 per
cent stopped using public
transportation. 46 In large
FACT
According to the
local experts
surveyed by UN-Habitat,
crime emerges as another
major impediment to the
prosperity of cities. No
city can claim to be truly
prosperous if it is crimeridden
and the population
lives in a perpetual state of
insecurity.