International Research work "Global Cities and National States: A New Course for Partnership in the

World Cities and Nation States: promoting a new deal for the 21st century – Greg Clark and Tim Moonen

Main Report for IV Moscow Urban Forum

Hong Kong London Moscow Mumbai New York Paris SĂŁo Paulo Seoul Shanghai Singapore Tokyo Toronto

publisher The Non-profit Organization Moscow Urban Forum 22 Voznesensky Pereulok Moscow, 125009 +74956505044 www.mosurbanforum.ru ceo Olga Papadina written by Greg Clark and Tim Moonen project coordinator Maria Semenenko design Nonna Khismatullina

Š Moscow Urban Forum

Prof Greg Clark Chairman, The Business of Cities

Greg Clark is an advisor, advocate, and mentor on cities and businesses. He works with leadership teams in global cities, global firms, global institutions, and at global gatherings. His current roles include: • Chairman, OECD LEED Forum on Local Development and Investment Strategies, OECD. • Global Fellow, Metropolitan Programme and Global Cities Initiative, The Brookings Institution.

• Senior Fellow, Urban Land Institute, Europe.

• Chairman, JLL Global Research Centre on Cities.

• Advisor on City Development to JPMorgan, GVA, Buro Happold, and other leading firms.

• Visiting Professor, and Co-Chairman of Advisory Board, City Leadership Initiative, University College London.

Greg Clark is also Chairman of The Business of Cities Ltd, an intelligence and strategy group based in London, UK, that observes, comments, and reports on global trends and changes in cities, leadership, investment and development.

From 2008 to 2014 he was chairman of the International Advisory Board of the New York Regional Plan, Oslo strategy, and the Sao Paulo Strategic Plan. He was an International Advisor on the Metropolitan Strategic Plans of Rio de Janeiro, Barcelona, Gauteng/ Johannesburg, Western Cape, Toronto, Glasgow, Mumbai, Vienna and Auckland. He has advised on metropolitan governance reform in London, Toronto, Barcelona, Auckland, Sao Paulo, Milan, and Oslo. He has led 20 reviews of city and regional development for the OECD, and has advised on national policies for cities and regions in the UK, Ireland, Canada, China, India, Colombia, Sri Lanka, South Africa¸ New Zealand, Italy, Slovakia, and Latvia.

Tim Moonen Tim Moonen is the Director of Urban Intelligence at The Business of Cities. He leads research and strategic evaluation on the future of cities and globalisation. His current focuses include urban investment, long-term metropolitan strategic planning, and comparative city competitiveness. He has recently authored and co-authored original work on the state of development bank investment for cities, the future of European cities, and the concept of global fluency as a tool for city and metropolitan leaders. He recently submitted his PhD on the politics and governance of global cities at the University of Bristol, and also has degrees from the University of Cambridge and the Universidad Europea de Madrid.

www.thebusinessofcities.com

contents Introduction

Part 1

1 World cities and nation states: the rise of a new political relation 1. The world city phenomenon:

a new paradigm for nation states 2. Playing ‘catch up’ with the

new urban world 3. The evolution of national

and regional policies

3

5

Understanding the world city model and its needs

National policies and frameworks

1. Global financial competitiveness/business friendliness

1. Recognition of urban and metropolitan role in economy and prosperity

2. Supporting research and innovation 3. Support for hosting global events 4. Open Labour Markets 5. World Class connectivity

2. Managing negative externalities and the system of cities 3. Collaborative governance between world city and nation state

6. Managing growth and metropolitanisation

4. Collaboration between world cities and other cities in their nations

2

4

6

Different models and starting points for world cities and nation states

Improvement and expansion of governance in world cities

Conclusion – Innovation and progress in world city/nation state relationships

4. The nation state: the end of

the beginning 5. A new cycle of world cities?

1. Political system and institutional framework 2. City size and scale 3. Inter-governmental relationships 4. System of cities 5. National approach to globalisation and market economy 6. Economic specialisation and sector leadership

1. Enhancing leadership and institutional frameworks 2. Governance systems in world city regions 3. Fiscal and Investment Systems

1. The agenda between world cities and nation states into the future 2. A new cycle

Part 2 12 summary case studies 5

Introduction The emergence of ‘world cities’ presents an historic opportunity and challenge for nation states.

World cities have the potential to help a national economy be more globally connected and productive, and to spread multiple benefits across national systems of cities through connectivity, economic specialisation, and co-operation. Their activities can increase the connection of national economy to global systems of trade, investment, and human capital flows. They also provide access to international markets, the spur for entrepreneurship and the clustering advantages for globally trading firms and sectors. World cities also help to build the ‘business brands’ of nations in an increasingly urbanised global economy.

But world cities also depend on nation states and national governments in order to manage the effects of their global integration. Rapid population growth and diversification, urban restructuring, inflation, congestion, stretched housing and labour markets, infrastructure deficits, land-use dilemmas, ill-equipped city systems, environmental weaknesses, and social divisions can all be part of the side effects of becoming a world city. At the same time national governments have to pay attention to the performance of other national cities and rural areas and address the impact the world city has on how other cities and regions within the nation develop. These challenges lie at the heart of the relationships and tensions between nation states and their major world cities, and lead to concerns about whether the ‘world city model’ is always a good one to adopt.

6

In the current period, world cities and national governments are now beginning to embark upon a range of different forms of communication and collaboration around these issues that have major implications for the futures of both. This emerging dialogue and co-operation is designed to improve the understanding of the world city model and its needs, enhance the complementary roles of multiple cities within a national system, increase or improve governance and investment in the world cities, or develop national policies and platforms that can support different kinds of cities with specific tools and interventions.

This report explores this new ground in examining the different ways that world cities and nation states are contributing to each other’s shared success. Each city’s organisational and legal framework is different and complex, and the range of institutional dynamics in the world’s major cities has not been analysed in this way before. The report draws on the latest practical experience of 12 cities around the world to identify the trends and innovations in relations between central governments, state or provincial governments, and their main international gateway city. Using a combination of local and global expertise, it identifies recent innovations and good practice in governance, communication, investment and planning between different tiers of government. It will also pinpoint the future potential for nation states to leverage their world city to achieve mutually beneficial national outcomes.

Methodology A literature review of over 40 books and academic journal articles identified the latest knowledge of how the rise of world cities is changing national governance, and how both city and national governments are adapting to the new balance of power. The review consulted prominent contemporary books written in Europe, Asia and North America, and drew from the most recent findings by the World Bank, OECD, and relevant international financial institutions.

This project identified 12 major world cities that reflected a fair balance of geographic location, constitutional structure, city status (eg balance of capitals and non-capitals, balance of established and emerging cities), and stage of development. Together these 12 cities’ GDP exceeds $7 trillion, and account for roughly 10% of global GDP.1 12 case studies were then created, drawing on recently published books, academic journals, independent media, international benchmarks, and local studies.

This report benefits from consultation with current (and former) senior members of city governments in the 12 cities, and with national officials with responsibility for urban policy.

It also engaged extensively with both business leadership organisations in the 12 cities, and with leading academics specialising in the world city’s relationship with its national government. In total, over 40 expert interviews were conducted.

The authors wish to record their sincere thanks to all those who participated in this study: —— Uma Adusumilli, Chief of Planning Division, MMRDA, Mumbai, India.

—— Bruce Berg, Associate Professor of Political Science, Fordham University, New York, US.

—— Claudio Bernardes, President, Ingai Incorporadora S/A, São Paulo, Brazil.

—— Professor Neil Bradford, Associate Professor of Political Science, Huron University College, University of Western Ontario, Canada.

—— Professor Miguel Bucalem, Director, USP Cidades, São Paulo, Brazil.

—— Dr. Xiangming Chen, Director of the Trinity College, Hartford Center for Urban and Global Studies, Connecticut, US. —— Rt Hon Greg Clark MP, Minister for Universities, Science and Cities, UK. —— Professor Alistair Cole, Professor of Politics, Cardiff University, UK. —— John Dickie, Director of Strategy and Policy, London First.

—— Fernando de Mello Franco, Municipal Secretary of Urban Development, São Paulo, Brazil.

—— Professor Meric Gertler, President of the University of Toronto, Canada.

—— Professor Hiroo Ichikawa, Executive Director of The Mori Memorial Foundation; Dean, Professional Graduate School, Meiji University, Japan.

—— Paul Lecroart, Senior Urban planner at IAU (Institut D’Amenagement et D’Urbanisme) Ile de France (IDF), France.

—— Professor Christian Lefèvre, Directeur de l'Institut Français d'Urbanisme, France.

—— Sir Edward Lister, Chief of Staff and Deputy Mayor, Policy and Planning, GLA, London, UK. —— Dr Vincent Gollain, Director, Department of Economy and Local Development, IAU IDF, France.

—— Dr Yeong-Hee Jang, former Senior Research Fellow, Seoul Institute, South Korea.

—— Professor Hideo Nakazawa, Faculty of Law, Chuo University, Japan.

—— Narinder Nayar, Chairman of Mumbai First, Mumbai, India.

—— Dr. Karima Nigmatulina, Director at the Institute 7

of Master Planning, Moscow, Russia.

—— David O’Rear, President, Hong Kong General Chamber of Commerce, Hong Kong.

—— Dr. Abhay Pethe, Vibhooti Shukla Chair Unit in Urban Economics and Regional Development, University of Mumbai, India.

—— Professor Nirmala Rao OBE, Pro-Director, SOAS, London, UK. —— Dr. Xuefei Ren, Associate Professor of Sociology and Global Urban Studies, Michigan State University, US. —— Anacláudia Rossbach, Regional Advisor for Latin America and the Caribbean, Cities Alliance; Director President of Rede Interação São Paulo, Brazil.

—— Professor Andrei Sharonov, Dean, Skolkovo Management School, Moscow, Russia.

—— Professor Enid Slack, Director, Institute on Municipal Finance and Governance, Munk School of Global Affairs, University of Toronto, Canada.

—— Professor Tony Travers, Department of Government, LSE; Director of LSE London, London, UK. —— Professor Aleksandr Vysokovsky, Dean, of the Graduate School of Urban Studies and Planning, Higher School of Economics, Moscow, Russia.

—— Professor David Wolfe, Department of Political Science, Centre for International Studies, University of Toronto, Canada.

—— Kathryn Wylde, President and CEO, Partnership for New York City, US. —— Norio Yamato, Assistant Manager, Corporate Planning Office, Mori Building, Japan.

—— Professor Robert Yaro, Former President, Regional Plan Association, New York.

—— Professor Fulong Wu, Bartlett Professor of Planning at the Bartlett School of Planning, University College London, UK. —— Professor Natalia Zubarevich, Director, Regional Programme, Independent Institute for Social Policy, Moscow, Russia.

8

and two anonymous public officials at —— Tokyo Metropolitan Government —— City Bureau, MLIT (Ministry of Land, Infrastructure, Transport and Tourism), Japan.

12 detailed case studies have been created. They are available to read at www.mosurbanforum.ru.

This report reviews the insights and observations from these 12 case studies.

1

World Cities and Nation States: the rise of a new political relation

1 The world city phenomenon:

a new paradigm for nation states In the decades up until the 1980s, the nation state was the dominant unit for economic organisation and regulation. It was the established institutional platform for the trade of goods and capital flows, and for the negotiation of trade agreements and strategic alliances.

National-level policies supported mass production and consumption to manage demand, and national political cultures thoroughly influenced the character of their leading cities. The big cities were rarely seen as more than the administrative hubs for policies devised by national or state government decision-makers.

The global economy experienced a sustained surge of growth and trade after 1945, but many national governments deliberately tried to prevent industrial and office development becoming over-concentrated in their major cities through ‘regional policies’ (see Table 1).

Subsidies, financial instruments, and the relocation of business parks and public sector jobs were used to decentralise economic activity and spread benefits of growth more evenly. Policies were also put in place to curb population concentration. This approach was especially evident in London, Paris, São Paulo, Seoul and Tokyo. Brazil went one step further and relocated its capital city from Rio de Janeiro to inland Brasília in order to decentralise industrial activities and reduce growth in its large southern cities.

National governments in centralised states also tried to limit the influence of larger city governments that did not follow instructions.

Organisations such as the District de la Région Parisienne, and the Government Office for London, were established as branches of central government operating at the regional level, reporting directly to the state. In London’s case the defiant city government had been abolished altogether in 1986.

9

2 Playing ‘catch up’

with the new urban world The opening up of the global economy since 1985 has accelerated flows of capital, goods, information and labour faster than political structures could adjust.

Cities have been much more flexible than their national governments at taking advantage of the new order. As well as the consolidation of genuine global ‘command and control’ centres (e.g. London, New York, Tokyo), regional capitals and gateways have emerged that also take on aspects of the ‘world city’. World cities have rapidly become switchboards for key decision-making and negotiations between national and international representatives in government and business alike.

Box 1: What is a world city?

A world city is one that not only participates in national and regional networks, but also influences and directs global flows of trade, investment and population. World cities host high concentrations of industries whose value chains are globally integrated, such as banking, electronics, ICT, telecoms, cars and tourism.

They serve as national, regional and global headquarters for globally trading firms. Their employment and productivity advantages are magnets for domestic and overseas migrants, and their political and cultural importance makes them popular visitor gateways and aviation hubs. World cities also tend to assemble major institutions of knowledge, culture, and recreation. World cities are not always national capitals, several federal nations have deliberately created alternative capital cities.

10 1 | World cities and nation states: the rise of a new political relation Part

Nation states have responded to this unforeseen world city ‘revolution’ with policies that focus on supply-side factors to achieve competitiveness and improve productivity. Even in more centralised countries, central governments no longer directly allocate production, capital, land and labour to different parts of the country. In one notable example, in 1994 China enacted a revolutionary fiscal reform to decentralise its system and encourage city governments to lease state-owned land for revenue. In the case of Seoul and Tokyo, their respective national governments have shifted from their de-concentration policies in favour of improving urban quality in their capital cities.

Many of the nation states in the developed world, with established world cities, have become more place-specific in their approach to economic development. This is partly because flows of capital and content increasingly take place between world cities, and because policy design and implementation has been shown to be more effective and accountable in cities.2 In some established world cities, working relationships between national leadership and new growth coalitions have flourished. For example in London in the 1990s, pragmatic and collaborative partnerships catalysed progress in areas such as international promotion.

3 The evolution of national

and regional policies

Many nation states have shifted from one kind of territorial policy to another, though the speed and degree of change varies. Most have developed some regional policies in the past 50 years. On the other hand, not all nations have national urban policies.

—— Regional Policies traditionally sought to constrain growth in the largest regions, and incentivise growth in other regions.

—— Urban Policies traditionally focused on ameliorating urban problems rather than recognising the economic potential of cities and systems of cities.

Neither of these traditional regional or urban policies have fitted well with the globalisation of cities and city-regions, where the dynamics have been more about capturing internationally contested opportunities. Around the world the tools used for effective spatial development are evolving quickly. Globalisation places new stresses on how national and sub-national economies perform, and is influencing the ways that national development policies are designed and executed. These are summarised in the table below.

Table 1: Differences between traditional and new development policies (developed from OECD) Traditional Development Policies: ‘Regional Planning’ 1950s to 1990s

New Development Policies:‘Territorial Development’ 1990s to present

Objectives

Balance national economies by compensating for disparities.

Narrow economic focus.

Increase regional development performance across the whole nation.

Integrate economic with spatial, environmental, and social development measures.

Strategies

Sectoral approach

Integrated development programmes and projects

Geographical Political regions focus

Metropolitan regions and economic regions

Target

Lagging regions

All regions – Metropolitan regions – connections between regions and across national borders

Context

National economy

International economy and local economies

Tools

Subsidies, incentives, state aids, and regulations

Assets, drivers of growth/productivity, soft and hard infrastructures, skills and entrepreneurship, collaboration incentives, development agencies, co-operative governance, financial intermediation, investment incentives.

Actors

National governments and sometimes regional governments

Multiple levels of governments, private and civic actors. Implementation agencies. Collaborative governance. A major role for business and civic institutions.

11

Territorial development systems in most countries are at one point along a continuum between ‘old style’ development policies and ‘new style’ development approaches. All other things being equal, those countries that can most quickly adapt and modernise their approaches are likely to be more successful in pursuing development objectives.

The urbanisation of the global economy has required nation states to re-think traditional approaches and to recognise: 1. The emergence of world cities. Many countries have seen their leading city or group of cities become international commercial and corporate management hubs, serving large customer and client markets in their wider regions, beyond national borders. These cities have had to be recognised by national policy because of their effects on the movement of workers, the examples they set on productivity and standards, and the role they play in bringing international firms, capital, talent, and visitors into a nation.

2. The emergence of city regions and metropolitan areas. As cities grow they expand beyond their set borders and boundaries, and their economic and social ‘footprint’ becomes ever larger. National and state governments have to respond to this phenomenon. No response leads to large and expensive co-ordination failures between neighbouring municipalities that are politically independent of each other and yet are functionally inter-dependent and share a common business community, labour market, infrastructure platform, and housing system. National and state governments

12 1 | World cities and nation states: the rise of a new political relation Part

can adjust to the growth in city regions by changing the boundaries of cities, by creating additional co-ordination vehicles, by reforming city governance, or by incentivising co-operation in other ways.

3. Systems of cities with complementary roles. National governments can also recognise that their network of cities can form a complementary system of different functions and specialisations. Since the mid-2000s, Chinese national urban policy has begun to plan its huge scale of urbanisation by identifying large regional city clusters as strongholds of future sustainable development. The Pearl River Delta, Yangtze River Delta and the Beijing-Tianjin-Hebei regions all became the subject of regional plans, with the aim of accelerating development, bridging regional divides and restructuring the economy.3 4. Many cities with potential for international roles. As new waves of globalisation occur, new economic sectors internationalise and integrate, and a larger range of cities have the potential to enter the global system of trade and exchange. This can lead to nations having more than one ‘world city’. Whilst this is common in larger nations (eg. in the U.S., New York, San Francisco, Los Angeles, and Chicago might all be seen as world cities, and in China Hong Kong, Beijing, and Shanghai all have this potential). This can also occur in much smaller nations. Switzerland might argue that both Zurich and Geneva are world cities. Barcelona and Madrid, Cape Town and Johannesburg, and Munich, Berlin and Frankfurt, are all examples of more than one city developing clear international roles within the same country.

4 The nation state:

the end of the beginning Claims about the demise of sovereign national governments in a globalised and highly urbanised world have proven exaggerated. National governments no longer have absolute authority and tend to negotiate and experiment with regional and city partners.

This process is very visible in cities such as Paris, where political relationships between the different tiers have improved over time and a more multipolar system has evolved. But even when nation states no longer dictate policy, they continue to play critical roles. In particular, nation states: —— manage and control migration into, and often across, their territories. The ability of world cities to attract new supplies of talent, or to manage population growth, is shaped by national immigration and visa policy.

—— choose where to locate key strategic assets. The location of national military, trade, research or scientific facilities can have big impacts on agglomeration. This also applies to intergovernmental headquarters – for example the decision to locate the BRICS New Development Bank in Shanghai may have a long-term effect on the geography of global finance.

—— decide planning policies and regimes.

New urban planning laws can enable world cities and their local governments to adapt more effectively to infrastructure challenges.

Brazil’s 2001 City Statute gave São Paulo’s municipalities valuable tools to implement master plans and enter into new partnerships.

—— lobby for intergovernmental rules, treaties and regulations that uphold their country’s basic urban competitiveness. Trade agreements or new political alliances can catalyse periods of innovation or rapid mar-

ket expansion, as cities such as Toronto and Shanghai both illustrate.

—— protect key sectors during economic downturns. New York and London were high-profile beneficiaries of central government bail-outs of their financial sectors, followed by economic stimulus allocations and grants.4 In London’s case this has been followed by ongoing adjustments to the tax and regulatory regime to retain firms and even expand into Islamic and yuan-denominated finance. Protective measures have also been made by national governments to protect manufacturing, R&D and construction industries in Singapore, Tokyo and Toronto.5 —— redistribute benefits to safeguard national cohesion. National transfers try to prevent the gap between the first-movers and the casualties of economic change becoming too large. This is not only a concern of developed countries: as early as 1989, China’s National Urban Planning Law tried to control big city growth.

Not all national governments have been proactive or successful in these areas. Some have tried to mitigate the externalities of their world city but have succeeded only in disrupting cluster agglomeration and damaging overall competitiveness. Others have failed to provide a consistent legal and regulatory framework or delivery mechanism to allow world cities to thrive.6 Having learnt some painful lessons from the past, nation states identify the opportunities as well as the threats of globalisation and the rise of world cities. National governments can leverage world cities to achieve goals that are otherwise hard to achieve. They also are more willing to endorse urbanisation processes because to do otherwise would weaken their attraction as a place for capital or for talent.7 13

5 A new cycle of world cities?

Cities tend to embrace international opportunities in waves and cycles.8 Which cities take part in a given wave may depend on major geopolitical events, key industries, new technologies, or the whims of city and national leaders. What is clear is that today, more cities than ever are participants in the new cycle of globalisation that began after 2008-9. Many cities have no prior global experience, while others draw on a legacy of earlier phases of outward-facing trade and engagement. But as new sectors grow and as some countries increase or resume their global orientation, new world cities are emerging all the time.

The previous cycles in which world cities such as London, New York and Tokyo thrived, hinged on cities playing hub roles in finance, business, media, leisure tourism, and commodities. In the current cycle, science, medicine, ICT, cleantech, traded urban services, design and real estate are all more prominent. World cities are now also complex visitor economies – not just attracting holidaymakers but also students, researchers, events and congresses. Established and emerging world cities all compete for investors, entrepreneurs and start-ups by focusing on liveability, culture and regeneration.

This new cycle of world cities is shaped by a clearer grasp of the mistakes of the past and the concerns for the future. The 2008-9 financial crisis exposed the weaknesses of city development approaches that had become

14 1 | World cities and nation states: the rise of a new political relation Part

over-dependent on one sector – be it financial services, exports or tourism. Its fall-out has also highlighted the fragile investment profile of many cities as they seek to update and renew their own systems – housing, education, and infrastructure. It has also focused attention on cities’ environmental and spatial resilience, and how to avoid becoming ‘locked in’ to an undesirable development path.

Finally, there is more attention on the growing inequalities within and between cities, which has prompted a tide of pessimistic opinion in many countries opposed to the perceived impacts of the ‘world city model’. The stance of national governments on this issue varies from place to place. But in most cases, however, national leaders have become more equivocal about whether and how to support its major urban centres. This cycle of globalisation is therefore unusual because the growing economic roles of world cities is coinciding with a rise in nationalism, separatism and anti-immigration.9 The distinctive elements of this new cycle of world cities – wide-ranging competition, new industry trends, strategic awareness, and conflict between the ‘winners’ and ‘losers’ of globalisation - all demand a fresh set of relationships and partnerships with leaders and agencies in national government. Nation states are only just getting to grips with this new terrain. As the sections below show, the agenda for the future is now slowly coming into view.

2

1Political system

Different models and starting points for world cities and nation states The relationships between national governments and world cities are important and far-reaching in all cases, but their character varies widely.

The mega-trends of continental integration, globalisation, and decentralisation do not play out in the same way for all world cities. Each city faces a different set of organisations, state structures and path dependencies. As such, they have a different set of constraints and needs.

and institutional framework

Perhaps the most decisive shaping factor in the relationship between world cities and nation states is the system of government by which the country is governed. We identify four basic types of political arrangement that set the terms for the responsibilities of national government and for the nature of the dialogue between world city and national level.

1. Centralised systems: e.g. London, Paris, Seoul, Tokyo In centralised government systems, the central government controls most public spending, and most macro policy on economic competition, taxation, infrastructure planning, and immigration. These countries’ world cities are usually the capital city and centre of state power, which offers the competitive advantage that national politicians are automatically aware of many of the city’s obvious needs. In these nations the tensions between serving the needs of the world city (often also the capital) and looking to the effects upon, and needs of, the second tier of cities, and a wider set of regions, is most acute.

National executive leaders therefore tend to pay close attention to city policy and major city projects, and most large infrastructure projects depend on at least some national-level capital investment. National policies may also designate key clusters and business districts, and set the standard of social housing and public services.

2. Federal systems with strong tier of state government: e.g. Mumbai, New York, São Paulo, Toronto.

In many federalised systems it is the state or provincial governments that are de facto world city managers. This ‘middle’ tier usually has the authority to decide all the policies that shape how the world city develops: governance, fiscal policy, infrastructure planning, allocation of resources to urban development or elsewhere.

Even though the world city is always by far the largest in the state, the electoral balance in state governments are often tilted towards rural areas or smaller cities. This means that state level decisions rarely favour a pro-urban or proworld city agenda.

In most world cities that operate under these arrangements, they are not national capital cities and the relationship with the federal government is more remote, often mediated via the state or provincial government. Formally, these world cities are just one of several thousand municipalities vying for federal attention. This makes a customised relationship difficult, and puts the onus on city governments to be proactive. National governments may issue directives, provide advisory support and fund programmes, but they do not become directly involved in urban governance, and the ministerial focus on the world city may be less sustained. With central grants typically comprising only 5-20% of city revenues, the government’s main roles lie elsewhere: their 15

control of economic, population, and immigration policies, their ownership of strategic public land; their management of railways, ports and airports; their research and infrastructure investment programmes; their welfare and poverty initiatives; and their national urban and economic development frameworks.

self-governing powers and fiscal resources. Hong Kong is a rather different and unique case, possessing a high degree of autonomy within the ‘one country two systems’ approach.

4. Independent city-states: e.g. Singapore A small number of cities have a fully independent or autonomous structure that means they are not administered as a part of any national government, and have their own diplomatic and military apparatus. It functions as a unified metropolitan area with a highly centralised, unitary government and a single parliamentary chamber. The city-state system assigns local bodies formal advisory and management roles, and so they do not form an empowered ‘lower tier’ of government that is found in cities such as London and Tokyo. Unlike other world cities, being a small city-state demands constant attention to resource management (water, energy).

Singapore fits the city-state model more closely than any other major city, but others with similar levels of autonomy and direction include Abu Dhabi and Dubai.

3. Federal systems with highly empowered cities: e.g. Hong Kong, Moscow, Shanghai A number of world cities enjoy a high degree of autonomy despite being ruled in full or in part by a sovereign national government, and operating within a federalised system. These federalised systems are effectively hybrids, where most of the territory operates through a states and provinces system, but larger and important cities may attain an equivalent status to a state or province and manage their own affairs more directly.

Moscow and Shanghai are examples of cities that are directly recognised by their federal governments, and have gained a high level of Table 2: Government systems and city designations in the 12 world cities Government system

Higher tiers of govt

Metropolitan government

Special designated city

Hong Kong

Federal

1

Yes

Yes

London

Unitary

1

Yes

No

Moscow

Federal

1

Yes

Yes

Mumbai

Federal

2

No

No

New York

Federal

2

Yes

No

Paris

Unitary

1

No

No

São Paulo

Federal

2

No

No

Shanghai

Federal

1

Yes

Yes

Singapore

City-State

0

Yes

-

Seoul

Unitary

1

Yes

Yes

Tokyo

Unitary

1

Yes

Yes

Toronto

Federal

2

No

No

16 1 | Different models and starting points for world cities and nation states Part

2 City size and scale World cities emerge in their own spatial context, and evolve to have rather different population sizes and spatial scales. Size is no absolute determinant of world city status.

Dubai, for example, has become a world city despite having a population of under 2.5 million, whereas Karachi and Cairo have only very limited functions of a world city despite their huge population resource.

Size and scale not only affects how world cities compete, but also affects their ability

to thrive in inherited institutional frameworks.

Land locked cities such as Singapore have not spilled over into a manufacturing hinterland.

But for many emerging world cities, the major challenge is dealing with scale challenges and getting the national system to adapt to realities of massive urbanisation. Weak growth management resulting from underpowered city government, and/or weak alignment between institutional and functional geography, often results in congestion, low productivity, inequality, and inflation.

Table 3: Size and scale of world cities and world city regions City

Hong Kong

City population/m

City size/km2

Region

Regional population/m

Region size/ km2

7

1,100

Greater Pearl River Delta

64

43,000

London

8.5

1,500

Greater South East

24

39,500

Moscow

12

2,500

Moscow and Moscow Region

19

47,000

Mumbai

12

440

Mumbai Metropolitan Region

23

4,350

New York

8.5

1,100

Tri-state region

23

34,000

Paris

2.1

105

Ile-de-France

12

12,000

S達o Paulo

12

1,500

S達o Paulo metropolitan region

21

8,000

Shanghai

24

6,200

Yangtze River Delta

100

100,000

Singapore

5.5

720

-

-

-

Seoul

10

605

National Capital Region

26

12,000

Tokyo

13.2

2,200

Tokyo Metropolis

36

14,000

Toronto

2.8

630

Greater Toronto Area

6.1

7,100

17

Fig. 1: Comparative size and density of 12 world city government units and their city regions

Shanghai

Tokyo

Moscow

Paris

Hong Kong

Seoul

Sao Paulo

Density of central city

London

Toronto

New York

Mumbai

Singapore

Density of region

3 Inter-governmental relationships Given the different models of governance described above, and the different patterns of ‘shared authority’ implicit in all of the models, it is clear that a high degree of negotiated collaboration between world cities and nation states is desirable. However negotiated collaboration is not always easy to achieve.

Inter-governmental conflict along party political lines often influences the speed of progress for world cities. This is especially true in cities that are deeply polarised politically and ideologically,

which include São Paulo, Toronto and Paris. In the federal systems in which Mumbai, São Paulo and Toronto each operate, the incumbent state government is often ruled by a different party to the city government. Inter-party rivalry can result in deadlock and tension, and brief periods of political alignment represent an important opportunity to build trust and push through projects. The cities of London, Paris, São Paulo, and now Toronto, all currently benefit from political alignment with ruling parties at a higher level.

18 1 | Different models and starting points for world cities and nation states Part

4 System of cities Cities such as London, Moscow, Paris and Seoul have historically always been much larger than their national counterparts due to their lead role in industrialisation, trade, and even empire.

The urban system may have evolved over time, but their position at the top of the hierarchy is absolutely unchallenged. This means that these cities can be viewed as dominating the political, economic and cultural life of their nations, and that central governments are usually vigilant about their impact on national affairs.

World cities that tower above the rest of their country’s urban system have great advantages of agglomeration and political influence.

However sometimes they must also manage political grievances that emerge when disparities are perceived to grow too large.

In other city systems, world cities have developed in a context where other cities are as large if not larger, and where they are not the automatic gateway for investors and decision-makers. At certain points in the last 50 years, Mumbai, Shanghai and Toronto have all been less favoured by their national governments compared to other large cities (Delhi, Beijing, Montreal, respectively), and each operates in a more evenly balanced system with three to six other major population and corporate centres. To a lesser extent, a diffuse national system is also visible in the cases of New York and SĂŁo Paulo, where competitive or antagonistic relations with other big cities are much less common.

Fig. 2: Dominance of world cities in their national economies (in financial services and manufacturing)

Source: Brookings Global Metro Monitor (2012)

= GDP size More dominant

Financial services share vs national economy

Hong Kong

London New York Seoul

Tokyo

Moscow

Shanghai Mumbai

Sao Paulo

Paris Toronto Singapore

Less dominant

Manufacturing share vs national economy

19

5 National approach to globalisation and market economy

a pro-global approach across all areas of government policy and delivery. (Example: Hong Kong, Singapore).

Cities have become world cities in very different ways, because they are immersed in different economic and political traditions that shape the way they engage with international affairs.10 Based on the approaches in these 12 world cities and others, there are at least four basic types of city in terms of their national government’s level of involvement and commitment to globalisation (see Fig. 3).

3. World cities in a market-oriented economy that

receive minimal support from the state. They tend to exist in a ‘low investment, low return equilibrium’ that encourages experimentation to finance and initiate large projects. As a result these cities tend to have high-quality local leaderships and engaged business communities that closely monitor strategic needs. (Example: New York).

1. World cities in an interventionist and mono-cul-

tural state that has been reluctant to proceed with liberalisation and other open-ness reforms.

Often their national governments preferred to ‘balance’ development and build the domestic assets to be competitive, with mixed results.

(Example: Seoul, Tokyo).

4. World cities in a fragmented government sys-

tem that have a distant or antagonistic relationship with national/federal government, especially in relation to fiscal needs. They tend to have a shorter history of global engagement, and rely on strong local institutions and commercial expertise to provide direction and responsiveness to international competition. (Example: São Paulo, Toronto).

2. World cities that operate in a bureaucratic and

professionalised state structure that is, for historic and size reasons, tactically committed to internationalism. These cities look to integrate

Fig. 3: Typology of world cities and nation state traditions of engaging with globalisation11

Statism (Presence of the State)

High

low

Hierarchical, institution-dependent, regular national government intervention in public policy. State tries to counteract and oppose effects of globalisation; few opportunities for world city to manoeuvre

World City viewed as engine of growth; national government attempt to manage spatial inequality; rapid strategic response to lead economic and spatial development

Moscow

Singapore

Seoul Tokyo

Shanghai

London

Paris

Localist ethos, federal, close public-private collaboration; local networks of innovation

Sao Paulo Toronto

Mumbai

Globalisation (maturity of competitiveness agenda)

20 1 | Different models and starting points for world cities and nation states Part

Private sector service and project delivery; self-organising business and civic leadership; selective engagement with other cities and surrounding region

Hong Kong

New York

High

6 Economic specialisation and

sector leadership

World cities play specialised economic roles in their national system of cities and the global system. The size, diversification and path dependency of a world city’s economic base presents different challenges for its national government – in terms of skills, space needs, types of investment, and a wider eco-system of policies and business climate.

Financial services has been a key driver of world cities’ global orientation in recent cycles.

Every world city has a disproportionately large financial and business services cluster compared to the rest of its nation state (see Table 4), but some leverage their finance specialisation more than others. Hong Kong’s finance and business cluster is 12 times as large as its share of the Chinese population, for example,

and Moscow’s factor increase is nearly 5.

At the opposite end of the spectrum, relative concentrations in Seoul and Tokyo are much lower (1.3-1.5), because of their more diversified roles in technology, R&D, chemicals and other sectors.

On the other hand, world cities vary in the extent to which manufacturing is still part of their economy. This indicates the different stages they are at in cycles of industrialisation and de-industrialisation. Hong Kong, New York, Seoul and London all have a lower share of manufacturing relative to their population size, having made a full transition into a more diversified services economy. But not all established world cities have shed their manufacturing capability. Paris, Toronto and Sydney retain a larger share of the manufacturing economy relative to their size. Meanwhile Shanghai and São Paulo are still industrial powerhouses for their national and continental economies.

Table 4: World cities’ share of national economic output in financial services and manufacturing % of national share of business/financial services sector

Sector size compared to share of population (average = 1)

% of national share of manufacturing sector

Sector size compared to share of population (national = 1)

Hong Kong

6.3

11.99

0.1

0.26

London

44.3

2.02

15.9

0.73

Moscow

38

4.78

13.8

1.73

Mumbai

5.7

3.4

3.5

2.06

New York

11.4

1.91

3

0.50

Paris

40.4

2.15

19.1

1.02

São Paulo

27.1

2.76

21.2

2.16

Seoul

67

1.39

31.9

0.66

Shanghai

6.1

3.47

4.5

2.55

Singapore

100

1

100

1

Tokyo

43.9

1.47

24.2

0.81

Toronto

27.6

1.65

19.2

1.15 21

3

Understanding the world city model and its needs In the current and most recent cycle of global economic growth, national governments have begun to recognise that changes to the status quo are needed to allow world cities to effectively serve their citizens and stay competitive. This recognition has not usually grown organically, but as a result of external catalysts – economic crises, political scandals, environmental disasters, or imminent sporting events. Nation states sense the opportunities and threats associated with the changing centre of economic gravity, or with the integration of large regions (eg. EU, MERCOSUR, NAFTA), and have had to identify new strategies for their world cities to succeed. Six key themes are reviewed below.

1 Global financial competitiveness and business friendliness

Box 2: Opening up a national economy: the Shanghai Free Trade Zone

A sharper awareness of the competitive dynamics between cities, of failed regional policies, and of the unequal effects of globalisation, have triggered a policy response from developed nation state governments (e.g. France, Japan, Korea), to make their world cities more competitive. Many emerging world cities require their national governments to get the business basics right in order to become major international hubs. Their future competitiveness in higher value knowledge sectors depends on government managing inflation, and improving public sector efficiency, legal certainty and transparency, in order to incentivise the private sector to invest and take the lead on key projects. A national inquiry into Mumbai’s future finance competitiveness over ten years ago identified exactly these shortfalls, but little progress was then made. Others have made bigger strides, including by altering the ownership and management structure of key national assets if there is a strong case to do so. In São Paulo, the privatisation of Guarulhos airport for R16bn ($6bn) in 2012 provided a signal in Brazil about the potential of deregulation to raise the investment rate and increase the productivity of existing assets.

Shanghai’s new 29 km2 Free Trade Zone, established in 2013 on the city’s outskirts, is an example of national government collaboration with a world city to gradually open and further liberalise the national financial system.12 The Zone, devised by the municipal government but whose final approval was given by central government, is a testing ground for commodities trading, liberalising interest rates and increasing the yuan currency’s role in global transactions. Foreign companies can now register in the Zone to invest in sectors such as oil exploration, motorcycle production, shipping and property, and mainland firms are also using the Zone to make overseas investments.13 The Free Trade Zone illustrates the attempts by Shanghai’s leadership – both its Mayor and its Party Municipal Committee – to complement the city’s modern infrastructure ‘hardware’ with the ‘software’ to become globally competitive – customs procedures, logistics, exchange controls, taxation, dispute resolution, and simplified regulatory oversight. President Xi Jinping and Premier Li Keqiang have personally endorsed the zone, and central government ministries want Shanghai officials to move forward boldly yet safely with the institutional innovation.

22

2 Supporting research and innovation

With technology and science led industries now in a rapid phase of global integration, many more world cities are seeking to become science and technology hubs. National and State Government play a key role in deciding where the facilities that underpin such hubs are located. National research grants and scientific institutional decisions can enhance world cities’ technology and innovation ecosystems.

Government designations of major new innovation sites – such as Paris-Saclay, which been accelerated by the government naming it an ‘Operation of National Interest’ – are often a catalyst to opening up new parts of the city into the spatial economy.

Toronto is one world city that has really benefited from successive federal research funding programmes. Launched in 1989, the federal Networks of Centers of Excellence (NCE) programme has created partnerships at the centre of some of Toronto’s high-tech clusters – notably clean energy, ICT and life sciences. At the same time the Canada Excellence Research Chairs (CERC) have helped attract international researchers. The Canadian Institutes of Health Research, the Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council provide a large slice of teaching hospital research funds.14 Since 2006, federal government has invested more than C$11bn ($10bn) in science, technology and innovation,15 and recent funding schemes support Toronto’s cutting edge research in neuroscience, cancer and stem cells.16 Federal funding streams have ultimately helped turn Toronto’s high-quality universities and research institutes into world-class strengths.

Given bureaucratic caution in delivering de-regulation, patient partnership and risk-sharing is needed between the municipal government and the departments represented on the State Council to ensure the experiment is carried off effectively. A clearer set of future roles for state-owned enterprises are also needed, with capital expected to be re-directed towards new advanced manufacturing and service sectors, as well as quality of life investments. City government must present compelling cases for change to the central bank, ministry-level regulators and politicians.

If Shanghai’s zone can prove successful, it is expected to become a blueprint for others on the mainland. The central government faces the challenge of managing city and investor expectations as demand to create more low-tariff zones increases around the country.

Shanghai will rely on it to ensure that shortterm investor demand is matched by strategic decision-making about which locations to develop and how. In the meantime, Shanghai’s leadership is collaborating with Shenzhen to share learning about trade zones, urban management, and international standards.

23

3 Support for hosting

global events

Box 3: Government collaboration and global events: Waterfront Toronto and the Pan Am Games

Global events are once-in-a-generation opportunities for world cities to raise their profile, alter their brand and bring forward infrastructure development. The highest profile events – such as Olympic Games and football World Cups – focus global attention on world cities’ physical modernisation and cultural vitality. Many other international events –such as political assemblies, sporting championships, and regional multi-sport games – offer opportunities for cities to interact with new ‘customers’ and enter new markets. For events to be branding successes rather than failures, they require close co-operation with national governments to ensure infrastructure projects are completed on time, technical standards are met, and visitor experiences are positive.

Waterfront Toronto is a unique governance experiment in Toronto, in a system where no single level of government holds enough authority or resources to deliver redevelopment by itself. It consists of a joint federal-provincial-municipal development corporation that was established in 2001 to transform Toronto’s waterfront in preparation for hosting major events. The three tiers of government established Waterfront Toronto, in a decision made permanent by legislation of Ontario province.

Rather than grant the new corporation control over land assets, a multi-year funding plan was agreed in 2005 that earmarked C$500m from each level of government to invest in an 8km2 area of brownfield contaminated land that had been neglected for over a century.17

Major events have been catalysts of infrastructural transformation in many world cities. The 1988 Olympics and 2002 World Cup in Seoul, the 1998 World Cup and 2016 European Championships in Paris, the 2009 Shanghai EXPO and the 2012 London Olympics, all provided rare opportunities to regenerate ex-industrial areas in partnership with national agencies. Such events are often decisive catalyst in the transformation of a part of a world city, creating new capacity for growth and urban restructuring.

At the same time they are identity-building exercises that signal new facets of the city’s offer. Most importantly, they are an important means through which investment in the world city can become a national priority for affixed period of time, and the fixed deadlines are often important in unlocking and accelerating key infrastructure and other investments.

24 1 | Understanding the world city model and its needs Part

Waterfront Toronto has effectively combined the financial resources and oversight of the federal government, the province’s authority over housing and land-use, and the local expertise and interests of municipalities. The corporation has had to maintain very regular contact with ministers and leaders at all levels, in order to secure over 80 separate ‘contribution agreements’ with government partners.

This multi-level application and negotiation for funds has given it credibility and largely insulated it from the changing whims of different political leaders, and allowed it to focus on the patient task of building high-quality public space that boosts Toronto’s image as a global city.18 Indeed Toronto’s selection to host the 2015 Pan-Am Games was widely attributed to the waterfront development, which will host the athlete’s village.

Waterfront Toronto has had to overcome many hurdles to become the success story it is today.

Quarterly meetings of the Intergovernmental Steering Committee were suspended in 2009, and high-level intergovernmental dialogue faded.19 Requests for new powers for Waterfront Toronto have not been granted because of inter-governmental distrust, and many projects have been slow to be approved. But despite these setbacks, the co-operation and engage-

ment across the three levels of government has raised expectations that future tri-governmental endeavours of this size could be successful in future. The project continues to receive considerable interest from the responsible federal minister and the federally owned Port Authority. $1.3bn of shared funding has yielded over $3bn in economic output,20 and Waterfront Toronto is now seeking another 10 years of funding worth over $1.6bn.21

Fig.4: The range of institutions collaborating on Toronto’s waterfront Department of fisheries and oceans

Ministry of infrastructure Houses provincial waterfront secretariat

Responsible for fish habitat protection and pollution prevention

Federal

Toronto port authority Government enterprise; owns/operates Billy Bishop Toronto City Airport, the Port of Toronto, and Outer Harbour Marina

Provincial

Departament of finance Houses federal waterfront secretariat, known as the Toronto Waterfront Revitalization Initiative

Infrastructure ontario Crown corporation; oversees major project procurement and delivery

Toronto and region conservation authority Arm’s lenght agency; manages regional watershed

Municipal City planning division

Toronto transit commission

Responsible for community planning and urban design

Arms lenght agency; operates public transit system

Toronto port lands company

Waterfront secretariat

Municipal corporation; manages city properties in the Port Lands

Dedicated waterfront office; reports to Deputy City Manager

25

4 Open Labour Markets

5 World Class connectivity

The operation of international firms in globalised clusters that serve markets in many countries from a single location within a world city, produces requirements for labour markets that are open to international talent. Most world cities therefore need to be within a country has some degree of open-ness to international workers and also to have universities and other specialist institutions that are able to recruit students internationally.

World cities have to pay attention to both internal and external connectivity. External connectivity is critical to play the international roles required and expected of world cities.

Ports, airports, high speed trains, logistics platforms, motorway networks, and all aspects of digital connectivity, are critical competitive assets to internationalising cities. At the same time, rapid population growth, and the imperatives for managed density, and re-ordering of land uses that goes with internationalisation depend upon excellent internal connectivity, especially public transport. The finance and agreement of public transport is a pressing issue in many high demand world cities. Metro, bus rapid transit and light rail projects provide relief from congestion, and in many cities are viewed as the major mechanism to stimulate development patterns that are less dependent on city centres.

Many world cities have difficulty staying open to talent over multiple cycles, but Singapore ‘s unique government arrangement has enabled it to leverage the support and control of key institutions to develop a world-class business climate. The city-state’s effective management of trade unions and wages has allowed it the unusual luxury of managing its own labour market to keep wages more competitive at each successive stage of internationalisation.22 It has also been able favour global firms and state-owned-enterprises and maintain focus on economic objectives.23 Its ability to intervene in social policies – usually a role left to national governments – has created a highly educated urban workforce well prepared for new cycles of growth. To ensure an attractive labour force for global firms, Singapore has invested heavily in education at all levels, both tertiary and skills-based curriculums, and closely monitors skills and crime levels to optimise its business environment as the city moved into high value services and manufacturing, and later towards creativity and innovation.24

26 1 | Understanding the world city model and its needs Part

National government financial contributions are often the critical bridge to enabling transport projects to go ahead, but political support is also necessary to deliver projects that are on time and bankable. In one of the high-profile example in established world cities, the French central government appointed a Minister for Le Grand Paris in 2008 to oversee a new €30 bn metro transportation and drive through an agreement with the regional government.

Although the ministerial position was disbanded, the funding envelope for the 200km, 72 station metro system is now tightly linked to Paris’s long-term development. Other national governments – including London and Singapore - have helped their world city improve their connectivity by improving the governance of the transport system.

6 Managing growth

and metropolitanisation The employment opportunities, cultural offer and relative political stability of world cities has created unprecedented demand from domestic and international markets. Rising demand for real estate, from employees and investors alike, presents new and unexpected challenges around housing supply – especial-

ly for younger people – managing land-use, maintaining education and health services, and economic inclusion. The provision of new infrastructure comes on top of requirements to modernise previous generations of urban energy, water, sanitation and disaster management systems.

Table 5: Population and visitor growth in world cities Population growth since 2000 25

Visitor numbers change since 2010 26

Shanghai

+7.5m

-0.6m

Moscow

+2.1m 27

+1.9m 28

SĂŁo Paulo (city)

+1.5m

+0.2m

London

+1.4m

+4.0m

Singapore

+1.4m

+3.7m

Toronto (GTA)

+1.4m

+0.5m

Tokyo (prefecture)

+1.2m

+0.9m

Paris (urbanised area)

+1.0m 29

+2.3m

Mumbai (city)

+0.9m 30

+2.5m 31

Hong Kong

+0.5m

+0.7m

New York City

+0.4m

+2.4m

Seoul

-0.4m

+2.6m

27

Box 4: Addressing the housing challenge: Singapore

Housing challenges are especially acute in land-scarce cities such as Hong Kong, Mumbai and Singapore, but are also very serious in established cities such as London and New York.

While cities such as Singapore have managed to anticipate and push through housing supply at scale through integrated approaches (see Box 4), more fragmented metros such as São Paulo have made slower progress. In São Paulo, for example, the central City has only recently begun to benefit from federal mass social housing programme Minha Casa Minha Vida, after several years of low participation.

The rapid growth in immigration (and in visitor numbers) also creates challenges of social cohesion and labour market integration in cities such as Toronto and New York. These open world cities have an under-employed (and sometimes undocumented, but often skilled) base of foreign labour that is ignored or excluded by national policies, and so requires innovation and investment at the city level.

Supporting world cities with these challenges and opportunities is a critical role for national governments. It requires the bending of national frameworks towards the needs of world cities, and many of the practical projects now being undertaken fall into these themes and goals.

28 1 | Understanding the world city model and its needs Part

Singapore has tackled the housing challenges associated with being a successful world city better than almost any other. Only 9% of Singaporeans lived in public housing in 1960, but this figure has risen to a remarkable 82% today, even more impressive considering the city’s land scarcity. Its Housing and Development Board (HDB) is a government agency that has been dedicated to supplying affordable housing at required scale for the city-state’s growing population. The Board has been given extensive powers to acquire and develop land, and has its goals tightly integrated with wider government (eg. Ministry of National Development) objectives on density, public transport and liveability. It has been able to take ownership of land at pre-development value, in order to ensure that the public sector can capture the development gains that come from infrastructure upgrades.

The Board’s key advantages compared to other world cities are its capacity to leverage scale, and to control procurement, licensing and permitting processes. It is also supported by a city government savings account that allows residents to contribute to and withdraw from a Central Provident Fund to buy homes on long leases.32 While home ownership has declined in many established and emerging world cities, Singapore’s relentless focus on implementation has enabled it to grow home ownership from 59% to 91% since 1980.33 This achievement has also given the city government legitimacy and popularity to initiate other programmes to prepare Singapore for new cycles of globalisation.34

4

Improvement and expansion of governance in world cities Nearly always in the evolution of a world city, existing governance arrangements come to be insufficient to sustain and develop their lead roles within a fast-moving global economy. Often local government institutions are well-run and have acquired professional know-how, but their sound policies may be hampered by the lack of alignment across the functional economic space. Governance fragmentation and duplication is most acute in Mumbai, but is also very visible in Paris, São Paulo and Toronto. Even in cities where powerful citywide governments are well-established, it is no easy task to organise investment, institutions and policies to solve problems at the right scale. The alignment of investment, policy and institutions is complex but imperative.

1 Enhancing leadership

and institutional frameworks World cities have seen their nation states attempt to strengthen their governance systems over the past two decades. The Korean government cabinet had appointed the mayor of Seoul until municipal self-government legislation in 1991, and Seoul’s first directly mayor entered into office in 1995 as the government began to promote Seoul as a world city as part of an official policy of segyehwa, or internationalisation. Similarly, after a hiatus of over a decade

without a citywide government, in 1997 Britain’s New Labour government agreed to create a Greater London Authority and a directly elected Mayoral system. In federal systems, state or provincial governments may take the lead to enhance governance arrangements. In 1998, the provincial government’s City of Toronto Act amalgamated the city’s six municipalities and gave it responsibility to run public programmes.

Most recently, in November 2014 Maharashtra’s Chief Minister proposed a new senior ‘CEO’ co-ordinator of Mumbai’s city agencies.

Table 6: Recent ‘elected mayoral systems’ created or expanded by national government City

Year created

First Mayor

Paris

1977

Jacques Chirac

Moscow

1991

Yuri Luzhkov

Seoul

1995

Cho Soon

Toronto (amalgamation)

1998

Mel Lastman

London

2000

Ken Livingstone 29

World cities can survive even fundamental changes to their institutional framework if the governance deal is well designed and builds in flexibility for the future. In the most radical case, Hong Kong has benefited from Chinese central government commitment to a “one country, two systems” model agreed in advance of independence in 1997. For the most part the government has kept its promise to uphold the mandate, and treat Hong Kong as a ‘special administrative region’ – a separate country from an immigration and currency standpoint, with more liberal media laws. Beijing's interpretation of electoral provisions in the Basic Law, and later its commitment to universal suffrage by 2017, provided some certainty about the process of constitutional reform, in a way which did not hinder flows of foreign invest-

ment into the city. Contrary to many predictions, Hong Kong was able to expand its international influence after 1997, because of the success of the model and ongoing integration with the Pearl River Delta. Its status as an autonomous region has been highly attractive to foreign investors seeking access to the Chinese market without the uncertainties of Chinese corporate law. In 2014, the city has witnessed an upsurge of debate on the long-term future of this unique model, in light of Beijing’s desire to retain its role as gatekeeper to the city’s leadership. This has yet to critically undermine Hong Kong’s unique assets as a entry-point to the second largest national economy in the world, but the city will require compromise on electoral reform and an open dialogue of propositions about the city’s future.

Table 7: Empowerment of city/metropolitan government City

Leadership structure

№ of local governments Responsibilities and fiscal powers

Hong Kong

Chief Executive; Executive Council 1 assist policymaking

Responsible for all affairs except security/defence. Full legislative powers and control of annual operating expenditure of HK$325bn ($42bn) 35

London

Two-tier, directly elected Mayor/ Greater London Authority

33 boroughs

Transport, police, planning, promotion and economic development; Only 7% of tax paid retained by Mayor and boroughs

Moscow

Executive Mayor and 35-member city council. Federal city status, with powers of a regional government

12 districts (okrug) and 146 smaller territories

Full service delivery roles. Donates 40% of tax revenue to federal budget

Mumbai

Fragmented between Maharashtra Chief Executive, Municipal Council of Greater Mumbai, MMRDA, and 15+ other councils and corporations

9 municipal corporations and 8 smaller municipal councils

Institutions lack defined functions; severe problems bringing forward infrastructure investment – e.g. 40% of MMRDA budget unspent due to project implementation delays 36

30 1 | Improvement and expansion of governance in world cities Part

City

Leadership structure

New York Directly elected city-wide Mayor; public corporations (MTA, Port Authority)

№ of local governments Responsibilities and fiscal powers

1 in city; 31 counties in region

Paris

City of Paris Mayor, Paris Regional 20 arrondissement Council and President; (future mayors in central Métropole du Grand Paris) City; 7 other departements

São Paulo

Municipal Mayor; metropolitan governance fragmented into sub-regional arrangements

Most core services, including education; $75bn budget, 70% self-funded, $27bn of non-property taxes37 $11bn City budget (transport, affordable housing), and $6bn regional budget (transport, schools). Fairly high local tax raising and retention. New regional ‘green bonds’38

39 municipalities/ Central municipality has full public mayors in metropol- service delivery roles and is a leader in itan region fiscal innovation. Lack of metropolitan management of key systems; major fiscal outflows and debt repayment challenges

Shanghai Dual structure – CCP municipal secretary, and city Mayor. Small number of well co-ordinated bodies and development corporations with close links to the CCP

16 -17 districts and Land sales have enabled very high 1 county spending on fixed assets, new tools currently under development

Singapore

Cabinet of Singapore, led by elected Prime Minister, answers to 87 Parliament MPs

No local governComplete fiscal and decision-making ment; advisory autonomy bodies based on 23 electoral divisions

Seoul

Metropolitan government and directly elected Mayor

25 autonomous districts (gu)

Tokyo

Tokyo Metropolitan Government 23 self-governing governs 13 million person prefec- wards, and 26 ture; powerful elected Governor suburban ‘cities’

Direct taxation in 23 wards; corporation, residents and property taxes

Toronto

Directly elected Mayor and 44-member City Council

Bus services, social services, police; $9bn operating budget, 40% funded from property tax39

Single-tier municipality; 4 regional municipalities

Education, crime, welfare and infrastructure; some special fiscal rights but highly centralised revenue collection

31

Box 5: Filling the metropolitan governance deficit: the new Paris Métropole

Fig.5: Paris Metropolitan Area

Paris’s governance is unusual because, although the entire urbanised area is inside the boundaries of the region, it has had no citywide authority that addresses the metropolitan scale. The current framework features the small central municipal département of Paris (2 million), the large regional council that has been in existence for 40 years, and voluntary co-operation between the many other municipalities. The central city Mayor began the process of engaging with the surrounding départements over a decade ago, but since 2007 the activity of the national government has catalysed the creation of a new metropolitan government structure, La Métropole du Grand Paris. In 2014, a new national law (MAPAM) grants metropolitan status to 12 French cities, adding a whole new institutional layer to the system in Paris.

Pre-1964

The new métropole is scheduled to be in place in 2016, incorporating the three surrounding départements into a 6.7 million city. The National Assembly still has to choose between a highly empowered Grand Paris Council, or a more federal system with strong inter-municipal relationships, but the new entity is set to have its own taxation powers and powers for planning, land use, social housing, and economic development. The challenge for the new institution is to coordinate investment better than Paris has been previously able to, and to use financial instruments to steer development wisely.

At the same time, national policy changes are increasing the role of the Paris regional council to stimulate much-needed economic development. Up until now, business development and clustering in Paris has been unsystematic, but under new plans, national civil servants will be moved to regional councils to integrate their capabilities to support business growth. This simplification of leadership in economic development is allowing the Paris

32 1 | Improvement and expansion of governance in world cities Part

Seine

Seine-et-Oise

Seine-et-Marne

Hautsde-Seine

1968-2016 Val-d’oise

Yvelines

SeineSaint-Denis

Paris Val-de-Marne

Seine-et-Marne

Essonne

The 46 surrounding communes that may join the metropole

Post-2016 Val-d’oise

Yvelines

Seine-et-Marne

Essonne

The new Paris Metropolotan Area (124 communes)

Region to prepare an economic and innovation strategy in 2016 to be more effective and provide confidence to companies and investors.

The approval of the regional council’s new masterplan integrates the Grand Paris project into its framework.

Fig.6: Federalised/decentralised nations Empowered city govt.

Singapore Hong Kong

New York

Tokyo

Empowerment of city government

Moscow Shanghai Seoul

London

Toronto

Sao Paulo

Paris

Mumbai

Disempowered city govt.

Centralisation of nation state

Federalised / decentalised nations

Figure 6 shows the mixed correlation between centralisation of national political systems, and the empowerment of city governments. In centralised nation states such as Russia, Japan, Korea and China, their world cities often have fairly empowered city or metropolitan government structures, with a wide span of control, access to a range of fiscal tools, and favourable net fiscal flows. Often these advantages were granted after periods of political or social upheaval. But centralisation is no guarantee of an empowered world city government. London has limited ability to finance projects or to enforce its strategic ambitions, and Paris has no metropolitan framework, although in both cases the situation is changing.

In many decentralised nation states, world cities have not acquired a powerful institutional self-governing structure. Paternalistic relation-

Centralised nations

ships with state or provincial governments, and a lack of political or popular will to recognise metropolitan-scale problems, mean that cities such as Toronto, S達o Paulo or Mumbai have sprawled, fragmented, and are still unable to address the next phase of their evolution as a world city comprehensively. Sprawl and complex governance are also visible in New York City, but in its case leaders have managed to gain control over a large and diversified set of taxes, and have set high standards of bold and innovative city management.

Figure 6 indicates that inherited political systems are not binding for world cities. Their capacity to break out of traditions that become less favourable over time, and to steer more positive development paths, is also linked to their dialogue and advocacy with other tiers of government.

33

2 Governance systems

in world city regions

World cities are growing well beyond their historic borders. As functional economic regions they are experiencing steady population growth which threatens the functionality of existing systems. There are new costs of regional sprawl, growing risks of regional exclusion, and a concern to reduce energy consumption.

In most cases, cities’ ability to address these challenges are hampered by leadership and co-ordination failures between the city and the region that have been overlooked by national departments.

Some national governments have begun to take an active interest in their world cities’ spatial growth and regional governance needs.40 At the boldest end of the spectrum some governments have increased the geographical boundary of their world city. This has been taken in Moscow, where the national government has taken the unprecedented step of merging the city with sparsely populated territories southwest of the capital. This move to create ‘New Moscow’ effectively doubles the size of the city, and provides potentially much-needed room to relieve congestion, with an intention to house 1.5 million people eventually if enough private investment can be attracted. This initiative is long term in nature and builds upon international experience such as Navi Mumbai, which began in the early 1970s, and the development of the New Territories in Hong Kong. Russia’s sovereign wealth fund has already committed to financing half the $8bn cost of the four lane Central Ring Road, while a metro connection is already underway. Although Russian government ministries will no longer be relocated to the new territory, the territorial innovation provides valuable opportunities to overhaul Moscow’s development path dependency and raise standards of living and commuting.

34 1 | Improvement and expansion of governance in world cities Part

Other world cities have a longer history of regional planning but have yet to receive backing from higher tiers of government to build government structures accordingly. Mumbai’s Metropolitan Region Development Authority (MMRDA) is 40 years old, having been created by the Maharashtra state government to plan for expansion beyond the city’s historic peninsula. It has become a highly competent long-term planning body that relies on the sale of land holdings to help finance specific projects. But MMRDA’s powers only extend to planning and transport, and not to other city systems. There are strong calls to finally widen its span of authority and strengthen its mandate to co-ordinate a shared regional vision.

The risk of unmanaged regional growth also looms large in New York. Access to economic opportunity is declining across its ‘tri-state’ region, and investment from New York State and federal governments in housing, density, amenities and rail infrastructure lags behind what is necessary to adapt to New York’s future economy. The region has a highly credible and experienced Regional Plan Association that produces strategies for the region, but the RPA has no implementational authority. Although territorial expansion or metropolitan consolidation are not plausible options for New York, the region needs higher tiers to increase the capacity of its large institutions, especially the Metropolitan Transportation Authority and the Port Authority.

Regional governance for fast growing and large cities is an important imperative to address by higher tiers governments. Where reforms have been undertaken in the past 30 years they are generally perceived as positive. However to remain successful such reforms need to be adaptable and continuous so that the governance can continue to adjust to the changing shape and character of the world city region.

3 Fiscal and Investment Systems Only Singapore and Hong Kong among the 12 cities have entirely independent and self-sustaining revenue sources. Even a comparatively empowered city government such as New York, which raises 71% of its budget through its own funds, is reliant on $12bn of state government grants for areas such as school and pre-school education, and on $8bn of federal government grants.41 Other world cities, even those that have gained some improved taxing powers, are much more restricted and struggle to raise the finance both to modernise their city systems and cope with operating costs.

There are a number of dimensions in which world cities are still fiscally disempowered: —— Net fiscal outflows. World cities invariably raise a greater sum of total tax revenue for the state than is re-invested by central government allocations, despite local government obligations to own and maintain infrastructure.

—— Competing for ‘trophy’ projects.

In centralised systems where central government collects or controls a clear majority of tax revenues, world cities often have to ‘bid’ against other cities for financial support for large glamorous projects that will attract government interest and attention. In London, this process began with the regeneration of its Docklands in the 1980s, and continues to this day with projects such as Crossrail, Crossrail 2 and the 2012 Olympics.

The advantages of one-off disbursements for prestigious developments tend to be offset by uncertain time-frames and the constraints on preparing for future growth. A well-backed

London Finance Commission was launched in 2012-13 and made a persuasive case for expanding London’s share of held taxes from 7% to 12%.

—— Debt and borrowing restrictions. Some world cities are trapped in highly unsatisfactory debt repayment situations that squeeze their room to invest in future infrastructure items. São Paulo, for example, has been repaying debts to federal government at rates of up to 9% p.a. plus inflation. Although interest rates were finally reduced by the Senate in November 2014, its scale of debt disqualifies it from seeking many other sources of debt finance.42 In this and other cases, the world city is not treated differently in recognition of its unique role.

—— Inelastic taxes. Many established world cities depend on fairly inelastic property taxes that do not rise in accordance with increased spending demands. The costs of social housing and housing supply more broadly has grown, but national governments in the U.S., Canada and the UK have largely withdrawn from this area.

World cities are active in debates about fiscal and investment systems with their national and state governments. They are exploring both the creation of new taxes and different ways to share existing taxes (London, Paris). They are pursuing new or increased forms of debt financing and a new generation of PPPs (São Paulo). They are experimenting with municipal bonds (Shanghai). And they are developing new mechanisms such as value capture finance, and tax increment financing (Toronto, São Paulo, Moscow).

35

Many, if not most, world cities require a higher investment rate and greater investment capacity and these might be achieved through increased fiscal competences and new discretionary tax instruments, and/or the right to retain larger shares of tax revenues. Not all of these challenges can be solved by a simple national government reform, but many solutions require a national-level dialogue that rejects a hostile, ‘zero-sum game’ approach to cities’ fiscal contributions, and examines opportunities for greater revenue autonomy. World cities’ ability to make progress on achieving a fairer or more advantageous fiscal arrangement depends on a better grasp among leaders and the public about the best level of fiscal autonomy.

Summary Governance reforms and upgrades, at citywide, metropolitan and regional levels, are an important ongoing task for nearly all world cities. They can have a significant impact on world cities’ capacity to build a unified vision, to raise their international profile, and to unlock new development pathways. Larger and still fast-growing world cities urgently need integrated governance and to re-align institutions with new geographies, while others with more settled spatial patterns often need more extensive sources of finance and fiscal autonomy.

The experience of London, Paris and even Hong Kong shows that national governments are sometimes willing to agree new governance for individual cities. In general however, preferential treatment for one city is politically difficult to achieve, and also may have long-term ramifications in terms of broader inter-city co-operation. Leaders in many world cities are realising that is better to ask for governance reform as part of wider sub-national governance reforms (see Section 5.4).

36 1 | Improvement and expansion of governance in world cities Part

5

National policies and frameworks The ideal scenario for world cities and nation states is a system of cities that can adjust so that each can benefit from changes brought about by globalisation. World cities and other cities rely on national frameworks and policies that are designed to help all cities to succeed, and which optimise the specific combination of cities within its territory. For such frameworks to emerge, national government policies must first recognise the mega-trends of urbanisation and globalisation, and then create the conditions for institutions to act in the longterm interest of cities rather than short-term political imperatives. Many national policies and regulatory/institutional frameworks are unintentionally anti-urban; they encourage sprawl or fragmentation, or they incentivise unhelpful internal competition, or they place legal and other rigidities in the way of cooperation of at the local level. Most state and national governments operate with powerful sectoral ministries that may be highly competent but have the unintended consequences of militating against cross sectoral and integrated solutions at city and metropolitan level.

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1 Recognition of urban and

metropolitan role in economy and prosperity A common theme for world cities is that national governments do not fully recognise the role of cities in their country’s development, especially their economic role, as the primary engines of prosperity in the 21st century. Until recently, most have treated their country’s urban challenges as welfare and safety problems rather than as priorities for strategic economic attention. There is also a tendency not to trust local authorities to act appropriately or decisively. Periodic changes to the macro-economic framework may have helped globalising sectors in world cities, but without the systems (land-use, energy, governance) in place to support and manage the growth that followed. When national governments fail to provide direction or confidence, this often leads to disjointed narratives, and a tendency to be reactive rather than proactive.

There is no doubt that national governments are becoming more alert to the needs of its cities, and no longer favour an entirely equalised, ‘spatially blind’, approach:

aims to establish mechanisms for integrated development of metropolitan regions, and tools to implement a national policy for regional planning.

These programmes and policies are very welcome for having raised the profile or investment rate in cities. Most however, do not necessarily ensure effective implementational capacity in its major cities, or simplify the complex relationships and processes between national and city governments. Initiatives are not a substitute for a clear spatial strategy, or for genuinely improved institutional mechanisms for government co-operation and delivery.

2 Managing negative externali-

ties and the system of cities

The experience of these 12 cases illustrates the many ways in which world cities provide benefits of to their nation states.

—— Korea has approved commercial development in restricted ‘green belt’ areas of its secondary cities to catalyse much-needed investment.

In emerging nations, they have played a decisive role in the transformation of national economies. In the case of cities such as Hong Kong and São Paulo, financial expertise and trade and export management capabilities facilitate mass employment of millions of workers in manufacturing industries. World cities are intermediaries in a huge share of nation states’ external trade and foreign investment. They manage nations’ financial risks, propel domestic capital internationally, and help supply international capital for new cycles of investment and growth. At the same time their experience and exposure to international practices help raise domestic company performance, governance and productivity. The positive spin-offs of world cities may include:

—— In Brazil, a Ministry for Cities was established in 2003, and in 2014 a law is currently being discussed at the national congress that

—— Their density of firms and workers encourage the sharing of infrastructure, services and information around the country.

—— France’s 2014 MAPAM law grants a special statute to the three largest cities (Paris, Lyon, Marseilles), and also grants métropole status to nine other cities, effectively acknowledging their metropolitan character.

—— In India, the JNNURM investment programme was introduced in 2005 as a demand-driven approach to cities for the first time, releasing large sums for urban projects.

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—— Their tax yield from high-value industries (finance, ICT), when re-distributed, is vital to raising the standard of living in lagging regions.

—— The fostering of supply chain development regionally and nationally.

—— Their global firms help domestic firms learn about new techniques, products and processes.

—— Spending by the global functions increases demand for national goods and services – including in medicine, retail, education and construction.

—— They are gateways to the rest of the country for tourists and visitors who otherwise would not visit, and connectivity hubs providing access to transport networks.

—— They are ‘escalator regions’ for upskilling national workers who then take their knowledge and proficiency to secondary and tertiary cities.

—— They have high levels of entrepreneurship and can diffuse new firms and sectors into the national economy.

—— In emerging countries, they reverse ‘brain drain’ by attracting ‘returnees’ who had previously left to work in high-end industries in North America and Europe.

—— They provide important ‘business brands’ for nations by being identified as leading business cities.

The (perceived and actual) negative externalities of having a world city As we have detailed, national governments have mostly become more ‘open’ to international economic flows, many of whose benefits accrue to their world cities. After one or two cycles of exposure to globalisation, national government, political representatives, national media and national electorates often observe a number of costs or externalities that appear in world cities or in the wider nation:

—— Higher per capita expenditure on infrastructure. World cities’ capacity to compile investable projects can mean that national government part-financing of projects happens more regularly than in other less bankable cities. Even when rail links to other cities are proposed or developed, there is concern that this merely serves to increase the magnetism of the world city at the expense of others.

—— Political influence on and support national central government. World cities are seen to receive a lot of help after serious economic or security setbacks (e.g. financial bail-outs).

—— Over-concentration of financial and business services sectors, as agglomeration continues to intensify. This has also begun to occur in other sectors that historically have been more dispersed (e.g. digital, creative industries).

—— Government monetary policy that is too oriented around the world city because of the concern to head off house price booms, to the detriment of the rest of the country. The unequal structure of the housing market in general is viewed in some countries to be a deterrent against labour migration between different regions.

—— Easier access to finance, because of clusters of banks and venture capital firms, is seen to give world cities’ small and growing firms undue advantages.

—— ‘Brain drain’. Many world cities have been temporary ‘escalators’ for upwardly mobile talent from its country’s regions, but there is concern that a smaller share of highly skilled talent now returns to lower-income regions, intensifying the skills gaps.

—— Insufficient fiscal redistribution. World cities generate high proportion of national income tax and in nearly all years are net donors to national government revenue, but there is a perception that net fiscal outflows are still not enough to tackle the ever-growing welfare needs in other regions.

39

The extent to which these negative externalities are real or perceived is widely debated.

What is clear is that these concerns pose a major challenge to the viability of the world city model. Leaders in world cities will need to make the case that some of the externalities and perceived biases can be amended with the right policies and intervention, without the nation state needing to reject the world city model entirely. They may also have to admit that some systemic advantages are hard to change but are than offset by the benefits of a world city to economic vitality. Nation states may need to accept that world cities will increase inter-regional disparities, and even alter the spatial character of a nation for good. The task of world cities is to build collaboration and alliances that can manage and leverage these changes for the long-term national good.

World cities also have challenges that arise from the performance of the second-tier and smaller cities in their nations. The larger British cities outside London have regenerated physically after industrial decline but have struggled to achieve social and economic regeneration. French cities have been more successful but have not grown access to economic opportunity in their suburbs. Korea’s six other metropolitan cities struggle with population decline, a narrow economic base, and unappealing city centres. China’s largest coastal gateways are rapidly entering a new phase of innovation, and other suburban and inland cities are also growing, but the large wealth and lifestyle gap with smaller cities is set to result in higher net fiscal outflows from its globalising cities.43 In most countries reviewed, relations between leaders of smaller cities and the globally oriented cities are strained or non-existent.

The performance gap between the world city region and other national regions is perhaps most visible in Moscow. Few other Russian cities, apart from St. Petersburg, have been able to build complementary roles in the urban 40 1 | National policies and frameworks Part

system, and most lack the capacity or resources to shape their own longer term investment and development needs. This imbalance risks causing unsustainable congestion effects in the capital. In the absence of a clear national regional development strategy, Russian cities need to build their own agenda for co-operation and knowledge-sharing. Moscow has become an active leader in the Central Federal District, helping to restore regional co-operation and investment flows between itself and other regions.

3 Collaborative governance be-

tween world city and nation state The activity of governing world cities is and will continue to be a shared endeavour, involving two, three or even four levels of government.

Substantial and active co-operation between the city government and ministries of the national government is usually a prerequisite to a world city’s resilience and successful adjustment to change.

Many national governments take a direct ministerial interest in their world cities, monitoring developments closely and making regular policy adjustments. Often periods of engagement are personality-led. Canada’s last two federal ministers of finance, for example, have also been responsible for the Greater Toronto Area. In Hong Kong several members of China’s 7-member Central Standing Committee have direct experience with the city, and are engaged with a high-level working group that oversees city affairs. Current senior Party officials have strong links and experience with Hong Kong’s business and political communities. Shanghai World city mayors are vital to getting city, national and state/province governments to talk productively about city needs. They champion funding models,

—— New institutions. World cities have created new In 2013 Hong Kong established a Financial Services Development Council as a senior cross-sector advisory body that explores new opportunities associated with Chinese financial reform, and its proposals are used in negotiations with central government authorities.44 This extends existing efforts from banking and accountancy associations to engage with the State Council and China’s financial regulators to defend Hong Kong’s interests and advocate for improve practices.

—— Business leadership. The most advanced business leadership groups lobby state or federal governments intensively for political reform and financial support. They help build a shared recognition that world cities need to be co-ordinated across their entire urban region. Toronto’s regional Board of Trade

has become an influential opinion shaper on business and public policy issues, and is an active advocate for economic development, transportation infrastructure and regional governance. In London, the 20-year old London First has good channels of communication with central government and urges the national tier to be bold and decisive on infrastructure hardware and openness to emerging markets.

—— Civic coalitions offer an additional source of leadership in world cities and lobby higher tiers to recognise the environmental and cultural needs of vibrant world cities. Toronto’s CivicAction and New York’s Regional Plan Association are examples of credible civic institutions that use their research and networks to advocate for short-term reform and long-term strategy.

Table 8: Channels of communication and advocacy between world cities and national governments Relationship and dialogue with national government

Role of business and civic leaders

Hong Kong

Chief Executive builds trust between electorate and Mainland government. Senior CCP officials have experience in city; HK Legislative Council builds inter-city networks, subject to approval; new Financial Services Development Council advocates with central govt.

Accountants and bankers dialogue with China Banking Regulatory Commission, People's Bank of China, the State Council, and Ministry of Finance, to defend financial sector interests.

London

Charismatic Mayor has platform and profile to speak for the entire city; usually benefits from political alignment; long-term infrastructure plan to highlight finance needs; new alliance with secondary cities.

London First has channels of communication with central government and advocates on Crossrail 2, airport expansion, China visas, housing supply; national arts and cultural institutions make economic case for funding support.

Moscow

Strong, mutually supportive relationship, fostered through high-level leadership networks.

Business elites have sponsored key projects such as Skolkovo Management School and Innovation District.

Mumbai

Limited relationship; Maharashtra Chief Executive is key point of contact.

Bombay First makes the case for de-regulation and investment to make Mumbai more liveable and competitive.

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Relationship and dialogue with national government

Role of business and civic leaders

New York

High-profile Mayor has direct access to lobby for better policy on immigration, gun control, terrorism etc; ad-hoc alliances with other bigcity mayors.

Important roles played by Partnership for New York City, Real Estate Board, and Regional Plan Association

Paris

Leaders and agencies in central City government; complex negotiation with Ile de France regional council; consultation with expert planning agencies.

Chambers of commerce work separately to advise on strategic processes; emerging public-private model at regional council level.

SĂŁo Paulo Modest but improving; shared working on demonstration projects; stronger informal networks as many Ministry of Cities staff are ex-members of municipal government.

Shanghai

Emerging business leadership makes investment case to adjust fiscal model, and marshals a business-friendliness agenda.

Strong personal connections between city May- Limited. or, CCP municipal party chief, the State Council, and central ministries; many city officials graduate upwards

Singapore Fully integrated city and national government.

Limited.

Seoul

Mayor advocates for greater fiscal and political autonomy. Negotiations with Ministry of Security and Public Administration, on devolution of powers.

Limited.

Tokyo

Small role, mainly via Chamber of Commerce, major New Governor Masuzoe a powerful advocate and co-operative relationship with Prime Minis- firms and state-owned companies; growing in the ter Abe. Research Institutes provide evidence on lead up to 2020 Olympics. competition and pro-globalisation approach.

Toronto

Mayor champions funding models for infrastructure to upper tiers governments; Federal Minister of finance also responsible for the Greater Toronto Area; Consider Canada City Alliance collaborates with federal government on trade missions.

42 1 | National policies and frameworks Part

Toronto Region Board of Trade, Canada’s largest urban chamber of commerce, lobbies federal government intensively for money for transport and immigrant training; Greater Toronto Civic Action Alliance lobbies on immigration, green space, R&D, strong links with new Mayor.

4 Collaboration between world

cities and other cities in their nations

Leaders in most world cities recognise that collaboration with other large cities in their nation states can help make a more powerful case for national reform. For these reasons we observe several new or enhanced alliances and networks of cities at national level. National legislators in several countries are discussing (eg. Brazil, U.K., India), or have approved (e.g.

France, Canada), reform that involves all of its major metropolitan areas. Most nation states do not have an organisational structure through which large cities can put forward their needs to higher tiers of government, even though they share overlapping challenges and needs. Major cities and regions ally on housing and infrastructure (e.g. Brazil’s ConCidades), decentralisation reform (e.g. Japan’s Forum for Consultations), and economic development (e.g.

Consider Canada City Alliance).45

Box 6: Building collaboration and opportunity with national cities: London and Hong Kong Perceptions of London’s unfair advantages in the UK system are fuelled in part by the unique under-performance of England’s secondary cities. Only one of the eight English ‘Core Cities’ (Bristol) has a per capita output above the national average, a rare situation among developed nations. Despite the potential for deep division, London has learnt to build alliances with these second cities. In 2014, the Mayor of London and the London boroughs have united with the nine UK Core Cities for the first time to call for changes to the current government finance formula.46 Advocacy from the Core Cities often now takes place in London with the capital’s direct support, and leaders of these cities reject an easy ‘anti-London’ position, on the basis that additional freedoms for all cities is the best route to unlocking their economic potential.

In 2013, Hong Kong formed a new Consultative Committee on Economic and Trade Co-operation to advise the city on future opportunities with Mainland China, reorganising the previous Greater Pearl River Delta Business Council. The new Committee addresses all Mainland regions, making relevant policy proposals to help Hong Kong firms succeed in the Chinese market.47 The 30-40 member group is chaired by former head of the Trade Development Council Mr Jack So, and includes many senior business leaders.48 Hong Kong’s national delegations are now even better organised, with Committee presence supported by representation from key Chambers of Commerce, foreign corporations in Hong Kong, and the Economic Development Commission.49

43

6

Conclusion: innovation and progress in world city/nation state relationships

1 The agenda between world

cities and nation states into the future The age of the world cities is still, in many ways, just beginning. There will be many more world cities in the next 25 years as new sectors internationalise and new countries emerge. This means that some versions of the world city and nation state dialogue will need to be around for at least the next 50 years. The speed at which nation states adjust to having world cities will be critical. Building a positive national or state agenda for how to support the internationalisation process and the evolution of the world city whilst also tackling the unintended spillovers and externalities for the whole nation or state is very challenging for governments. It requires them to move beyond simple formulations and to engage in public education as well as to find ways to simultaneously address complex challenges that cut across many ministries. For all of these reasons a major current focus is on strengthened local governance and on negotiated reforms and programmes that go beyond institutional rigidities.

44

We can summarise the future challenges best by looking at groups of world cities: Established World Cities, such as London, New York, Paris, Tokyo and Toronto, seek to address investment deficits and stay affordable and competitive. They mostly look beyond their

Competitive challenges

London

national economy to identify new sources of growth, but depend on national decisions on trade, immigration, visas and open-ness. They also rely on national (and state) government to create more investment space and capacity, especially on infrastructure which is expensive to develop in mature cities.

New national-level policies

Relentless demand for in- New Minister for Cities, frastructure, housing and City Deals, commitment transport supply; political to widespread devolution. resistance against London’s divergence from UK.

What else is needed from national government

Specific commitments to increased fiscal autonomy in London and elsewhere and continued evolution of city governance; conclusive airport growth policy; housing investment, remain open to immigration and European markets; incentivise city-regional collaboration.

New York Risks of unmanaged growth; high polarisation, chronic under-investment in infrastructure, business climate concerns.

Major policies blocked; slight integration of transport, housing and environmental policy; education funding.

Major improvements to immigration policy; air traffic control and airport investment; greater focus to manage the New York region, access to economic opportunity, and high speed rail; increased support for welfare and housing costs.

Paris

Expand innovation and attract investment; address housing shortages; integrate metropolitan economic and social fabric.

200km Grand Paris metro; MAPAM law to recognise metropolitan areas.

Sensible metropolitan government arrangement with regional perspective; incentivise transport-oriented development around new metro; support and invest in economic and housing initiatives.

Tokyo

Low national economic growth and deflation; compete in pharmaceuticals and green technologies; prepare for 2020 Olympics.

National Strategic Special Zones, to relax labour regulations for foreign businesses; business climate changes to revitalise regions.

Consensus on specific projects, spaces and participating companies for Special Zones; upgrade of financial infrastructure and legal regimes; protect Tokyo’s revenue sources.

Toronto

Regional congestion; slow labour productivity growth; labour shortages; need for stronger clusters in financial services, ICT, education, life sciences.

$47bn Building Canada Plan up to 2023;50 new Gas Tax Fund; International education strategy and Digital Canada 150 strategy.51

Direct recognition of Canada’s large cities; more predictable and aligned transport funding; progress on Trans-Pacific Partnership and interprovincial trade deals; improved labour market information system; careful support for creative and auto sectors.

45

Emerging World Cities, such as Moscow, Mumbai, Shanghai, São Paulo, have been successful when they offer high profitability incentives, good risk management, basic security, and high standards of public services.

Their cyclical rise up global value chains, and their experience of unprecedented population growth, means that they are now seeking to address quality of life in a more structured and systematic way than in previous cycles. This

usually requires in new spatial character and infrastructure, either through re-development (of waterfronts, manufacturing zones, or city centres) or expansion into new suburban territories. These cities depend on their national economies sustaining high levels of growth in order to retain their new global roles. They also depend on national governments to play an active diplomatic role in championing their world city credentials.

Competitive challenges

New national-level policies

What else is needed from national government

Moscow

Growth management strains; mono-centric development pattern; supply of public transport; liveability and waterfront redevelopment.

New Moscow territory.

Commitment to pursue innovation agenda and investment in transport and urban restructuring.

Clear economic, spatial, and infrastructure prospectus for New Moscow and for Skolkovo; multi-departmental co-operation to deliver Moscow River - regulations, land acquisition; clarity on regional development and fiscal balance.

Mumbai

Slow project implementation; under-developed financial services sector; congestion, informality and inequality.

Smart cities; industrial development corridors; revised urban transport policy.

Constitutional reforms and capacity-building to empower urban bodies; De-regulation of coastal and rail lands; policy enablers to support financial services and SMEs.

Shanghai Transition into higher value economy; talent attraction; culture and liveability; managing integration of migrants.

Free Trade Zone; national urbanisation plan to raise quality; pilot bond issuance programme; global finance and shipping status for Shanghai.

Faster support from state financial institutions to develop free trade zone policy; ongoing reform on currency, local revenue tools; effective long-term strategy for Yangtze River Delta.

São Paulo Public pressure to deliver improved city systems; lack of legal certainty and transparency to attract private sector project finance.

Major packages of rail Support for greater fiscal/tax competencand subway investment es; recognition of metropolitan areas and – Urban Mobility Pact; São Paulo’s economic development role. reduction of local government interest rates to 4% + inflation.

46 1 | Conclusion: innovation and progress in world city/nation state relationships Part

Successful Transformers Singapore, Hong Kong, Seoul A handful of cities have successfully showed how to make a rapid transition from emerging to established world cities. Their development model has managed both to tackle quality of life issues (housing, transport, health, educa-

tion) and invest in competitiveness – in financial services, trade, management, technology, or R&D. This group of cities now possesses genuine economic diversity that can withstand external shocks. Some have successfully made their case to national governments and won support for infrastructure needs and liberalisation reforms during the past cycles.

Competitive challenges

New national-level policies

What is needed from national government

Hong Kong

Uncertainty about future political arrangements; future roles in the Asia-Pacific urban system; housing and affordability pressures; continued productive integration with the PRD.

National new type urbanisation plan 2020; promotion of Hong Kong as offshore yuan financing centre; deeper GPRD liberalisation.

Fair compromise on electoral reform; clarity on post-2047 political formula; support for zone to allow Hong Kong-based companies and individuals to freely access Chinese markets; opportunities for stewardship of satellite Mainland communities; assurances on air traffic and airport provision.

Seoul

Improve sluggish growth rates through higher education, fashion, digital content and high-tech R&D sectors; finance aging infrastructure; adjust to an aging society.

Relocation of government ministries; approval of green belt development.

Strengthening of governance and fiscal powers in the Capital Region; legislation to make immigration easier; regulatory reforms to restructure service sector.

Singapore Land supply pressures; aging society and immigration challenges; middle-income job creation.

More restrictions on Careful management of competing deforeign labour; increased mands for open-ness, liveability, density and high quality public services. focus on health, education and housing services.

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2 A new cycle Nations do not share the same idea of world cities. In some countries they are seen as strategic economic assets; in others they are only seen as either capital cities or large cities.

This depends on the national framework towards globalisation, and especially on whether national attention is on advanced services and knowledge industries.

Despite many important differences, most nations that have world cities are struggling to find a clear framework for their management.

In general, globalisation makes larger cities grow. Shaping and managing that growth has become an important task for national and state governments.

2. World city governance, development, invest-

ment and promotion will be important. Governance will need to evolve as the city grows and the ability to invest at a fast rate will be required. Specialist institutions will be needed but they must be renewable and adaptable to change.

3. Inter-city networks and collaborations

between all of the cities in a national system will be very helpful in preventing both binary and zero sum perspectives. They will also be useful to help build the case for necessary reforms, and to evaluate how opportunities and assets can be shared and leveraged.

4. Far sighted business leadership will be impor-

tant to keep the dialogue between national and state government and their growing cities fresh and focused, and to intervene when politics prevent sustained dialogue.

There is huge scope for tension and problematic relationships unless a clear framework is developed. If a nation wants a world city, it needs to be able to optimise positive effects and address world city problems. If nation does not want a world city, it must be able to accept that some opportunities will go elsewhere.

5. Attention to the potential, needs, and aspira-

For nation states that accept they will have a world city, there appears to be five dimensions of an approach that will be positive.

6. This report has reviewed progress and

1. National policies for spatial economy, infra-

structure, and development are needed. These must guide decisions in ways which are future oriented and are able to anticipate future spatial changes.

tions of second and third tier cities is critical, and this should consider how they develop activities which complement and leverage the world city as well as other opportunities.

agendas in 12 world cities. It is likely that in the next 50 years there will be more than 100 cities that are genuinely international in their character. It is therefore essential to digest what has been learned by leaders in established and emerging world cities over the past 25 years.

48 1 | Conclusion: innovation and progress in world city/nation state relationships Part

–

Hong Kong’s size and economic performance

0.5

% of national population

3

% of national GDP

5.6

GVA per capita vs national average (1)

4

City global competitiveness rank52

7

Country global competitiveness rank53

Hong Kong

What is Hong Kong's operating framework as a world city?

Within the Asia-Pacific, Hong Kong is the leading finance hub and decision-making centre for global firms. It is also the capital-raising gateway into and out of China. With a population of 7 million, the city has become the managerial locus for the mainland Pearl River Delta, one of the world’s most productive regions for export manufacturing. Despite its success as a destination for investment, tourism and air cargo, the city faces uncertainties about its political future, its future roles in the Asia-Pacific urban system, and its capacity to manage housing and affordability pressures.

Hong Kong is one of two ‘special autonomous regions’ under the sovereignty of the People’s Republic of China (the other is Macau), as part of the ‘one country, two systems’ model introduced in 1997 and guaranteed until at least 2047. The city’s Executive Council is led by the Chief Executive, who is ultimately appointed by the Chinese State Council and reports directly to it. Hong Kong’s unitary system of government means there is no local government, only 18 district councils that advise the government. Instead the city has a large and powerful bureaucracy, whose numerous agencies and departments deliver services.\

What is the character of the relationship between Hong Kong and its nation state?

Hong Kong has received careful and timely support from the Chinese central government in most periods since the handover of power. Helped by national Five Year Plans and personality-driven policies, Hong Kong has been able to successfully open up a vast market as an economic hinterland, and has retained its own policies on immigration, currency and media. Central government supported its ambition to be the largest offshore renminbi centre, and continues to invest in high-speed rail connectivity. And until recently, assurances about the process of constitutional reform have helped encourage foreign investment.

Hong Kong and China are inter-dependent. Hong Kong manages an enormous manufacturing economy on the Chinese Mainland, and its stock exchange is a key source of international capital.

Its financial experience has helped China to manage its financial resources and risks. Government leaders typically recognise the assets of Hong Kong's unique trading experience, legal framework, company performance, mature capital markets, and global network, especially as China begins a transition towards a long period of potentially slower growth.

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Which areas does Hong Kong need to address with its nation state?

Hong Kong is witnessing an upsurge of debate on the character of its democracy, in light of Beijing’s desire to retain its role as gatekeeper to the city’s leadership. The current debate focusses upon the arrangements that will be put in place when Hong Kong moves to universal suffrage in the election of its city leader, the Chief Executive officer. The debate turns on whether the election will, in future, be open to all candidates or only those approved by the Chinese government. Although no outcomes are clear, future stability will likely involve compromise on electoral reform. The Chinese government may not wish to commit publicly to a long-term vision for the city up to and beyond 2047, but Hong Kong requires an open dialogue of ideas and propositions about its future.

Further integration with the Pearl River Delta, facilitated by cent ral government, promises many benefits for Hong Kong. The city’s companies and entrepreneurs would benefit from freer access to markets in the Pearl River Delta, and from intensified agglomeration achieved by further transport links with its major cities. A better-organised regional airport system and air traffic corridors, and the enforcement of environmental standards in Guangdong, are also important. The central government’s urbanisation plans can shape the pace, direction and collaborative ethos of infrastructure development in the PRD. Hong Kong’s ‘first-mover’ status as a global renminbi trading centre can be consolidated by the removal of a capital cap that restricts foreign investment in yuan-denominated products.

The China Securities Regulatory Commission can also sustain support for joint ventures between the Hong Kong and Shanghai stock exchanges, which require complex tax rule changes.

Meanwhile the new Qianhai zone could become a hub for RMB internationalisation and finance reform, and relieve Hong Kong’s office space shortages, if central government can strengthen the incentive structure.

Hong Kong has very serious house price challenges, exacerbated by limited land supply. Opportunities to manage and oversee satellite communities across the border may eventually prove part of the solution to the city’s housing demand.

As part of the 2014-2020 plan for Chinese urbanisation, Chinese cities are being encouraged to experiment with liberalisation and trade initiatives. Hong Kong’s success in many of these areas means it plays a role of a laboratory for Chinese urbanism. But these experiments leave the future character of China’s urban system uncertain. Hong Kong needs reassurance and license from central government to continue to differentiate its offer. The governance system between city and central governments could be strengthened to allow for more participative decision-making and for greater cross cutting activity.

52 2 | Hong Kong Part

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London metropolitan area’s size and economic performance

13

% of national population

22

% of national GDP

1.75

GVA per capita vs national average (1)

2

City global competitiveness rank54

9

Country global competitiveness rank

Hong Kong London Moscow Mumbai New York Paris São Paulo Shanghai Singapore Seoul Tokyo Toronto

What is London's operating framework as a world city?

London is the capital and ‘front door’ of a medium-sized island nation which is also the world’s 6th largest economy. As Europe’s leading gateway for companies, capital and talent, London is half way through a 60 year cycle of rapid population growth, from 6.5 million to 11 million. The city has a unique global reach in its DNA as a result of centuries of trade, empire, open-ness and diversity, and has recently applied these strengths to become a world leader in financial and business services, creative and media production, and higher education.

London’s recent success brings major redevelopment, investment and growth management challenges. As by far the UK’s largest, most productive and competitive city, it also faces significant national political obstacles to gaining a consensus to support its global city growth agenda.

London exists in one of the world’s most centralised government systems. Central government controls over 90% of public spending, and all macro policy on economic competition, taxation and immigration. The city is unique in the UK in having a metropolitan government and elected Mayor, but Mayoral powers are limited compared to both other world cities, and to the 33 London boroughs that deliver the majority of local services.

What is the character of the relationship between London and its nation state?

London’s governance has gone through several important cycles in the past 30 years. In the 1980s the then citywide government (GLC) and the Inner London Education Authority (ILEA) were abolished by the national government. This reduced the tiers of government from 3 to 2 and the 33 London boroughs took on more direct responsibilities. The creation of the Government Office for London in the 1990s sought to better co-ordinate national government activity in the capital, and was matched by increasing self-organisation of the London business community. In the 2000s a new citywide government was created with a balanced division of labour between the 33 boroughs and the new Mayor and Greater London Authority (GLA). This system has been supported by actively engaged ministries of central government and the Prime Ministers’ Office.

The Mayor of London’s powers have been incrementally increased but are still mostly linked to transport, policing, planning, housing, and economic development. Most of the Mayor’s impact on other policy areas is achieved through influence, networking and publicity. The Mayor has only very limited roles in education, energy, waste, water, leisure, culture, and social services. The two-tier Mayor/GLA-boroughs system is perceived to have improved London’s management of its transport challenges and its international promotion. However, the relationship between the Mayor, London Assembly, and the boroughs has not always been well articulated and this has been an ongoing source of dissatisfaction.

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Since the 1980s, given the UK’s centralised finance system, London has entered a pattern of ‘bidding’ for financial support from central government for large ‘trophy’ projects (e.g. Jubilee Line, Millennium projects, Olympic Games, Crossrail). Its occasional success in advocating for investment has exposed limitations in an arrangement whereby projects can only be mounted one at a time, each requiring extensive promotional and lobbying effort.

The emphasis on eye-catching projects eclipses London’s more systemic investment needs. The city has developed a 2050 longterm infrastructure plan to set out needs and costs of investment, and to bring attention to the gaps in available funding.

Which areas does London need to address with its nation state?

There is now widespread political concern that London’s benefits to national economic growth (net fiscal contribution, access to world-class expertise, innovation spin-offs, professional development) no longer outweigh its capacity to suck in talent, jobs and investment. This perception is heightened by the unusually weak economic performance of the UK’s large secondary cities. The growing economic, cultural, demographic and political divergence from most of the rest of the UK presents significant hurdles to a shared national strategy for urban growth. A new economic action plan being prepared by the London Enterprise Panel explicitly addresses London’s relationships with the UK as a whole.

The UK’s highly centralised governance system is evolving into a more ‘negotiated’ system: a strong central state, substantially ‘devolved’ nations, an empowered metropolitan government in London, and combined authorities in city-regions (e.g. Leeds, Manchester, Sheffield). The current national government has made positive steps to support (i) national ministerial co-ordination on the cities agenda via the creation of a Minister for Cities within the Cabinet Office; (ii) Inter-city initiatives that strengthen the system of cities; (iii) ‘City Deals’ that strengthen individual city and city-regional systems; and (iv) a National Infrastructure Plan to provide confidence for a steady pipeline of major projects.

London has made a strong case for more fiscal autonomy and for transformation of the housing sector. Spurred by the momentum of the 2014 Scottish independence referendum, it is working positively with second tier of UK ‘Core’ cities to call for changes to the current government finance formula. The national government needs to help reach and implement a shared agreement about the right level of fiscal autonomy for the UK’s cities.

Dialogue about London government is confined to the city as a built up conurbation, and does not include the functional commuter region - the Greater South East. Although the concept of the London city region gained ground in the 2000s, there is currently no plan for how the region should be organised and optimised in national political debates.

56 2 | London Part

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Moscow metropolitan area’s size and economic performance

8

% of national population

23

% of national GDP55

2.8

GVA per capita vs national average (1)

58

City global competitiveness rank56

53

Country global competitiveness rank57

Hong Kong London Moscow Mumbai New York Paris São Paulo Shanghai Singapore Seoul Tokyo Toronto

What is Moscow’s operating framework as a world city?

Moscow is Russia’s economic and political capital and the wealthiest city in the Russian Federation. It is a ‘federal city’ directly recognised by the federal government and with a high level of self-governing powers and fiscal resources. Its emergence as a 12 million person world city hinges on a number of critical assets: the commercial, transport, governmental and management hub city of a large centralised country, the largest customer and distribution market in Europe; a large, high-quality, technically proficient labour force; a good balance of profitability and risk; high standards of health and education; and low crime compared to its peers.

Like St. Petersburg, Moscow is a federal city with the powers of a regional government. It is located within the Moscow Oblast (Region), an industrialised area of 7 million people the size of Denmark. Moscow has a strong city government that administers 12 local districts. Following an unprecedented extension of the city boundary by the federal government, additional ‘New Moscow’ land in the South West is now available to help it accommodate its future growth.

The strains of Moscow’s rapid growth, combined with a mono-centric transport system and development pattern, means it is now embarking on a bold and much needed programme of transport extension and modernisation, longer term spatial planning towards an enlarged centre and poly-centric development, urban and waterfront redevelopment, housing development and sector positioning. These all require national government support such as framework, eco-system, and investment incentives. Key projects such as the Moscow River and 2018 World Cup have both local and national significance. A new strategic master plan in 2015 will lay out major proposals for Moscow’s future.

What is the character of the relationship between Moscow and its nation state?

Moscow’s powerful city government maintains a close, complex and largely positive relationship with the federal government.

Centralised national government has encouraged firms to cluster in Moscow in order to be close to decision-making, enhancing agglomeration in the capital. The city regularly commits 40% of its tax revenue to the federal budget, below the regional average of over 50%, but cumulatively the second largest amount of any Russian region. At the same time, as a major city it has high investment needs that cannot be solely addressed by its own resources.

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The federal government has supported Moscow’s ambitions in financial services with a sequence of necessary reforms. Russian state institutions are also major users of land and infrastructure in the capital. Co-operation around how this can be best put to use to relieve congestion and growth challenges is a priority.

Ideas have been proposed to relocate parliamentary buildings to New Moscow to ease congestion, but this will also require a clear economic, spatial, and infrastructure prospectus. How national bodies can support Skolkovo as a new innovation cluster is another key opportunity.

Which areas does Moscow need to address with its nation state?

A major challenge for Moscow is that few other Russian cities are able to develop complementary roles. Apart from St Petersburg (also a ‘federal city’), most Russian cities have limited competences and resources. This means that they are not easily able to shape their own longer term investment and development patterns. This reinforces Moscow’s role as the key node in the Russian system of cities, and increases negative externalities associated with a congested/inflationary hub city in a centralised state. Russia’s fiscal system both concentrates the declaration of profits in Moscow, as many firms with national platforms have HQs there, and it requires much of Moscow’s tax revenues to be redistributed to other regions through a system of centralised control.

The recent disbanding of the Federal Regional Development Ministry highlights the lack of policy attention on how Moscow interacts with other cities and regions in the Russian system, or how national urban policy in Russia will develop. Increasing centralisation, fiscal dependence upon larger cities and state backed industries, growing path dependency in national development patterns, and low level of regional development policy, all mean that Moscow and other Russian cities need to build their own agenda for co-operation and knowledge sharing. This will include initiatives for mutual learning and opportunities for other Russian cities to showcase themselves through Moscow, for example via the Moscow Urban Forum.

60 2 | Moscow Part

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Mumbai metropolitan area’s size and economic performance

2

% of national population

7

% of national GDP

4

GVA per capita vs national average (1)

70

City global competitiveness rank58

71

Country global competitiveness rank59

Hong Kong London Moscow Mumbai New York Paris São Paulo Shanghai Singapore Seoul Tokyo Toronto

What is Mumbai’s operating framework as a world city?

Mumbai is by far the most globalised city in South Asia, and a regional centre of finance, decision-making, film and entertainment. Its attraction as India’s major corporate headquarters hub has seen its population more than treble in 40 years, but weak growth management has resulted in congestion, low productivity, and an extreme rise in informal labour markets and inequality.

Mumbai is now a 23 million person metropolitan region, comprised of Greater Mumbai (440 km2, 12 million), seven other municipal corporations and nine smaller municipal councils. The 4,350 km2 region is part of a 110 million person state (Maharashtra) whose population is majority rural, and whose system of government reflects this balance. Greater Mumbai has just 6 of the state’s 48 MPs in a national parliament of 543 representatives. The federal structure of 29 states means that the Maharashtra state government, rather than the Government of India, is the higher tier authority that plays the decisive role. The state has discretion to decide urban governance and fiscal policy, and its urban agenda is only slowly becoming more visible.60

What is the character of the relationship between Mumbai and its nation state?

Although central government is not directly active in Mumbai’s governance, it is a key actor in the city region; its agencies control critical security, rail and trade infrastructure; it has active institutions ‘on the ground’ that use and rent land; it wields key financial powers and investment programmes, and it shapes economic planning.

A 1992 constitutional amendment tried unsuccessfully to devolve powers to municipal governments such as Mumbai’s.

Although the reforms boosted the resources of some agencies, the distribution of power between the Maharashtra government and institutions in the metropolitan area was not dramatically altered. Fiscal imbalances between the centre and states have been partly addressed by Finance Commissions, but what actually is implemented depends mostly on the Maharashtra state government Commissions.

63

Central government policy can create the conditions for Indian states to act in the long-term interest of cities rather than short-term political imperatives. But so far it has not fully recognised the role of cities in India’s development, and does not co-operate with a wide span of Mumbai’s institutions other than Maharashtra state. Its lack of prescriptive support has led to disjointed narratives, and a tendency to react to unintended consequences.

Which areas does Mumbai need to address with its nation state?

Mumbai has an extraordinarily fragmented governance system, and most commentators argue that Mumbai should be allowed to create a metropolitan authority with at least some executive power. This would require constitutional amendments to recognise metropolitan areas and determine the role of state agencies and municipal agencies within them. In order to realise its economic potential, Mumbai requires simple durable reforms from higher tiers of government that can make the region’s challenges more coherent and empower urban governments to deliver more projects. . A proposal in November 2014 by the Chief Minister of Maharashtra to create a senior co-ordinator ‘CEO’ of Mumbai is an important first step, but for such a leader to co-ordinate effectively will require the whole system of governance to be recalibrated.

With a new national government in place in 2014, there are signs of a firmer agenda around smart cities, development corridors to Bangalore and Delhi, and private sector partnerships for urban infrastructure projects. This agenda will only be optimised in Mumbai if attached to a broader reform to the system of planning and implementation.

Constitutional reforms to strengthen the leadership, technical capacity and resources of local bodies, and regulatory reforms to support urgently needed coastal and rail development, would be very welcome in Mumbai. Policy enablers to support the financial sector and small business growth are also important.

64 2 | Mumbai Part

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New York City metropolitan area’s size and economic performance

6

% of national population

8

% of national GDP

1.33

GVA per capita vs national average (1)

1

City global competitiveness rank62

3

Country global competitiveness rank

Hong Kong London Moscow Mumbai New York Paris São Paulo Shanghai Singapore Seoul Tokyo Toronto

What is New York City’s operating framework as a world city?

New York City is a global capital of business and finance, and the major gateway to the Western Hemisphere for professional and creative talent. It has recovered from multiple setbacks (fiscal, environmental, security, financial) and continues to define what it means to be a successful global city. The city has strengthened its position in diverse business clusters, nourished by world-class civic institutions, a deep spirit of enterprise and progress in improving education and public space. There are, however, risks of unmanaged regional growth, including polarisation, under-investment, housing costs, and worsening business climate.

With a population of 8.5 million, New York City has a powerful Mayor-Council city-wide government model that is more centralised and unified than most U.S. cities. The City’s five boroughs have limited powers. The City is located in the far south east of New York state, the third most populated of the country’s 50 states. New York’s urban development has however extended across the borders of two other states (New Jersey and Connecticut) to form the 23 million person ‘tri-state’ area.

What is the character of the relationship between New York City and its nation state?

The US federal system arrangements mean that federal government does not take a leadership role in the direction of its major cities. There has been no broad ‘national urban policy’ in the U.S. for over 30 years, with national urban programmes instead focusing upon small area-based initiatives for community-led housing and economic development. There is no direct constitutional link between New York City and the federal tier. Instead the state governments, which historically are not located in large commercial centres, play a more direct mediating role.

American political traditions mean local actors and the private sector play a prominent role in urban and economic development. The responsibilities of higher tiers of government are mainly to maintain a positive tax and immigration environment, and to provide additional finance to ensure good connectivity, infrastructure capacity, housing and education systems.

New York’s relationship with federal government has become even more remote over the past 30 years. The federal tier has withdrawn from many financing responsibilities and focused primarily on security, immigration and healthcare challenges.

67

Which areas does New York City need to address with its nation state?

Support for New York City tends to occur after major crises – such as 9/11, the 2008 recession, and Hurricane Sandy – rather than as part of a systemic approach. By contrast, the New York State government in Albany has maintained financial aid while drawing large fiscal resources from taxable activity within New York City. The City-state relationship has a much more sustained and negotiated character.

New York can benefit from the federal government becoming more involved and taking leadership on airport and air traffic control investment, inter-city transport, R&D, and the platform for international trade. New York’s flexibility to address economic, social and environmental challenges is constrained by federal programmes that are rigidly prescriptive and siloed.

Although the federal government supported New York’s financial sector in the initial aftermath of the financial crisis, various departmental attempts to rein in the industry are having wider effects on New York’s competitiveness. National immigration policies in particular are proving a deterrent to the city’s reputation as an open city to skilled workers and students.

There is no empowered institution attempting to forge co-operation in the New York region, and few bodies that operate across state boundaries, (apart from the Port Authority that manages some regional transport infrastructure). The functional ‘Tri-state’ region is nevertheless growing and requires very high upfront capital investments in key infrastructure projects. A careful mix of federal support, new financing tools and inter-state government collaboration must be assembled to deliver on these projects.

New York City Mayors play the major role in advocating for federal policy in Washington. The political system’s reliance on campaign contributions means that the Mayor works uses the support of wealthy donors to raise awareness of the City’s needs New Mayor Bill de Blasio intends to continue former Mayor Bloomberg’s lead in working actively to bring a congressional focus back to necessary investments in education, public transport and housing.

68 2 | New York Part

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Paris-Île-de-France metropolitan area’s size and economic performance

18

% of national population

30

% of national GDP

2

GVA per capita vs national average (1)63

4

City global competitiveness rank

23

Country global competitiveness rank

Hong Kong London Moscow Mumbai New York Paris São Paulo Shanghai Singapore Seoul Tokyo Toronto

What is Paris’s operating framework as a world city?

The Paris city region is continental Europe’s main business gateway, and a diversified global centre for tourism, science, high technology, creative industries and decision-making. Its many strengths include world-class social and transport infrastructure, much of which is concentrated in the central zone. The metropolitan region however needs to encourage a new cycle of innovation and investment. Housing shortages have made it less attractive for younger workers, and social divisions between the wealthier West and the poorer East are entrenched. Paris is now implementing a major new metro system and preparing new institutional and funding arrangements to meet its strategic development challenges.

The central municipal département of Paris is small, at just 105 km2.

It is home to less than 20% of the 12 million people living in the capital Île-de-France region (called the ‘Paris Region’), and has a budget of just €8bn. The Île-de-France itself, at 12,000 km2, is composed of seven other départements in addition to Paris and encompasses the en-tire urban and functional area. It is one of 22 administrative regions in mainland France, yet generates nearly a third of national GDP. The Île-de-France regional council takes the lead on territorial masterplanning and public transport, and from 2015 will also administer European Structural Funds.

What is the character of the relationship between Paris and its nation state?

France in some ways has been an archetypal centralised nationstate dominated by a primate city: 1. Its Prime Minister and President take a very active role in formulating policy for the capital region.

2. State capital investment is critical to enabling Paris’s large infrastructure projects.

3. National policies, combined with local authorities, aim to attract investment in business districts and cultural projects, as well as sponsoring designated clusters.

4. The National Assembly actively debates and decides on the nature of city regional government reform.

5. Public investment is managed through a system of grants and tax-sharing with local governments, although most local financial resources are derived from local taxation.

6. National legislation upholds a local commitment to social housing and high quality public services in Paris.

But French politics has been evolving under the impact of internal and external pressures for change. The hierarchical model of a Paris Region administered by the State has given way to a more self-organising metropolis based on multi-level governance and co-operation. Paris’s local governments are responsible for planning, transport, economic development and housing, and over 100 inter-municipal communautés with fiscal powers have been established to deliver services and foster development. Decentralisation has therefore fed fragmentation.

71

A sequence of important metropolitan transport and development projects have been proposed since 2010, led by national government.

They promise to help reduce Paris’s spatial division and create a more integrated economic and social fabric.

—— The €32bn Grand Paris Express transport project is being accelerated by national government, which initially appointed a Minister for Le Grand Paris. After years of transport under-investment, the Grand Paris project will reinforce links between downtown Paris, Charles de Gaulle airport, and business districts such as La Defense, Val-deSeine, Plaine Saint-Denis and Paris-Saclay. The Prime Minister has taken a public lead on this project and the national government has raised money for it by raising personal and business taxes.

—— A national inter-ministerial committee has labeled several Operations of National Interest (OINs) in the region to boost planning powers in key development sites. A series of Territorial Development Contracts were signed in 2013/14 to boost housing delivery and urban development around these hubs.

Which areas does Paris need to address with its nation state?

Unlike London, Paris has no citywide authority or inter-municipal body that addresses the metropolitan unit. A new metropolitan government (La Métropole du Grand Paris) system is scheduled to be in place in 2016, that incorporates the three surrounding départements into the métropole of Greater Paris. However there are competing visions for Paris and uncertainty about which model will be implemented. The choice between a strongly empowered Grand Paris Council, or a more federal system with stronger inter-municipal authorities within the Grand Paris, has implications for how Paris can manage its growth and whether it can avoid becoming a ‘two-speed’ region.

New national policy changes are increasing the role of the Île-deFrance regional council to stimulate and coordinate economic development. Up until now, economic development and cluster actions in Paris have often been piecemeal. No public actor, even the national government, has had sufficient leverage to push firms to re-locate.

Some national civil servants will be moved to regional councils such as Île-de-France, to increase and integrate their capabilities to support business growth and internationalisation. This empowerment of regional councils to take a leadership role will simplify the number of players, and allow the Paris Region economic and innovation strategy in 2016 to be more effective and provide confidence to companies and investors.

In 2014, a new national law (MAPAM) grants metropolitan status to 12 French cities. In the case of Paris, this legislation adds an extra institutional layer to an already crowded system. These new métropoles will require tools to build political consensus and implementational capacity. The state can encourage the involvement of firms and residents to insulate the new metropolitan structures. Paris’s governance complexity means there are currently few channels to collaborate effectively with other French cities for a more focused national urban policy.

72 2 | Paris Part

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São Paulo metropolitan area’s size and economic performance

11

% of national population

20

% of national GDP64

1.8

GVA per capita vs national average (1)

62

City global competitiveness rank65

57

Country global competitiveness rank66

Hong Kong London Moscow Mumbai New York Paris São Paulo Shanghai Singapore Seoul Tokyo Toronto

What is São Paulo’s operating framework as a world city?

São Paulo is Brazil’s command and control centre for domestic and international companies, and the country’s major centre for business capitalisation, real estate, innovation, R&D and decision-making. Now a 21 million person metropolitan region, population growth has begun to abate, but city systems have still not come to terms with the earlier 50 year surge of in-migration. The city still has a substantial infrastructure deficit and major investment needs in its housing, rail, water, and flood defence systems.

The city of São Paulo is a 12 million municipality the size of Greater London. It is also the capital of São Paulo state, the so-called economic ‘locomotive’ of Brazil whose government is the middle tier of a three tier federal structure. The city is one of 39 municipalities in a sprawling 8,000 km2 metropolitan region, each of which has its own mayor and council. There is no metropolitan government, and only loose co-operation.

What is the character of the relationship between São Paulo and its nation state?

A functioning and effective relationship between federal government and São Paulo city government is not automatic and requires committed leadership. Federal governments rarely prioritise investment in the city and have not identified São Paulo’s distinct economic role or growth needs. Although Brazil’s business capital, São Paulo is more usually perceived as a tax resource for poorer areas than as a platform for national competitiveness.

The state government is a key partner of São Paulo, and the two governments work effectively together especially when there is political alignment. Endowed with strong powers by Brazilian constitutional law, São Paulo State engages with the 39 metropolitan municipalities on a 1-to-1 or small group basis, and is a major investor in infrastructure, transport and water systems.

Federal reforms and funding disbursements have recently enabled São Paulo to make inroads to long-term problems of housing, access and exclusion, helped by a long economic boom. They reflect a federal adjustment - aided by strong informal links between the Ministry of Cities and the city government - to support São Paulo’s infrastructure development and address inequality. A blended approach is emerging that combines federal, state and city budgets to deliver more housing and create more density. But problems of implementation persist, partly because federal solutions for the city are ‘single-sector’ and not joined up across social, economic and environmental departments.

75

Which areas does São Paulo need to address with its nation state?

Brazil is an emerging democracy where electoral mandates are short and political agreement between leaders from different parties across local, state and federal governments is very rare. This results in a low co-ordination and low investment equilibrium that has left São Paulo with a mounting investment deficit. The ability to counter this problem is hampered by a fiscal system with several disadvantages.

1. The city is a major tax revenue generator, but most funds are

reinvested elsewhere by state and federal tiers.

2. Brazilian municipal borrowing regulations are very constrain-

ing and risk averse and utilise high debt interest rates. The city repays existing debt to the federal government at a rate of 9% p.a. plus inflation, which accounts for more than 10% of the city budget, although this rate has belatedly been adjusted to 4% by the Senate in November 2014.

3. São Paulo’s debt ceiling has been calculated in the same way as any other municipality, even though its revenue base is much higher.

In a short window of political alignment, the federal government has already fast-tracked a new law to renegotiate interest rates, and others are needed to increase the debt ceiling for big cities, and to permit new revenue streams.

No metropolitan governance system was set up to respond to São Paulo’s rapid urbanisation, and there are only small-scale examples of inter-municipal co-operation. This situation partly reflects the lack of popular recognition for the challenges of metropolitan areas in Brazilian public life. The lack of competent management of metropolitan water, flood, drainage, transport, and housing systems is a major constraint for São Paulo’s growth. A new law to recognise Brazilian metropolitan areas is currently being evaluated by the Senate, which may be the start of the creation of an enabling framework.

São Paulo’s capacity to expedite projects is held back by a lack of legal certainty and predictability, and a low level of transparency and trust. An overhaul is needed of regulations at different tiers of government to allow reinvestment in the urban core. The city’s business leadership is playing a role to build a common reform agenda around transparency, safety and business friendliness.

São Paulo itself cannot afford to bring forward big programmes, but it can innovate with demonstrator projects to give confidence to private sector investors and state/federal ministries. The city is engaging with universities to build new innovative models of slum upgrading, social housing, industrial zones, and redevelopment that could act as an inspiration to national schemes.

76 2 | São Paulo Part

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Seoul metropolitan area’s size and economic performance

48

% of national population

49

% of national GDP

1.15

GVA per capita vs national average (1)

20

City global competitiveness rank67

26

Country global competitiveness rank68

Hong Kong London Moscow Mumbai New York Paris São Paulo Seoul Shanghai Singapore Tokyo Toronto

What is Seoul’s operating framework as a world city?

Seoul is one of East Asia’s premier world cities and the national platform for the global operations of Korean multinational companies. After making a remarkable transition up the manufacturing value chain, the city has developed a world-class IT and technology innovation system, and a well-educated and disciplined workforce.

Now the capital of a rich and mature democracy, the city has entered a sustained period of slower growth and needs to finance aging infrastructure and adjust to an aging society.

South Korea is a small, densely populated unitary state with a two-tier system of local government. Seoul is designated a ‘special city’ and has a metropolitan government led by a directly elected Mayor, with enhanced responsibilities for education, crime, welfare and infrastructure systems in the 10 million person city. The mayor oversees 25 smaller autonomous districts (gu) within a compact 605 km2 area. Seoul has expanded beyond its borders over time and its functional economic area matches the ‘Capital Region’, which includes Incheon City and Gyeonggi province. This 12,000 km2 Region, at 26 million people, now makes up over half of the national population. There is weak co-ordination across it, however, and proposals for consolidation have never been implemented.

What is the character of the relationship between Seoul and its nation state?

Korea has a long history of centralised rule and until recently the central government was indisputably the decisive actor in Seoul’s development. Its national urban development and public investment strategy was successful in its first phases of industrial growth. Seoul became one of the world’s only major cities to make the transition from low to middle to high income status in the late 20th century, a result of rapid technological innovation, massive infrastructure investment, high public services spending, and environmental management.

National policies have not managed to stem growth and agglomeration in Seoul. Sustained national efforts over 30 years to de-concentrate away from the capital have been inefficient and created unexpected negative side effects, and have subsequently been downplayed.

Since the mid-1990s, more local autonomy has gradually been introduced to cope with Seoul’s challenges of transport, environment, housing, infrastructure and welfare. These have not however been accompanied by significant fiscal devolution.

Although Seoul is more than 80% budget independent, national tax revenue outweighs local tax by a factor of 4 to 1 and the centre indicates how most money should be spent.

79

Seoul’s Metropolitan Mayor is a key actor in advocating for greater fiscal and political autonomy as the city looks to transition to a greener and more public-transport oriented growth model. The organisational reshuffle of the Ministry of Security and Public Administration, which oversees regional autonomy, presents an opportunity to renegotiate the transfer of powers to local governments in Seoul and other Korean cities. Seoul’s leaders are making the case to central government of the cost benefits of a regional approach.

Seoul is five years in to a long-term national project to relocate government ministries and semi-public bodies away from the capital in order to achieve more balanced development. These relocation decisions extend a long line of decentralisation policies, and are an attempt to try a different approach. The relocation may create inefficiencies in the relationships between national and city government and business representatives.

Which areas does Seoul need to address with its nation state?

Seoul’s new strategic 2030 plan aims to strengthen and connect growth around the three specialised urban centres - Seoul (culture), Gangnam (business), and Yeongdeungpo (finance).

Its success as a long-term planning guideline depends on firm institutional alignment, and central government strengthening of governance in the Capital Region.

Seoul’s growth potential in international higher education, fashion, digital content and high-tech R&D relies on attracting more foreign researchers and scientists. National government legislation on immigration is required to guarantee long-term stays. This could be supported by national regulatory reforms to restructure the service sector in order to raise capital to underwrite a new cycle of innovation.

Seoul’s future will be influenced in part by the success of Korea’s six other metropolitan cities – led by Daegu and Busan. Many of them struggle with population decline, a narrow economic base, and unappealing city centres, and their governments express resistance against any moves towards de-regulation that might lead to further concentration in Seoul. Seoul’s own programmes of collaboration with these cities lacks financial support, but central government is now engaged in a more co-operative partnership with these cities. It has begun to approve commercial development in restricted ‘green belt’ areas of the secondary cities to catalyse much-needed investment. This is kick-starting welcome regeneration, but a more compelling vision for the Korean ‘system of cities’ is needed.

80 2 | Seoul Part

–

Shanghai metropolitan area’s size and economic performance

2

% of national population

4

% of national GDP

2.1

GVA per capita vs national average (1)69

43

City global competitiveness rank70

28

Country global competitiveness rank71

Hong Kong London Moscow Mumbai New York Paris São Paulo Seoul Shanghai Singapore Tokyo Toronto

What is Shanghai’s operating framework as a world city?

Shanghai is Mainland China’s financial and cultural capital, and arguably the newest member of the global urban elite. The port city has witnessed an extraordinary 30 year period of growth combining industry and services, not only becoming a huge retail and commercial hub but also acquiring expertise in engineering, R&D, and design. Now a city of 24 million people, Shanghai is currently in a process of adjustment towards a diversified higher skilled economy that requires not just hard infrastructure but also ‘soft’ factors such as talent, IP protection and liveability. Its 2040 Master Plan also has to manage the negative externalities of its exposure to globalisation: the challenges of wage growth to its manufacturing and trade-oriented model, and more acute concerns about income inequality and social inclusion.

Shanghai spans a large (6,200 km2) area and is administratively made up of 16 districts and one county. It is one of four city municipalities in China that is administratively equal to a province, which places it under direct central government administration. The Chinese Communist Party (CCP) Municipal Committee Secretary still outranks the city Mayor, although both are very powerful positions in a centralised political system, and a gradual and limited shift of leadership responsibilities towards the Mayor is visible.

What is the character of the relationship between Shanghai and its nation state?

Shanghai has a history of pragmatic and opportunist leadership that is prepared to take risks and negotiate with central government on issues of economic development, talent and trade.

In most political cycles, there are strong personal connections between city and central government, and many city officials graduate to the national tier. Mayors Jiang Zemin (1985-1988) and Zhu Rongji (1988-1991) both went on to occupy top national posts, and current President Xi Jinping served as the Shanghai party chief in 2007.

The Chinese state has played a decisive role in steering Shanghai’s emergence into a world city since 1990. It empowered the city government to harness foreign capital in order to upgrade the metropolitan economy very rapidly. It granted Shanghai more fiscal autonomy to run an expansionary budget policy and more planning powers to encourage local government innovation. It also takes regular measures to manage the property market, and makes national infrastructure decisions (e.g. high speed rail) that shape the pattern of Shanghai’s growth. In addition, state banks invest in the city’s technology system and issue development loans when necessary. Shanghai’s success is an important element of the CCP’s legitimacy.

83

Which areas does Shanghai need to address with its nation state?

City and central government are united in the ambition to cement Shanghai as Mainland China’s leading financial centre and a pioneer of China’s reform agenda. Shanghai has rarely been used as a pioneer of national reform, so this process will require careful stewardship, where Beijing provides confidence on macro-economic policy and new fiscal tools. One key mechanism is a new 29 km2 free trade zone, supported so far by central government ministries. The zone is set to liberalise regulation on commodities trading, futures exchanges, two-way investments and re-insurance, after previous opposition to opening up to foreign participation. This is effectively an experiment for a broader programme of internationalisation in Shanghai, and progress so far has been stop-start.

Central government may also support Shanghai’s aspirations as a financial centre in a number of other ways.

1. Move ahead with relaxation of exchange control as way to manage the risks of China’s export-oriented economy.

2. Reduce its ownership role in state enterprises that restrict the spread of innovation, and move towards a model of owning assets rather than companies.

3. Support its role as a potential headquarters for the BRICS New Development Bank.

Central government’s new 2014-2020 urbanisation initiative places big financial pressures on cities to spend on infrastructure and housing projects. It has therefore approved a pilot bond issuance programme for Shanghai as a new revenue source, reducing over-reliance on proceeds from the real estate sector.

These bonds are a more responsible long-term option for the city than other local government debt facilities, but they need central government to improve standards of budget transparency and debt-to-GDP caps.

Shanghai has developed in close relation with other cities in the Yangtze River Delta region, building shared infrastructure and energy systems. The relocation of industries and people to cities further inland (e.g. Suzhou, Hangzhou, Wuxi) creates opportunities for deeper regional collaboration but also poses risks of unmanaged or incoherent growth. Central government can support more sustainable regional urbanisation with reforms to land taxes and sales regulations, and with the removal of artificial barriers to migration.

84 2 | Shanghai Part

–

Shanghai metropolitan area’s size and economic performance

5.5 mln population

100

% of national population

100

% of national GDP

3

City global competitiveness rank72

2

Country global competitiveness rank73

Hong Kong London Moscow Mumbai New York Paris São Paulo Seoul Shanghai Singapore Tokyo Toronto

What is Singapore’s operating framework as a world city?

Singapore is now an established member of the leading group of world cities. With a population of more than 5.5 million living in an area two-thirds the size of Hong Kong (720 km2), the city is now among the leading five centres for finance and business services globally, having been a largely impoverished former colonial society half a century ago. From an unpromising starting point after independence in 1965, Singapore now clearly exemplifies many characteristics of a world city: wealth, stability, cultural diversity, deep networks, leading-edge innovation, and inspiration for others.

Singapore is unique among global cities for its status as a city-state. It has only one consolidated government whose 15 Ministries perform both urban and state functions – a product of its geographical location, political evolution, and institutional framework. From this point of view, Singapore offers an important point of comparison with other world cities. Singapore does not have to negotiate relationships between a world city government and a national government in the same way as the other cities.

What is the effect on Singapore being both a city government and nation state?

Singapore has had to navigate some disadvantages of not having a nation state above and around the city. With no higher tier of government, it has not had access to a larger fiscal base for investment capital or transfer payments. Equally, it has not enjoyed the larger diplomatic structures, diverse institutional presence and global reach of a major nation state. Instead Singapore has contrived to produce these features within a smaller city-state by committing to successive cycles of internationalisation. Since independence in 1965, the disadvantages of lack of space, economic isolation, multi-ethnic tension, unemployment, housing shortages, water supply and infrastructure have all been addressed through an outward facing approach that is open to global corporate investment and expertise.

Singapore’s lack of support from a large, powerful national government with a large domestic market has been offset by a highly efficient and unified city-state government. Without a higher tier of government to answer to, the government has been able to mobilise key institutions and a national workforce in pursuit of its goals. Its ability to closely manage trade unions and wage regulations has allowed it the unusual luxury of managing its own labour market to keep wages more competitive in than other industrialising Asian cities, and of being able to exclude extractive business elites. Control over state owned firms and banks have allowed it to impose a high savings rate, keep inflation low, focus on re-investment rather than consumption, and sustain macro-economic stability. Over time, these areas have all proven advantages over other aspiring world cities.

87

Because Singapore PAP constitutes both city and national leadership, it has been alert to the importance of fast and consistent results to achieve political survival. The imperative to adjust has translated into the creation of a highly integrated government whereby different agencies and departments pursue the same strategic objectives, and are carefully organised to complement each other. Co-ordination failures across government are minimised with powerful planning and a ‘whole of government’ approach to addressing major issues. This has required professionalism and self-discipline at the institutional and professional level and the avoidance of a ‘silo culture’ between Singapore government ministries.

Many global cities face major problems of land-use and sprawl, but Singapore’s record of scarce land management has been very positive. Extensive house-building programmes and co-ordination with the Urban Renewal Authority and other system agencies (telecoms, utilities, economy and environment) have helped prevent urban fragmentation and supply commercial and public service facilities to self-contained communities. Integrated systems have enabled Singapore to deliver larger-scale affordable housing than would have normally been possible: 80% of Singaporeans still live in Housing Development Board housing, and the city-state boasts one of the highest home-ownership rates in the world, defying the pattern found in high-performing cities.

Singapore has suffered from none of the tensions between nation state and world city that exist in other cities. Rather it internalises such tensions into city wide debates about the nature of the development path and the best means to meet the needs of the Singaporean people. One way Singapore is able to defuse tension is through its greater scope (compared to other world cities) to intervene in social policies and behaviour – savings, housing, education, skills, health, water usage and crime. The opportunity to experiment with and monitor policies without interference from national levels have helped maintain an appealing business environment and achieve responsive public services.

Which areas does Singapore need to address?

88 2 | Singapore Part

Singapore’s governance model has accomplished a lot but still faces its share of challenges. With population approaching 7 million people by 2030, the city’s transport system is increasingly congested. Its population is also ageing and more demanding of public services, while the supply of middle-income jobs is a growing challenge. The city will need find to a sustainable set of solutions to immigration, social inclusion, density and liveability.

These issues will be addressed through its capable city state government in a much more coherent way than they can be addressed in the other world cities.

–

Tokyo metropolitan area’s size and economic performance

29

% of national population

31

% of national GDP

1.08

GVA per capita vs national average (1)

6

City global competitiveness rank74

6

Country global competitiveness rank75

Hong Kong London Moscow Mumbai New York Paris São Paulo Seoul Shanghai Singapore Tokyo Toronto

What is Tokyo’s operating framework as a world city?

Tokyo is the world’s most populated urban area and largest economic unit. Its market volume ensures it remains one of the ‘Big Six’ command and control centres of the global economy and has prodigious R&D, transport and quality of life assets.

As Japan’s low economic growth and deflation persists, Tokyo’s priorities are to open and re-energise its economy to prepare for and finance a rapidly aging society, as well as to diversify its energy sector after Fukushima. To this end, Tokyo’s new long-term vision focuses on becoming “the world’s best city” and a model of sustainable development.

Tokyo is the only city in Japan governed as a metropolitan prefecture, and is one of 47 prefectures in Japan. The Tokyo Metropolitan Government (TMG) has a powerful governor and metropolitan assembly that preside over 23 Wards (population 9 million), each with their own mayors and local governments, and 26 suburban cities to the west (pop. 4 million). The prefecture is home to one in ten Japanese but generates 20% of national GDP. It forms the dense core of a large (13,000 km2) three prefecture conurbation with a combined population of 36 million.

What is the character of the relationship between Tokyo and its nation state?

Japan is a centralised unitary nation state, but TMG has special fiscal and political autonomy. Its own 16 taxes raise 70% of the city’s revenue spending, much higher than the Japanese average, and it does not receive tax allocations from central government.

Central and Tokyo governments do nevertheless tend to share objectives and communicate formally and informally.

The Prime Minister’s Office and central ministries’ main responsibilities to Japan’s cities are to disburse powers, to invest in national infrastructure investment (e.g. high speed rail, inter-city motorways, airports), and to manage framework conditions. Policy co-operation between TMG and the national government has increased since the 2002 Urban Renaissance law to intensify investment in city centres. The national tier has responded to calls for more international flights and better airport connections. The government framework has also helped Tokyo manage its housing supply and affordability better than many other world cities.

But macroeconomic policy and government regulation has held back its progress as an international business location since the early 1990s.

Urban revitalisation and boosting Tokyo’s global competitiveness through local projects is now a cornerstone of national policy since the re-election of Prime Minister Shinzō Abe. The cen91

tral government has recently set up National Strategic Special Zones, which plan to relax labour regulations to make it easier for foreigners to live and work, and to simplify business setup rules. Previous Zone initiatives - including a Zone for Asian headquarters - have not reached their targets because of stringent tax conditions and vested interests that erect barriers to entering markets. The new Zones could have a transformative impact, but will need central and city government to reach agreement on the specific projects, spaces, density limits and participating companies.

Which areas does Tokyo need to address with its nation state?

Tokyo will host the 2020 Olympics, and the TMG will be responsible for a quarter of the total budget for sports infrastructure and urban upgrades. The capital’s ambitious new Governor Yōichi Masuzoe is leading a new phase of co-operation in the lead up to the 2020 Olympics, which also includes engagement with secondary cities. Co-ordination with national agencies is essential for the Olympic projects, especially if Tokyo is to showcase a model of urban sustainability and renewal.

Tokyo’s 2020 timetable has accelerated its ambitions in financial services, supported by Prime Minister Abe and the Chief Cabinet Secretary. The TMG is establishing an investment vehicle for foreign investors that requires central and local government deregulation reforms and education initiatives to boost English language uptake. The TMG’s active promotion of public-private partnerships and business creation requires a shared commitment to government deregulation to leverage the private sector. An upgrade of financial infrastructure and legal regimes, and a suitable range of incentives, would also enable Tokyo to compete more effectively in medicine, pharmaceuticals, hydrogen energy and other green technologies.

Tokyo leads a dense and well-connected system of Japanese cities, but attracts a disproportionate share of corporate activity and human capital. Its superior economic growth and fiscal flexibility have prompted leaders of Japan’s secondary cities to raise the agenda for greater devolution. Osaka and Nagoya consistently ask for metropolitan status (‘to’) on the same level as Tokyo in order to help reverse declining population. Central taxation reform may try to redistribute a greater share of local taxes raised by cities to less populated areas, despite TMG opposition, and the city’s own corporate tax rate may come under pressure to be cut. Tokyo’s diplomatic and public relations skills will be important if it is to avoid strains on its revenue base.

92 2 | Tokio Part

–

Toronto metropolitan area’s size and economic performance

17

% of national population

19

% of national GDP77

1.1

GVA per capita vs national average (1)

12

City global competitiveness rank78

15

Country global competitiveness rank79

Hong Kong London Moscow Mumbai New York Paris São Paulo Seoul Shanghai Singapore Tokyo Toronto

What is Toronto’s operating framework as a world city?

Toronto is Canada’s world city, and North America’s second most globalised urban area after New York. In the last half century it has emerged as an open and pluralist international city anchored around diverse business clusters and world-class universities. The city operates in a ten province federal system, and is the provincial capital of Ontario, hosting a strong Provincial government and administrative presence. The City of Toronto, the provincial government, and the federal Government of Canada all share responsibility and resources for different dimensions and aspects of urban development.

The City of Toronto is one of 25 municipalities in the Greater Toronto Area, a 6 million person metropolitan region with a high level of jurisdictional fragmentation. Greater Toronto’s economic and productivity growth is held back by congestion, housing shortages and weak clustering. Fiscal/investment and governance/co-ordination issues have left Toronto metropolitan region with low capacity to tackle these challenges. Although the provincial government amalgamated six municipalities plus Metro Toronto into the new City of Toronto in 1998 and additional powers later boosted city-wide government, horizontal co-ordination for Toronto’s (much larger) functional labour market and (‘Greater Toronto’) commuter region is weak. This has only been partially addressed by the provincial government, and is not a sustained concern for the federal tier.

What is the character of the relationship between Tokyo and its nation state?

Canada’s federal government cannot intervene directly in individual city affairs, but it does collaborate with Toronto in many areas to share programme costs and jurisdictional responsibilities. The relationship between the city and federal levels evolves informally and depends to a large extent on the changing impulses of federal leadership. Advocacy for the city’s needs takes place through direct relationships between mayors, ministers and officials, via informal policy levers, and through the positive action of Toronto business and civic alliances that have mobilised in the last decade.

Federal government agencies help fund the Toronto region’s world-class universities and many of their research programmes.

They have also helped facilitate integration of immigrants and boost Toronto’s business climate. Sound national macro-economic policy has enhanced the reputation of Toronto’s banking sector and financial risk management. More broadly, Toronto’s high quality public services (especially health and education) are a significant draw for mobile talent.

95

Which areas does Toronto need to address with its nation state?

Toronto lacks an adequate and predictable fiscal base to manage demand and plan innovation-led urban development.

Despite recent increases to federal grants for capital infrastructure, and provincial delegation of some local taxing powers, the city and region face major fiscal barriers in trying to address the infrastructure deficit. Fragmented financing arrangements lead to ad-hoc rather than strategic planning for the city’s future.

Canadian federalism lacks a focused and integrated approach to the distinctive needs and opportunities of its 4-5 major cities. Urban policy initiatives tend to appear fleetingly and become diluted over time (e.g. during the administrations of Pierre Trudeau and Paul Martin). This partly reflects the agrarian and resource-based origins of Canada’s economy and society. No federal agencies currently analyse, monitor or support Toronto’s assets as an aspiring world city. There is a need for a more explicit administrative and policy focal point for the urban engines of the national economy, instead of siloed departmental structures. Toronto can also benefit from federal initiatives to encourage productivity growth through trade, to support the transition into high value sectors.

The dispersed governments and sectors in Greater Toronto need to combine resources to speak with a unified voice to higher tiers of government, and in co-operation with a firmer and more ambitious national network of large Canadian cities. New Toronto Mayor John Tory’s affiliation with influential regional alliance Civic Action, and strong working relationships with provincial and federal governments, may yield a period of more effective regional alignment and advocacy.

96 2 | Toronto Part

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98

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