Tuesday, February 28, 2017

Urbanization Without Growth?


GCI Insight Southeast Asia
Hello Everyone:

Today we are going to travel from the Kingdom of Saudi Arabia to Southeast Asia for a look at how urbanization is driving the region's economies.  In his CityLab article, "Does Urbanization Drive Southeast Asia's Development?" Richard Florida writes, "For those of us who live in the United States or in the advanced nations of Europe or Asia, urbanization has gone hand in hand with greater economic development, and the growth of the middle class."  However, in other parts of the world, the link between urbanization and increased living standards has been disintegrating over the past decade.  Mr. Florida points out "The world may be entering into a troubling new phase of urbanization without growth.". (http://www.citylab.com; 06/12/15; date accessed Feb. 28, 2017).  This is a situation where urbanization no longer leads to increased economic output, higher living standards, or a large middle class.

Map of Southeast Asia
Southeast Asia-see map at the left-is currently undergoing rapid urbanization.  Mr. Florida reports, "By 2030, its urban population will grow by another 100 million people, rising from 280 million people today to 373 million people."

A new study, The Rise of the Urban Creative Class in Southeast Asia (http://www.martinprosperity.org; 01/18/17; date accessed Feb. 28, 2017), focuses on urbanization in six major Southeast Asian nations and the cities of Phnom Penh, Cambodia; Jakarta, Indonesia; Kuala Lumpur, Malaysia; Manila, Philippines; Bangkok, Thailand; Ho Chi Minh City, Vietnam, and city-state of Singapore.

"Metropolitan Economic Output per Person in Southeast Asia"
Martin Prosperity Institute/Data from Brooking Institute
2014 Global Metro Monitor
Two of the study cities, Manila and Jakarta, are megacities with populations of over 10 million people.  Bangkok, Ho Chi Minh City, Kuala Lumpur and Singapore are populated with five to 10 million people.  By 2030, the populations of Bangkok and Ho Chi Minh City are projected to grow to over ten million, Kuala Lumpur will increase to nearly 10 million people, and Singapore will grow to seven million.  Mr. Florida reports, "The region provides an intriguing lens from which to better understand the opportunities and challenges of urbanization today."

The Martin Prosperity Institute's analysis accentuates the "...highly uneven process of urbanization across this region, as its cities and nations divide across four broad tiers of development."

If you look at the graph on the lower left-hand-side, charting the economic output person, focusing on the cities in bold face.  At the top of list is Singapore with an economic output of $66,864 person, making it the most prosperous and advanced cities in the world, right behind New York and just ahead of Tokyo, Seoul, and Hong Kong.  The city-state ranks "...as the fourth-most-advanced global city in the world, behind only New York, London, and Tokyo."  Singapore's creative class compose nearly half of the workforce (47.3 percent)-significantly greater than that of the United States (32.6 percent).

"The Global City Index"
Sources:  Brooking Institute 2014 Global Metro Monitor
Z/Yen Group Global Financial Centres Index 15;
A.T. Kearney's 2014 Global Cities Index;
The Economist's Hot Spots 2025 (Martin Prosperity Institute)
The graphic on the left illustrates "The Global City Index."  Singapore is ranked fourth, behind New York and Tokyo.  Moving down the the graph, we notice the Kuala Lumpur is positioned in the second tier, with an economic out of $28,076 per person, greater than Shanghai ($24,065) and Beijing ($23, 390).  Despite its second tier status, Kuala Lumpur's economic output per person is nearly three times greater than Malaysia overall ($9,7748).  The city also outpaces Stuttgart, Germany ($158 million); Stockholm, Sweden ($143 million); generating over half (50.8 percent) of the nation's gross domestic product.  According to the MPI "urban productivity ratio" which weighs a city's productivity against that of its host nation, "Kuala Lumpur is three times as productive as Malaysia."  Richard Florida adds, "It ranks 39th on my Global City ranking, not too far behind Beijing."

Bangkok, Thailand and Manila, Philippines are ranked as third tier cities, with economic output per person of $19,705 and $14,222 respectively-far greater than Thailand ($5,158) and the Philippines ($2,360) overall.  Mr. Florida writes, "Bangkok's economic output is $307 billion-more than Miami ($263 billion) or Frankfurt ($230 billion), and accounts for more than three quarters of Thailand's total GDP."  Manila creates $183 billion in economic output-greater than Stockholm ((143 billion). and comprises nearly two-third of the country's total GDP.  Interestingly, the Thai capitol is more productive than the nation overall, and the Philippine capitol is six times more productive than the island archipelago.

Jakarta and Ho Chi Minh City are ranked as fourth tier cities with economic output per person of $9,984 and $8,660-although lower than the other study Southeast Asian cities is still significantly larger than for Indonesia ($3,323) and Vietnam (($1,544).  Jakarta's total economic output-$321 billion-is greater than Toronto, Canada ($276 billion),  Ho Chi Minh City's economic output ($71 billion) is just smaller than Turin, Italy ($78 billion) and Oslo, Norway ($74 billion).  In both cases, they account for over 35 percent of their national economies.  Mr. Florida reports, "Productivity in Jakarta is three times higher than for Indonesia as a whole, while it is 5.6 time higher in Ho Chi Minh City than for the Vietnamese economy."

"Economic output per person"
Source: World Bank, World Development Indicators, GDP Per Capita 2010-12
Urbanization:  World Bank, World Development Indicators, Urban Population 2010-12
(Martin Prosperity Institute)
Richard Florida poses this question, "So is urbanization helping to propel economic growth in Southeast Asia or not?  The answer from our research is a qualified yes."

Take a look at the graph on the left-hand side.  It maps the relationship between the rate of urbanization and economic development (gauged as economic output per person).  Mr. Florida writes, "The slope of the line is upward and to the right, highlighting the generally positive relationship between the two."  The important point   is Southeast Asian nations fall either right on the line or just above it-indicating that their level of urbanization is about in line with their rate of economic development.

Singapore is the regional leader in urbanization and economic development with levels that place on par with the United States, Japan, Canada, and Australia.  Malaysia is second with a 75 percent urbanization level, ebbing closer to South Korea.  Indonesia and Thailand are over 50 percent urbanized; the Philippines is nearly 45 percent urbanized.  All three have urbanization levels close to that of China.  Vietnam's urbanization rate is 33.6 percent, just slightly ahead of India and Cambodia's rate of urbanization is 20.7 percent-"...still both have levels of urbanization that are roughly in line with their level with their levels of economic development."

What we can conclude from The Rise of the Urban Creative Class in Southeast Asia is that economic development across the Southeast Asian region and its cities is very uneven, "...mirroring the broader pattern of uneven development between the advanced nations and cities of the Global North and the struggling nations and cities of the Global South."  The region is varied-from the affluent and most urbanized Singapore to Cambodia, where economic output is merely $869 per person, placing it 116th among the 139 nations studied by the Martin Prosperity Institute.

Although some parts of Southeast Asia are urbanized and developed, others still have not made the leap.  The main question is "...whether urbanized can continue to propel economic development in the region's less developed cities and nations, or whether some will fall victim to urbanization without growth."

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