The world is urbanizing at an unprecedented rate. In 1950, only 29% of the world’s population was classed as urban dwellers. By 2050, the UN predicts that this will have risen to 69%. In 2000, 16 of the world’s top 30 most populous cities had over 10 million inhabitants; the UN predicts that by 2025 only one of the top 30 will have fewer than 10 million.
Shifting economic power from west to east and north to south has not only accelerated due to the global financial crisis, but it has also increased both the number and the sophistication of urban centers in all markets, especially the emerging markets. Globalization has meant that cities all over the world are more interconnected than ever before, as capital and people move freely between them — and these trends have increased the competition for talent and capital between cities worldwide. Today, every city in the world needs to be clear about its value proposition in order to attract people and investment in a highly competitive global marketplace. Every city needs to provide a sustainable, vibrant community for its citizens to live, work and enjoy life. Cities also need to foster economic growth by providing the right conditions for business and to promote and protect innovation. City leaders need to ensure they build an entrepreneurial ecosystem that supports the commercialization of innovation and attracts foreign investors. These factors and trends represent a trigger point for action.
Competition for resources — the talented people and capital that drive innovation — has never been so fierce. As resources are more mobile than ever, they will migrate to those places that have the most aligned offer in terms of brand, strategy, investment, infrastructure, services and culture. Cities today face a unique set of challenges and issues from stakeholder groups competing for supply side (essentially money/capital) and demand side (people and power) resources. In attempting to strike the right balance between these two forces, city leaders must also consider the unique set of challenges and issues they face from their competing stakeholder groups. So how does a city leadership engage, enthuse and energize all its stakeholder groups and build the consensus needed to move on a progressive journey toward a compelling vision?
Ernst & Young believes that a combination of ambition and sustainability underpinned by great leadership is needed to build a strategy. This must be backed by robust analysis and insight in order to sell the vision to all stakeholders and move the ambition toward a reality that will attract the required resources. Stakeholder engagement is critical: in our study, the top three criteria among the policy-makers we surveyed (city identity and brand, social inequality and economic progress) are not aligned with what the Philips’ Index for Health and Well-being and Economist Intelligence Unit’s Liveable Cities report are telling us about how to manage citizen expectations. In focusing on the “wow” it is essential not to lose sight of delivering the “now” that the citizen wants and needs.
Clearly, as we have discovered, city size is not important — all cities have the ability to deliver a vision and be the best they can be. And the perspectives of city leaders on what they would like their cities to be famous for in 10 years reflect this — “we want to be the best small city in the world,” said one.
However, many cities, and indeed their national governments, currently face financial hardship stemming from the impact of the global financial crisis: tax receipts are shrinking as a result of the downturn while public deficits increase out of proportion. A mixture of different funding streams must be considered, as reliance on central government is, for most, no longer a viable option. Our survey shows that cities will almost double the amount of debt/investment they seek to raise to deliver their vision for a brighter future.
Consequently, great financial management is needed: if the city treasury runs dry through poorly managed finances, then citizens and businesses will have to pay higher taxes. Will this attract or deter wealth creators and talent from migrating to the city? The answer is obvious. Managing the numbers, modeling options and their impact, and optimizing resources are vital capabilities each city requires because businesses, citizens, investors and donors alike will all expect city leaders to ensure that maximum stakeholder value is assured from every item of expenditure. Leaders must encourage transparency in city reporting and embrace direct accountability to the people. If you are doing a great job, tell them and let them review your performance!
Doing more with less and considering new delivery models involving the private sector will by necessity become the new norm. Simply assuming that capital markets can be relied on to fund additional debt is misplaced — appetite and capacity are limited. Therefore, creating markets and engaging with the private sector to co-deliver key aspects of city life could not only lead to performance improvement, but also create local growth. In fact, in 2010, Ernst & Young surveyed 12,000 citizens from 24 countries and 70% think that publicly operated enterprises are less efficient than private firms: all the more reason to explore market-based alternatives — especially as levying taxes is always unpopular. Developing citywide income earning enterprises for some services in partnership with commercial operators may even increase political popularity!
Trends in urban migration:
The world is urbanizing at an unprecedented rate. In 1950, only 29% of the world’s population was classed as urban dwellers. The UN predicts that by 2050 this will have risen to 69%. Regionally, this figure will be 90% in North America, 88% in Latin America, 84% in Europe and 75% in Oceania. As a result of this trend and population growth, cities are becoming more densely populated. In 2000, 16 of the world’s top 30 most populous cities had more than 10 million inhabitants. By 2025, the UN predicts that only one of the top 30 will have fewer than 10 million — China alone will have 5 cities in the top 30.
Now is the time to act
Shifting economic power from west to east and north to south — accelerated due to the global financial crisis — has increased both the number and the sophistication of urban centers in all markets, especially in the emerging markets. And globalization has meant that cities all over the world are more interconnected than ever before, as capital and people move freely between them.