I Beijing I Istanbul I Jakarta I Mexico City I Moscow I Mumbai I São Paulo I
From Moscow to São Paulo Emerging 7 Cities Report 2014 A Cities of Opportunity special edition São Paulo Contents
Introduction 2 Demographics and More— A Snapshot of Life in the E7 Cities 4 Approach 8 Highlights: How the E7 Cities of Opportunity Rank 10 Tools for a Changing World 14 Intellectual Capital and Innovation 14 Technology Readiness 18 City Gateway 20 Quality of Life 22 Transportation and Infrastructure 22 Health, Safety and Security 25 Sustainability and the Natural Environment 27 Demographics and Liveability 29 Economics 31 Economic Clout 32 Ease of Doing Business 34 Cost 36 Mega-Events as a Catalyst for the Social and Economic Development of Emerging Cities 38 Key to the Variables 43
From Moscow to São Paulo | 1 Introduction
2 | PwC Dear friends,
From Moscow to São Paulo is the second edition of a report that compares the Emerging 7 Cities of Opportunity (E7), our term for seven major emerging global cities that possess some of the world’s most dynamic urban economies. The global interest in the first edition in 2013 has prompted us to continue our research into the trends driving the E7 cities’ growth as well as the policies that have helped them to succeed.
Similar to last year, this report has been prepared for the 2014 Moscow Urban Forum, which will feature a separate discussion on the role of international benchmarking in urban planning and development. We hope that this comprehensive study of urban life will stimulate further thought and enable a better understanding of the strategies and approaches that cities should employ to improve their competitive standing now, and ensure healthy growth into the future.
This report is addressed to a wide audience. That begins with municipal and political leaders who shape the development of their cities. But our audience also includes the global business community and urban residents alike — who more than anyone else experience every day the benefits and problems of life in today’s major urban centres. In both developed and developing cities, it is increasingly understood that a concerted effort by government, business, and the community is required to ensure balanced development and sustained prosperity.
Our approach to From Moscow to São Paulo applies the same methodology as in our Cities of Opportunity 6 report; cities were compared according to carefully selected, balanced and interrelated indicators. At the same time, our approach is based on the assumption that it is not only quantitative data that represents a city’s level of social and economic development. Frequently, how a major city is perceived by its own residents and visitors, as expressed in numerous surveys, speaks more eloquently than mere numbers about the essential trends and challenges of modern urban life. Although the 10 comprehensive indicators are the same as in the first edition, we have changed or replaced some of the 59 variables that constitute them in order to sharpen our vision of urban life.
This year, we have also focused on one critical issue in urban development: the rewards of holding major international mega-events in developing cities. We hope you enjoy the study.
Best regards,
David Gray Managing Partner PwC Russia
From Moscow to São Paulo | 3
Demographics and More — A Snapshot of Life in the E7 Cities
As with last year's report, this the annual GDP growth rates of the document examines seven cities in the E7 countries between 2013 and 2025 leading E7 emerging economies. Why will range from 3% to 6%, which were these cities specifically chosen is higher than the projected 2.3% for benchmarking purposes? What GDP growth expected for the OECD are their commonalities? How do they countries in 2010-2020. This economic resemble each other, or not, in factors development will result in rising living such as demographics, overall wealth standards and growing consumer and development? This section sums demand, as well as improved quality of up statistical data that characterises life for the population at large, which, the main similarities and differences in turn, will facilitate the E7 cities’ among these seven cities in the E7 further development and heightened emerging economies. importance as hubs of the fast-growing world of the future. First of all, it is important to note the special role of the E7. At present, Moscow, Beijing, Mexico City, São China, India, Russia, Indonesia, Paulo, Jakarta, Istanbul and Mumbai – Mexico, Brazil and Turkey together each of these cities is a key strategic account for approximately 45% of the hub that serves as its country’s national world's population. Although the E7 financial and commercial capital. countries may currently lag behind These cities are also home to their Western Europe and North America countries’ largest national universities. in terms of social and economic They are magnets for daily migration development, their role in the global from other regions and neighbouring economy is destined to expand in the countries, attracting labour migrants in decades immediately ahead. As early search of employment opportunities. as 2050, the aggregate GDP of these For example, as home to around 8.5% countries is projected to significantly of Russia’s total population, Moscow exceed the aggregate GDP of the G7 generates more than 18% of aggregate countries. Moreover according to a Russian GDP. Istanbul, which is also joint PwC-Oxford Economics forecast, a major industrial centre, generates
A Snapshot of Life in the E7 Cities
Current city Average annual GDP per capita, City share of City share City land population, growth rate Dependency, Population density, USD ‘000, Employment, Employment in Income inequality, Crime national population, of national area, km2 thousandth 2013-2025, % % people per km2 2013 prices % manufacturing, % Gini index by country index % GDP, % Beijing 1 276 17 837 1.4 22 13 979 14.0 25.0 14.0 46.90 38.1 1.3 2.5
Mexico City 1 485 8 851 0.2 37 5 960 21.0 9.0 12.0 51.05 62.32 7.2 14.9
Moscow 2 511 12 108 0.1 40 4 822 32.0 18.0 9.0 45.10 53.55 8.4 18.1
Mumbai 603 12 478 0.4 61 20 694 4.6 8.0 25.0 36.80 47.6 1.0 3.1
Istanbul 5 196 13 256 0.7 55 2 666 14.0 9.0 25.0 45.00 46.01 18.5 22.9
Jakarta 664 10 188 0.7 53 15 343 13.0 7.0 15.0 39.41 52.17 4.1 14.5
São Paulo 1 521 11 254 0.8 53 7 399 17.0 17.0 19.0 56.43 74.46 5.6 8.4
4 | PwC
Beijing
about 23% of Turkey's GDP. About on a regional scale, but also constitutes the next 11 years, their populations 7.2% of Mexico's population lives an integral part of the global economy. will continue to grow, with Beijing in Mexico City, which accounts for and São Paulo expected to post the about 15% of the country's GDP. As Throughout the 20th century, each highest growth rates (1.5% and 0.8%, home to offices of the world’s leading of the E7 cities experienced dynamic respectively). In turn, the most stable transnational corporations, the E7 population growth. The main reason growth figures are projected for cities’ central business districts (CBDs) for such growth was heavy in- Moscow and Mexico City (0.1% and play a critical role in promoting ties migration by residents of outlying 0.2%, respectively). between such companies and their rural areas, who were attracted by clients and business partners in all employment opportunities in newly One of the most notable demographic corners of the world. This underscores developing industrial enterprises. At challenges today is the high percentage the fact that each of the cities studied present, each of the E7 cities is the of the non-working segment of the in this report not only plays a key role largest population centre in its country. population (older and younger than According to PwC projections, over working age) within the overall
Current city Average annual GDP per capita, City share of City share City land population, growth rate Dependency, Population density, USD ‘000, Employment, Employment in Income inequality, Crime national population, of national area, km2 thousandth 2013-2025, % % people per km2 2013 prices % manufacturing, % Gini index by country index % GDP, % Beijing 1 276 17 837 1.4 22 13 979 14.0 25.0 14.0 46.90 38.1 1.3 2.5
Mexico City 1 485 8 851 0.2 37 5 960 21.0 9.0 12.0 51.05 62.32 7.2 14.9
Moscow 2 511 12 108 0.1 40 4 822 32.0 18.0 9.0 45.10 53.55 8.4 18.1
Mumbai 603 12 478 0.4 61 20 694 4.6 8.0 25.0 36.80 47.6 1.0 3.1
Istanbul 5 196 13 256 0.7 55 2 666 14.0 9.0 25.0 45.00 46.01 18.5 22.9
Jakarta 664 10 188 0.7 53 15 343 13.0 7.0 15.0 39.41 52.17 4.1 14.5
São Paulo 1 521 11 254 0.8 53 7 399 17.0 17.0 19.0 56.43 74.46 5.6 8.4
From Moscow to São Paulo | 5
The challenge of aging populations is relevant for these cities even today. However, over the next decade, it will become even more acute, requiring municipal authorities to pay special attention to the creation of living environments suitable for elderly persons.
population, which places a greater populations is relevant for these cities burden on a relatively small number even today. However, over the next of working-age individuals. How to decade, it will become even more provide for an aging population in acute, requiring municipal authorities Europe is now a hotly debated issue to pay special attention to the creation in light of the growing burden on of living environments suitable for government budgets. At the same elderly persons. These cities may also time, public policies aimed at fostering face shrinking of their working-age employment and healthy economies populations. also remain a priority for many cities over five years since the height of the The cities examined in this report Great Recession. also differ significantly in terms of population density. The most densely Beijing enjoys the most In our report, this problem is reflected populated E7 city is Mumbai, where favourable balance between the in the demographic load factor, which on average about 29,900 persons are is calculated as the percentage of the concentrated per square km. However, working-age and non-working- total number of elderly people aged excluding those city districts where age segments of its population. over 66 and young people under real estate development is restricted, In Beijing, one dependent is 20 against the economically active Mumbai’s population density rises to supported by about 4.5 working working-age population. With respect about 50,000 persons per square km, to the Е7 cities under review, the in some instances reaching 100,000 individuals; Moscow shows highest demographic load factor was inhabitants per square km, the kind of a similar balance, where this recorded for Mumbai (61%), where figure seen in Manhattan. Meanwhile, ratio is 1:2.5. one dependent is supported by about a substantial part of the city's 1.6 working-age individuals. This population lives in low-rise buildings, high demographic imbalance is which frequently lack fundamental largely driven by the significant infrastructure. The least densely Beijing percentage of the population aged populated E7 cities are Istanbul, 0 to 19. A similar situation can be seen Moscow and Mexico City. The potential in Istanbul, Jakarta and São Paulo. benefits of a compact urban structure As they approach working age, the include energy conservation and more younger generation of these cities may efficient provision of infrastructure become a significant advantage – if the and services, thereby bringing Dependency: 22% 4.5:1 challenges of providing quality higher financial benefits to such cities. But, education and job opportunities can an overcrowded urban environment is be met. If not, high levels of youth unlikely to match the desires of most Moscow unemployment can result in social city dwellers, which invariably leads to conflict and disruption. ever-expanding urban sprawl.
Currently, Beijing enjoys the most In terms of GDP per capita, Moscow favourable balance between the and Mexico City record the highest working-age and non-working-age levels of wealth. The lowest figure was segments of its population. In Beijing, recorded for Mumbai, which in 2013 Dependency: 40% 2.5:1 one dependent is supported by about posted GDP per capita of USD 4,600, 4.5 working individuals; Moscow or nearly seven times lower than in shows a similar balance, where this Moscow. ratio is 1:2.5. The challenge of aging
6 | PwC
In terms of GDP per capita, The colored segments below represent each age group’s percentage of a city’s overall population: Shown on the right are people under age 50; on the left, over age 50. Moscow and Mexico City The gray arc circumscribing each segment of the schematic depicts the projection record the highest levels of of the respective age group’s percentage in 2025. wealth. Age Elderly 75+ Youth 0–19 0 20 75 Retirees 38 Young workers 67–74 avg. age 20–29
66 One of the distinctive features of each 30 of the emerging cities examined in Seasoned Prime working- this report is a high level of social workers 50 age workers 50–66 30–49 disparity, which not only manifests itself in income disparities between rich and poor residents, but also Projected levels in 2025 in opportunities to gain access to key social institutions. Differences in household income are most Population percentage by age group pronounced in the Latin American cities, São Paulo and Mexico City, while the lowest Gini index values are Moscow Beijing Mexico City characteristic of Mumbai and Jakarta. 13 7 Thus, the most egalitarian distribution 16 2 2 22 of household income is recorded in 39 5 41 16 3 22 2 35 those cities with the lowest GDP per avg. age avg. age avg. age 20 capita figures. São Paulo and Mexico 24 22 18 City also have the highest crime rates 32 38 35 among all the E7 cities, while Beijing is considered the safest among the cities under review. São Paulo Istanbul Mumbai
30 4 27 33 2 2 34 32 4 avg. age 17 3 17 30 avg. age 3 avg. age 21
17 14 12 31 33 29
Jakarta
32 1
2 29 avg. age 20
12 33
Sources: Local data sources, Worldpopulationstatistics.com, Oxford Economics, Euromonitor, Numbeo.com
From Moscow to São Paulo | 7 Approach
Our method for assigning Similar to the research for PwC’s Cities staff about issues of urban life because points to cities was developed of Opportunity report, in From Moscow they represent a broad cross-section to São Paulo we have maintained a of educated, mobile professionals so that, on the one hand, it rigorous fundamental approach while worldwide (including engineers, was clear and transparent continuously seeking to refine and technical specialists, and qualified for readers and, on the other improve our mix of variables and professional service providers) on hand, it allowed for performing methods for comparing them. whom the further development of their cities depends. We took into account a high-quality comparative Each variable meets the following that PwC is one of the world’s most analysis of the cities according requirements: relevance, comparability urbanised and globalised business to the selected categories. within the sample group, general enterprises, operating in cities of availability, timeliness, resistance strategic importance to fully meet to local distortions, and ability the needs of our clients worldwide. to accurately reflect the city’s Two variables, Ease of Commute achievements. Because our analysis and Relocation Attractiveness, were relies on publicly available data calculated based on the responses of supported by comprehensive PwC employees. research, we use three basic sources of information: We compared the E7 cities according to 10 categories and 59 variables, • international organizations, assigning points and ranking the such as the World Bank and the cities depending on the results they World Health Organization; demonstrated. To minimise the • national and municipal statistics probability of a city showing better offices; results merely due to its size, we normalised the variables by area and • commercial information agencies population, where possible. In some Data collection was performed in cases, we used data on an E7 city’s August-October 2014, and in most home country as approximate variable cases the data used in the research values, but first ensured that the data covers either 2013 or 2014. reflected the situation in the given city as closely as possible. This year, as an additional data source we used a survey of PwC employees Our method for assigning points to covering all 30 cities represented cities was developed so that, on the in our global Cities of Opportunity 6 one hand, it was clear and transparent report, including the Emerging 7 Cities for readers and, on the other hand, it of Opportunity. About 15,000 PwC allowed for performing a high-quality employees gave their views on what comparative analysis of the cities they see as vital for their cities, which according to the selected categories. problems are most critical to solve in So as to ensure transparency and avoid their cities, which of the 30 cities they using an overcomplicated weighting would like to move to if they had the system for the 59 variables, each chance, and how they commute to variable was given the same weight. work every day. We consulted our own
8 | PwC Istanbul
Based on the data for each particular category includes the evaluation of This year’s report organises variable, the E7 cities’ results were such areas as intellectual capital, the 10 comprehensive ranked from best to worst. Then, they innovation and implementation of were assigned points, from 7 (best advanced technologies. This category indicators into three result) to 1 (worst result). If the results also includes the evaluation of how categories that seek to reflect were the same, the cities were given a city can use its existing assets to the modern, fully-rounded the same number of points. After all establish global links and enhance aspects of city life and healthy of the 59 variables were ranked and its attractiveness for the global calculated, they were distributed into community. The indicators in the development: their respective indicators (for example, Quality of Life category characterise • Tools for a Changing World Economic Clout or Demographics and a city’s livability, as well as the level Livability). Then, the variable points of convenience and sustainability of • Quality of Life were added up within each indicator urban life. Finally, the Economics to obtain the total score. As a result, category evaluates the cities’ ability to • Economics tables for each of the 10 indicators were finance their own development and generated, which reflect the relative expand their influence beyond their results of the E7 cities. The general home countries. table is the result of summarising the values of all 59 variables. The study’s results provide ample opportunity for further discussion This year’s report organises the and more in-depth analysis by such 10 comprehensive indicators into stakeholders as businesspeople, three categories that seek to reflect researchers, municipal authorities the modern, fully-rounded aspects and average citizens. of city life and healthy development. The Tools for a Changing World
From Moscow to São Paulo | 9 Highlights: How the E7 Cities of Opportunity Rank
Despite methodological refinements in other E7 cities fell further behind the specific indicators and variables, each Chinese and Russian capitals, which of the E7 cities maintained the same can be seen in the increased point relative ranking as in last year’s final spread between second and third rating. This year, Beijing repeated its place as well as first and last place. prior year’s performance by scoring Indeed, of all the rated cities, Beijing highly in all 10 comprehensive and Moscow showed consistently high indicators; Moscow came in at second results in the majority of indicators. place while Mexico City ranked third. For example, Beijing came out top in Nevertheless, a comparison of the two categories – Tools for a Changing 2013 report against this year’s edition, World and Quality of Life – taking first as regards specific indicators, clearly place in five of the seven indicators demonstrates the dynamic pace of applicable here. Given its developed growth in the largest E7 cities. This is economy (finishing first in the reflected not only in the numbers but Economic Clout indicator), China’s also in the changing perceptions of the capital city is not only one of the cities among residents, visitors and the drivers of today’s global economy, but world community. also appears positioned to strengthen its place on the global stage, and is The results of the first and second increasingly becoming a competitor editions of From Moscow to São Paulo with the developed economies’ major show two trends are clearly visible. urban centres. Against the background On the one hand, this year the gap of an aging and shrinking working between Beijing and Moscow, holding population in China, government first and second place respectively, authorities at the national and shrunk considerably. Moscow municipal level are increasing their managed to move closer to the top emphasis on the availability and spot, shortening the gap from 14 down quality of healthcare and education, to 9 points. On the other hand, the
Summary table
Highest rank in each variable Sustainability Rating Intellectual capital Technology Transportation Health, safety and the natural Ease of doing Demographics position and innovation readiness and infrastructure and security environment Economic clout business Cost and Livability City gateway Score
1 Beijing 43 21 35 26 20 30 35 15 34 42 301
2 Moscow 42 22 30 19 25 27 34 22 34 37 292
3 Mexico City 35 16 28 26 24 20 41 22 25 25 262
4 Istanbul 39 17 18 21 20 15 36 23 28 38 255
5 São Paulo 28 14 23 19 20 17 35 18 24 24 222
6 Mumbai 20 14 18 17 18 18 26 20 10 15 176
7 Jakarta 19 10 19 14 16 16 21 20 14 18 167
10 | PwC Moscow
as well as developing Beijing’s This year, Moscow reinforced Moscow managed to move physical infrastructure and creating its second-place ranking, having closer to the top spot, a comfortable and attractive urban shortened its gap behind the leader environment. As a result of increased and extended its lead over third place. shortening the gap from prosperity among city residents and By total score, the city demonstrated its 14 down to 9 points the rising cost of doing business in the best result in the Economics category city, Beijing is gradually losing one of and second best in the Tools for a its main competitive advantages – Changing World and Quality of Life a low cost of doing business. This is categories. Moscow differs from other illustrated by the fact that Beijing E7 cities in the high percentage of its placed last (after São Paulo) in the residents with higher education, as Cost indicator. well as in its readiness to create and
Summary table
Highest rank in each variable Sustainability Rating Intellectual capital Technology Transportation Health, safety and the natural Ease of doing Demographics position and innovation readiness and infrastructure and security environment Economic clout business Cost and Livability City gateway Score
1 Beijing 43 21 35 26 20 30 35 15 34 42 301
2 Moscow 42 22 30 19 25 27 34 22 34 37 292
3 Mexico City 35 16 28 26 24 20 41 22 25 25 262
4 Istanbul 39 17 18 21 20 15 36 23 28 38 255
5 São Paulo 28 14 23 19 20 17 35 18 24 24 222
6 Mumbai 20 14 18 17 18 18 26 20 10 15 176
7 Jakarta 19 10 19 14 16 16 21 20 14 18 167
From Moscow to São Paulo | 11 Moscow differs from other E7 cities in the high percentage of its residents with higher education, as well as in its readiness to create and implement innovation, and the high quality and availability of information and communications technologies (ICT) infrastructure.
implement innovation, and the high Compared with last year, Moscow has quality and availability of information also improved its rankings under the and communications technologies Transportation and Infrastructure, (ICT) infrastructure. Health, Safety and Security, and Cost For example, this year Moscow indicators, thus enabling the city to leads in the Technology Readiness come closer to Beijing. The “weak indicator, and is in a virtual tie with zones” for the Russian capital remain Beijing in the Intellectual Capital and a high level of operational risk and law Innovation indicator. Despite the enforcement issues. severity of Russia’s climate, Moscow for the second time in a row has shown Mexico City ranked second in the the best results for the Sustainability Economics and third in the Quality and the Natural Environment of Life categories, while winning the and Demographics and Livability Ease of Doing Business indicator by indicators. The availability of public a wide margin and sharing first place parks and green zones is not only with Beijing in the Health, Safety higher compared with peers among and Security indicator. The city’s the E7 cities, but is comparable to such openness to business, relatively low “green” centres as Stockholm and Paris. costs and relatively favourable political
Mexico City
12 | PwC environment during 2013 and early 2014 have converged to create a strong opportunity to bolster the city’s role in the global economy. To increase its competitive advantages, Mexico City still has room to improve human capital and stimulate the development and implementation of innovations, as well as issues of transport infrastructure and balanced use of space.
Istanbul takes fourth place in the most recent From Moscow to São Paulo rating, three points behind Mexico City. This year, Istanbul was able to show strong results in most indicators. Its No. 1 ranking in the Cost indicator proves that a city with a relatively high Istanbul standard of living can be competitive as regards the cost of doing business. Compared to the previous year, Istanbul has strengthened its ranking in the Brazilian economy as a way as regards the business climate and of strengthening its positions on the enhanced international appeal, global economic, political and cultural thus moving up in the Ease of Doing stages. The city could also benefit from Business and City Gateway indicators. improving internal security and legal Moreover, of these seven cities, compliance, enhancing intellectual Istanbul was named as the most property protections, developing attractive city for foreign employees. ICT infrastructure and boosting Indeed, not many cities can boast of the penetration rate of advanced such a unique combination of cultural technology. and historical heritage and dynamic modern urban life. Istanbul, however, Mumbai and Jakarta show similarities scored seventh in the Economic Clout in their respective rankings for the and sixth in the Transportation and From Moscow to São Paulo indicators Infrastructure indicators. and variables. Although both cities rank at the lower end of the rating, This year, São Paulo performed in they have scored successes in such the middle of the group in the Ease of fundamental areas as intellectual Doing Business and Sustainability and property protection and upholding the Natural Environment indicators, shareholders’ rights. In both cases, a while also improving its ranking in relatively high security level is seen the Transportation and Infrastructure, as compared to most other E7 cities. Health, Safety and Security, and Cost Both cities enjoy the advantage of a indicators. Still, the city is relatively relatively low cost of living and rather expensive for both everyday living and low cost of business occupancy for doing business. Brazil’s largest urban office space. Jakarta was also ranked centre still has great room to tap into best in terms of the Total Corporate its huge potential and essential role Tax Rate variable.
From Moscow to São Paulo | 13 Tools for a Changing World
We have grouped three indicators – Intellectual Capital and Innovation, Technology Readiness, and City Gateway – together in one section because the combination of scientific knowledge, education, technology and openness to the outside world defines a city of opportunity today and as we move into the future. Intellectual capital contributes to the development of a competitive and knowledge-based economy, while technology is the key factor in achieving versatile living for society at large. A city’s merits in these areas also influence its attractiveness in the eyes of the outside world. The same three cities are ranked in the top three according to each of the indicators highlighted in this section – Beijing, Moscow and Istanbul. Currently, they are the most dynamic cities in terms of creating the right conditions for increasing intellectual and technological capital, and the most attractive cultural and economic centres among all the E7 cities.
Beijing
Intellectual Capital and Innovation
People and knowledge are critical property, and help talented young intellectual assets for any city. The people get on the radar screens of development of a city's overall leading companies, will boost its odds “intellectual brand” depends on how of winning investment and talent in well it contributes to generating, competition against its peers. protecting, reproducing and disseminating knowledge. Therefore, In this study, the Intellectual Capital the importance of this indicator for and Innovation indicator underwent both developed and developing cities some methodological changes can hardly be overestimated. For compared to the previous edition, thus the latter, intellectual resources play ensuring more accurate city rankings an even greater role. A city's ability in this category. The number of to offer educational opportunities variables we used this year to measure of the highest quality, as well as to a city's intellectual development has create the conditions for effective been reduced from nine to eight. knowledge sharing, protect intellectual We decided to drop the Classroom Size
14 | PwC variable, as the correlation between the research capabilities. In the previous which provides a comprehensive, number of students in a classroom and From Moscow to São Paulo study, all-inclusive assessment of world-class their academic achievement has proved scores were assigned based on the universities. to be a topic of considerable dispute. number of faculty articles published, The publication in December 2013 total citations of published work, and The top performers in the Intellectual of the test results for the Programme the quantity of highly cited research Capital and Innovation indicator for International Student Assessment papers. Such rankings favoured large demonstrated nearly neck-and-neck (PISA) demonstrated that 15-year-old universities and institutions that focus results, with the leader just four points students in Shanghai held the highest on the hard sciences. Therefore, in ahead of the third-ranked city. Beijing scores, even though the average this edition of the study, we have came in first with the highest scores classroom size in the city can hardly be replaced the Research Performance in three out of eight variables: Math/ described as small. of Top Universities variable from the Science Skills Attainment, Innovation 2013 study with a new variable: World Cities Index, and World University Another change concerns our University Rankings. We used the Rankings. Moscow ranked second approach to measuring how a city's widely recognised World University overall, ahead of its peers in two universities perform in terms of Rankings by Times Higher Education, out of the eight variables: Literacy
From Moscow to São Paulo | 15 and Enrolment and Percentage of by the Internet. However, given that The Literacy and Enrolment variable Population with Higher Education. only one-third of the global population is also based on country-level data. It It also had the second-highest has Internet access, traditional libraries consists of several metrics, such as the score in three variables: Libraries will not disappear completely because, average period of school education with Public Access, Math/Science for an extremely large part of the and the percentage of people who Skills Attainment, and Innovation world’s population, libraries remain enrol in secondary and tertiary Cities Index. Istanbul ranked third one of the few facilities where people educational systems. Although the overall with the highest score in the can get the information they need. top three performers overall are not Entrepreneurial Environment variable. represented by Asian countries, this The Math/Science Skills Attainment fact by no means diminishes the latter’s The Libraries with Public Access variable is based on country-level efforts to meet rising demand for variable measures the number of data with PISA test results serving as education in light of limited resources libraries within each city that are open the primary source of information. and a growing population. Access to to the public per 100,000 inhabitants. PISA tests are conducted by the education remains a key issue that Mexico City retains the top ranking Organization for Economic must be addressed by the governments among the E7 cities in this variable, Co-operation and Development of the emerging cities and countries. and ranks as a top five city for this (OECD) every three years among variable in PwC’s global Cities of 15-year-old students throughout the The Top-3 performers in our new E7 Opportunity 6 study, which was world. These tests assess students' variable, World University Rankings, published in May 2014 and features ability to practically apply the include Beijing, Istanbul and Moscow. rankings of 30 cities around the world. academic knowledge acquired in Interestingly, 10 Chinese universities Due to the intensive use of information school. Interestingly, seven Asian are listed in the World University technologies, combined with the countries top the rating of those Rankings 2013-2014 by Times Higher growing demands and expectations of countries with the highest PISA test Education, three of which are located local populations, libraries are eager results. This is possibly due to the in Beijing. Three of the five Turkish to enhance their functionality. In the fact that these countries focus on universities listed in the rating are most advanced cities, libraries are now practical knowledge. As in last year’s located in Istanbul. Meanwhile, transforming from traditional book- study, Beijing came in first among Moscow and São Paulo are represented lending facilities into cutting-edge the E7 cities for Math/Science Skills in the rating by one university each. cultural spaces – venues for meetings, Attainment. Moscow and Istanbul An individual university’s ranking is leisure and work. This suggests that improved their rankings in this derived from a number of parameters, the traditional usage of libraries will variable, moving from third place to including its contribution to innovation gradually transform and evolve toward second place and from fourth place to and international cooperation. providing new services, especially in third place, respectively, against their However, the most substantial weight the context of the opportunities offered performance last year. is assigned to teaching and research
Intellectual capital and innovation
Highest rank in each variable
Rating Libraries with Math/Science Literacy and Percent of population World university Innovation Intellectual Entrepreneurial position public access skills attainment1 enrolment1 with higher education rankings Cities Index property protection1 environment1 Score
1 Beijing 3 7 3 4 7 7 6 6 43
2 Moscow 6 6 7 7 5 6 1 4 42
3 Istanbul 4 5 4 5 6 4 4 7 39
4 Mexico City 7 3 5 6 3 2 3 6 35
5 São Paulo 5 2 6 3 4 3 2 3 28
6 Mumbai 1 4 1 1 2 5 5 1 20
7 Jakarta 2 1 2 2 2 1 7 2 19
1 Country-level data
16 | PwC activities, as well as citations of academic papers. Universities in both Beijing and Istanbul received high scores for these metrics. At the same time, however, Moscow lags behind its foreign peers, especially in citations.
In order to measure a city's potential as an innovation-oriented economy, we referred to the Innovation Cities Index produced by the 2Thinknow Innovation Cities™ programme. The index is derived from scores assigned for a city’s cultural assets and infrastructure, as well as its overall innovation-fostering environment. Beijing ranks first for this variable in the E7 cities rating, followed by Moscow. Meanwhile, Mumbai moved Istanbul up two places, while Mexico dropped two spots from its previous ranking.
Protection of intellectual property (IP) is a critical factor that investors based on executives' opinions on how Finally, the Entrepreneurial consider when entering any market. well intellectual property is protected Environment variable, in which Ultimately, both a city and country's in their countries. Although it is not Istanbul has ranked first for two years international reputation depends on usually associated with best practices in a row, proves that this city has the how well government authorities in IP protection, Jakarta ranks first potential to become a leader in offering address the issue of protecting in our rating, outperforming Beijing. attractive business opportunities. intellectual property. In ranking the Meanwhile, Istanbul improved its The widespread use of information E7 cities for the Intellectual Property performance, climbing two places in technologies in everyday life and Protection variable, we referred to the the rating to rank fourth, while São a strong local entrepreneurial Global Competitiveness Report 2014- Paulo showed poorer results, dropping spirit have been instrumental in 2015 by the World Economic Forum. to second-to-last place. As was the case transforming Istanbul into a leading Scores were assigned to the E7 cities last year, Moscow finished last. centre for start-ups.
Intellectual capital and innovation
Highest rank in each variable
Rating Libraries with Math/Science Literacy and Percent of population World university Innovation Intellectual Entrepreneurial position public access skills attainment1 enrolment1 with higher education rankings Cities Index property protection1 environment1 Score
1 Beijing 3 7 3 4 7 7 6 6 43
2 Moscow 6 6 7 7 5 6 1 4 42
3 Istanbul 4 5 4 5 6 4 4 7 39
4 Mexico City 7 3 5 6 3 2 3 6 35
5 São Paulo 5 2 6 3 4 3 2 3 28
6 Mumbai 1 4 1 1 2 5 5 1 20
7 Jakarta 2 1 2 2 2 1 7 2 19
From Moscow to São Paulo | 17 Technology Readiness
Development of information from the World Bank to data provided by the World Economic Forum technologies provides a foundation by fDi Intelligence. (WEF)1. Although China maintains its for innovation and an engine for a leadership in this variable among the city's economic growth. To become The E7 cities' performance in terms of emerging economies under review, technologically mature, a city must Technology Readiness is remarkable in Russia has jumped ahead in the WEF address the following three critical that there is no absolute leader in the Global Competitiveness ranking, issues: improving the quality of its sample, as each of the cities performs moving from No. 70 in the 2012-2013 physical infrastructure, encouraging quite well in at least one variable. For report up to No. 41 in the 2014-2015 the introduction of technological instance, the first- and third-place report. This, in turn, has helped solutions into daily life, and boosting cities are just one point ahead of Moscow to improve its position year the digital literacy of both the public their second- and fourth-place peers, on year as it moved up two places to and business. The Technology respectively. Moscow overtook Beijing overtake Istanbul and Jakarta in this Readiness indicator measures a to finish first this year, with Istanbul year's From Moscow to São Paulo given E7 city’s existing conditions for and Mexico City following the two study. Indonesia and Turkey have also developing new technologies. leader cities. Mumbai and São Paulo put in better performances and moved are tied for the fifth spot while Jakarta up eight and ten places, respectively, in While the number of variables in this ranks seventh. the Global Competitiveness ranking. indicator remains unchanged, we have revised certain data sources for two of The development of information Given the use of new sources of the variables. To measure Broadband technologies, and the Internet in information, Mumbai's second-place Quality, we are now using data from particular, creates major opportunities ranking in terms of Broadband Quality Internet metrics provider Ookla, for introducing educational can be seen as quite an achievement. instead of last year’s data source, the innovations that contribute to However, Mumbai will have to make a Broadband Quality Study, which is no improving the quality of education. concerted effort to improve technology longer being published. To refine the The Internet Access in Schools variable penetration among its population, Software Development and Multi-media is based on country-level data and the as well as upgrade channels for Design variable, we have added data findings of CEO surveys conducted dissemination of technology.
1 World Economic Forum, Global Competitiveness Report 2014-2015.
Technology readiness
Highest rank in each variable
Rating Internet access Broadband Digital Software development position in schools1 quality economy score1 and multi-media design Score
1 Moscow 6 7 2 7 22
2 Beijing 7 5 4 5 21
3 Istanbul 4 4 5 4 17
4 Mexico City 2 3 7 4 16
5 Mumbai 3 6 3 2 14
5 São Paulo 1 1 6 6 14 7 Jakarta 5 2 1 2 10
1 Country-level data
18 | PwC Mexico City
The Digital Economy Score variable Another initiative was the adoption measures a country's readiness of the Mexico IT programme, which to effectively implement and use aims at raising investor awareness of information and communications the Mexican IT industry's capabilities. technologies to gain economic and Intensive joint activities on the part of social benefits. It considers several the government and the private sector parameters, including the maturity have contributed to Mexico's current of ICT infrastructure, digital literacy, status as a global leader in IT services and the ability of business and the exports. broader community to use these technologies. Given that this variable Brazil's example is equally noteworthy. is based on country-wide data, it can The Brazilian authorities have placed be reasonably assumed that the cities a strong emphasis on developing ideal themselves will show stronger results. conditions for doing IT-related business Nevertheless, the leadership of Latin in the country and on increasing IT American cities in our ranking for this penetration across community and variable comes as no surprise. For governmental activities. Therefore, it example, the Mexican government has is not surprising that São Paulo ranks undertaken a number of initiatives to second in software and multi-media spread information technologies into development. However, these cities all sectors of the economy, as well as will have to make efforts to ensure strengthen the country's position in that their existing IT development this area on the global arena. Launched environments are naturally conducive in 2004, the Mexican government- to enhancing productivity, expanding funded programme PROSOFT aims opportunities for e-commerce and at promoting IT services exports, transforming the lives of consumers. attracting investment, providing support for training a highly skilled workforce, and developing the country’s IT legal framework.
From Moscow to São Paulo | 19 City Gateway
The City Gateway indicator is designed an airport rating that serves as the data Istanbul rose in the general rating for to evaluate the strength of a city’s sources for our variable. the City Gateway indicator to rank ties with the rest of the world. The second after Beijing. Turkey’s largest results for this indicator are highly Beijing retained its top ranking in the city, known as the “capital of three connected to, and balance with, the City Gateway indicator, reinforcing empires” with its rich historical and Demographics and Livability indicator, its position as one of Asia’s largest cultural heritage, is becoming an which adds perspective on culture and trade, logistics, business and cultural increasingly attractive destination quality of life within a city. hubs. Among E7 cities, Beijing leads for tourists, as demonstrated by the by number of hotel rooms in the city; figures for inflow of foreign tourists to This year, we excluded the Aircraft volume of the incoming and outgoing the city. In the City Gateway indicator, Movements variable from our analysis, passenger flows; and convenience, Istanbul surpassed not only its E7 as the data received for this indicator cost and speed of travel from the peers but also most of the 30 cities in was similar to data on the volume of airport to the city centre. In addition, PwC’s global Cities of Opportunities incoming and outgoing passenger Beijing Shoudu Airport ranks among 6 research study, including such flows. Due to this fact, those cities that the top 10 best international airports recognised tourism centres as Madrid, showed more moderate results under in the Top 100 Airports rating by Milan and Berlin. Investment in 2 these variables were “punished” twice, Skytrax . To provide additional developing Turkey’s tourism industry while those cities with better results incentives for inbound tourism, the has laid the groundwork for resolving received high grades twice. Two new Chinese government has introduced social and economic issues, which is variables that we have added to this a 72-hour visa-free regime for transit why the government is continuously year’s research are On-Time Flight passengers from 45 countries, which working on creating opportunities to Arrivals and Top 100 Airports. The has been in effect since 1 January fully realise the sector’s potential. One first variable evaluates the on-schedule 2013. However, one of the significant of the areas that has been most actively flight arrival record of the given city’s factors restraining the inflow of foreign developed in the country is business major airline. The second variable tourists is the still high level of air tourism. Thanks to the joint efforts of compares city airports according to pollution in the city. It’s likely that this, the Turkish government and industry a number of parameters, including together with a slowdown in China’s organisations, it has been possible to airport cleanliness and security, speed economic growth and the strong yuan, achieve an increase in investment in of baggage claim and passport control, was one of the factors leading to the the construction of major convention and convenience of location based decrease in the number of foreign and exhibition centres. Already on the feedback from more than tourists visiting Beijing in 2013. today, Istanbul is among the 10 most 12 million air travellers, resulting in
2 Skytrax The World’s Top 100 Airports in 2014, http://www.worldairportawards.com/awards_2014/worlds_top_100Airports.htm
City gateway
Highest rank in each variable
Rating International Number of international Incoming/outgoing Airport to CBD On-time position Hotel rooms tourists association meetings passenger flows access Top 100 airport flight arrivals Score
1 Beijing 7 5 6 7 7 7 3 42
2 Istanbul 2 7 7 5 4 6 7 38
3 Moscow 6 6 3 6 5 5 6 37
4 Mexico City 3 4 4 1 6 3 4 25
5 São Paulo 5 1 5 3 2 3 5 24
6 Jakarta 4 2 2 4 1 4 1 18
7 Mumbai 1 3 1 2 3 3 2 15
20 | PwC popular cities in the world for holding of museums and is well-known for conferences and business events3, and its cuisine, which only strengthens there is reason to believe that the city the city’s potential for developing its on the Golden Horn fully intends to tourism industry. In the E7 cities rating strengthen its position in this respect. under the City Gateway indicator, Mexico City ranks fourth by Number Moscow ranked third in the City of International Tourists, Number of Gateway indicator, lagging behind International Association Meetings, Istanbul by only one point in a virtual and On-Time Flight Arrivals. Among tie. The Russian capital demonstrated E7 cities, Mexico’s capital city stands relatively even results for all variables out for the convenience of travelling included in the indicator. In four of from the airport to the downtown them, it ranked second, and in two area. Thanks to Mexico City’s subway variables it ranked third. In this year’s system, which connects downtown to research, Moscow went up one step in the airport, the trip takes no more than the inflow of foreign tourists and came 20 minutes at minimal cost. in second in punctuality of flight arrivals by its largest air carrier, Aeroflot, which São Paulo, ranking fifth, demonstrated in 2014 was recognised as the best very good results in three variables airline in Eastern Europe4. (Hotel Rooms, Number of International Association Meetings, and On-Time Mexico City ranked fourth after Moscow. Flight Arrivals), but at the same time, For a long time, the city has paid in the other four variables the city considerable attention to developing shows much more moderate results, business tourism in particular; however, which prevented it from ranking higher the municipal authorities are currently in the rating. Jakarta and Mumbai working on fostering Mexico City’s still must make efforts to develop image not just as a city to do business the necessary infrastructure, expand in, but as a cosmopolitan city with a economic and cultural connections rich cultural life as well. Mexico City is with the rest of the world, and increase among the world’s leaders by number their attractiveness abroad.
3 According to the International Congress and Convention Association http://www.iccaworld.com/npps/story.cfm?nppage=3537 4 World Airline Awards, category “Best Airline in Eastern Europe”, 2014.
City gateway
Highest rank in each variable
Rating International Number of international Incoming/outgoing Airport to CBD On-time position Hotel rooms tourists association meetings passenger flows access Top 100 airport flight arrivals Score
1 Beijing 7 5 6 7 7 7 3 42
2 Istanbul 2 7 7 5 4 6 7 38
3 Moscow 6 6 3 6 5 5 6 37
4 Mexico City 3 4 4 1 6 3 4 25
5 São Paulo 5 1 5 3 2 3 5 24
6 Jakarta 4 2 2 4 1 4 1 18
7 Mumbai 1 3 1 2 3 3 2 15
From Moscow to São Paulo | 21 Quality of Life
This category groups together four indicators for evaluating the essential assets and quality of urban life – Health, Safety and Security; Transportation and Infrastructure; Sustainability and the Natural Environment; and Demographics and Livability. Beijing topped the rating in all but one indicator, while Mexico City and Moscow were among the best in three indicators, and Istanbul in two indicators.
São Paulo
Transportation and Infrastructure
Well-developed transport significant increase in the costs of infrastructure and the availability doing business. This is precisely why of high-quality housing are part and ensuring that the development of parcel of comfortable urban living. “physical infrastructure” matches the The level of development in these city’s growth is a top priority for urban areas has a direct influence on almost planning policy both in developed and every aspect of life in the city. In fact, emerging cities. the lack of safe and sound housing conditions can limit a person's ability This year, we have slightly modified to invest in education and healthcare, the way we measure the Cost of Public while also stunting the satisfaction Transport which now measures the of cultural and spiritual needs, fare for travelling on public transport professional advancement and the from the most distant point of the city realization of one’s personal potential. limits to the central business district Taking low-quality municipal transport (CBD), rather than measuring the fare systems as an example, this limits for getting from the farthest point on residents' mobility and results in a one end of the city limits to the farthest point on the other end, as we did last
22 | PwC year. In our opinion, this updated improvement this year. Moscow capital city has one of the longest approach offers a fairer measurement finished second (as opposed to third in subway networks in the world and of the daily travel costs for most city last year’s study) in the Transportation its tram routes are of considerable residents. The other change we have and Infrastructure indicator. São length. Furthermore, a substantial part made is the replacement of the Major Paulo ranks third for the Volume of of Moscow comprises government- Construction Activity variable by the Property Transactions variable which protected nature conservation areas Volume of Property Transactions helped the city move up to fourth place and parks, the area of which has been variable. from sixth in the Transportation and subtracted from the city’s total land Infrastructure indicator. As with last area to indicate developable land This year, the results for the year, none of our cities demonstrated when measuring the Mass Transit Transportation and Infrastructure consistently high scores across all Coverage variable, thus enhancing indicator, when analysed and variables. its significance. Mumbai, which has compared to last year’s report, extensive urban rail links and is the illustrate a certain reordering in our This year, Moscow has clearly taken most compact location among all of the rankings. While the leader, Beijing, the lead to finish first in the variables E7 cities, ranks second in this indicator. showing the most stable results across reflecting Mass Transit Coverage and Moscow’s ability to remain in the top all variables, remained the same, two the efficiency, reliability and safety ranks for Public Transport Systems cities have demonstrated significant of Public Transport Systems. Russia’s
From Moscow to São Paulo | 23 reflects the efficiency, reliability and have helped to significantly simplify connectivity of the city’s entire public the application process for taxi permits. transportation network, as well as the Taxi operators can access subsidies to diverse modes of transport available. receive compensation for certain costs related to vehicle-leasing payments. The Cost of the Public Transport Furthermore, the city has been setting variable reflects the absolute cost of up special taxicab stands and dedicated travelling by public transport in US lanes restricted to buses, which can dollars. Jakarta finished first for this also be used by taxis. The city has also variable but lagged behind the other been actively promoting social taxi six cities for other indicator variables projects in order to support people measuring public transport availability with limited mobility. All of these steps and efficiency, and Mass Transit have led to an almost five-fold increase Coverage. Indeed, the least expensive in the number of Licensed Taxis in the transportation systems often happen to city in the past five years. be least mature and efficient. Emerging cities must tackle the challenge of For the Volume of Property raising sufficient funding to develop Transactions variable Beijing finished convenient, reliable public transport first by far, followed by Moscow. Other services. Especially impressive in cities showed more modest results. this regard is the experience of Beijing, which has been continuously The Housing variable is defined as the expanding its Mass Transit Coverage measure of availability, diversity and while keeping costs relatively low. quality of housing, and household maintenance and repair services, Mexico City maintains the top position as well as the availability of quality for total number of Licensed Taxis. furniture and household appliances, An affordable taxi fleet complements according to the Mercer Quality of the city’s public transportation system, Living report. The best scores went to which is partially the result of a Beijing and São Paulo. All components policy of deregulation in the 1990s. A for this variable are based on an substantial share of passenger flow is assessment of perceptions among a served by private cab companies using city’s foreign residents. The top-ranking low- to medium-capacity vehicles. cities in this variable received high Moscow has made the most impressive scores for each component, with Beijing advance by far in the Licensed Taxis ranking higher with respect to quality variable. The city’s targeted policies of household maintenance and repair.
Transportation and infrastructure
Highest rank in each variable
Public Cost Volume of Rating transport Mass transit of public Licensed property position systems coverage transport taxis transactions Housing Score
1 Beijing 5 5 6 5 7 7 35 2 Moscow 7 7 2 6 6 2 30 3 Mexico City 3 4 5 7 4 5 28 4 São Paulo 4 3 1 4 5 6 23 5 Jakarta 1 1 7 2 3 5 19 6 Istanbul 6 2 3 1 1 5 18 6 Mumbai 2 6 4 3 2 1 18
24 | PwC Jakarta
Health, Safety and Security
High levels of healthcare and safety maturity of a city’s healthcare system, a row while also ranking in the top provision are basic components and also offsets variances between the three for the other two health-specific in urban quality of life. A healthy, cities due to differences in the way variables, thus indicating the maturity educated, and prosperous populace medical institutions operate. of the city’s healthcare system. These is obviously a critical resource for results are not at all surprising given and driver of any city's development. The Crime variable has also undergone that Mexico is a global leader in Meanwhile, it is worth noting that a substantial adjustment in the way medical and health tourism. A high a person's health is not only about it is measured. In the last report, the level of healthcare services at relatively the lack of any physical ailments, crime rating from Mercer’s Quality of low cost, as compared to its northern but also about his/her psychological Living report was used in isolation. neighbour, has spurred many US state of mind, which in turn is directly This year, however, we have added tourists to visit Mexico specifically influenced by numerous social, subjective perceptions (feelings) of to receive treatment. This, in turn, economic, environmental and genetic security and safety based on survey gives further impetus to developing factors. This highlights the close link data and homicide rates per 100,000 the healthcare system. Given India’s among the variables that make up the inhabitants. Thus, the Crime variable historical ties to Great Britain as overall Health, Safety and Security reflects the level of security in a city well as the extensive use of English indicator. both according to the perception of city in the country, it is understandable residents and statistical data on crimes that Mumbai is doing quite well as This year, as compared to the first of varying severity. regards the accessibility of hospitals edition of From Moscow to São to international visitors. However, The changes in this measurement have Paulo, we have adjusted how we Mumbai finishes behind almost all largely impacted the changes in the measure two component variables of of the other cities when it comes to final ranking for this indicator, with this indicator. In the Hospitals and Hospitals and Health Employment, Moscow and São Paulo improving their the Health Employment variable, whereas São Paulo and Moscow rank positions while Mumbai was pushed to we have included the level of health at the top. The employment factor the bottom. As with last year, Beijing, sector employment in this variable’s is what best explains the respective Mexico City and Istanbul held the top measurement as well as the number of performances of Moscow, São Paulo spots. hospitals with access for international and Istanbul and the lower-ranking visitors per 100,000 inhabitants. In For the Hospitals and Health results for Mumbai and Beijing in our view, this provides us with a more Employment variable, Mexico City regards to the Hospitals and Health objective statistical confirmation of the finished first for the second year in Employment variable.
From Moscow to São Paulo | 25 The Health System Performance residents' and visitors' sense of security. variable in this case is measured as However, the frequency of homicide the ratio of healthy life expectancy is still quite high. Mumbai and Jakarta to healthcare expenditures. This managed to reach the top three for this variable is calculated for a country as variable. Although the overall crime a whole rather than for an individual level in these cities is still rather high, city. Beijing, Istanbul and Mexico the premeditated homicide rate is much City performed best in this regard. lower when compared with the other Indeed, the Chinese population, cities studied. Mexico City and Moscow among all E7 countries, has the highest slipped slightly from their rankings in life expectancy while healthcare last year’s report owing to changes in expenditures per capita in China are the measurement approach rather than the lowest relative to other countries. fundamental shifts in these cities’ data. Moscow and Mumbai finished at the Moscow still has a relatively high crime bottom as these are the largest hubs rate. Furthermore, Mexico City and São in the countries with the lowest life Paulo, with their relatively high levels expectancies among the E7 countries5. of social stratification, remain the least safe of the E7 cities. Istanbul ranks first for the End of Life Care variable, while also doing The last variable making up the overall quite well in terms of Health System Health, Security and Safety indicator Performance. Moscow and Mexico is Political Environment, which reflects City finished second and third in perceptions of internal political End of Life Care variable. As End of stability, law enforcement, limitations Life Care is measured on the basis on personal freedom, and media of multiple components that factor censorship. The best-performing cities in both qualitative and quantitative here were Mexico City, São Paulo and characteristics; the leading countries of Mumbai. The Latin American cities, the E7 can rightfully be proud of their although demonstrating relatively achievements in this important sphere. high scores across all ranking criteria, should focus more on law enforcement, Although the Crime variable is now whereas Mumbai needs to pay more measured differently, Beijing is still attention to internal stability. The the safest city among the E7. The primary areas of concern for Moscow lowest overall crime score from Mercer and Jakarta include internal stability was recorded for the Chinese capital. and law enforcement. Beijing also received a high score for
5 Based on World Health Organization data.
Health, safety and security
Highest rank in each variable
Rating Hospitals and Health system Political position health employment performance1 End of life care1 Crime environment Score
1 Beijing 4 7 4 7 4 26
1 Mexico City 7 5 5 2 7 26
3 Istanbul 2 6 7 3 3 21
4 Moscow 6 2 6 4 1 19
4 São Paulo 6 4 2 1 6 19
6 Mumbai 3 1 1 6 6 17 7 Jakarta 1 3 3 5 2 14
1 Country-level data
26 | PwC Moscow
Sustainability and the Natural Environment
A clean natural environment and We think these changes have resulted The Natural Disaster Risk variable effective natural resource management in a more objective environmental assesses the likelihood of natural are essential to gauging a city’s overall assessment in terms of its quality and disasters occurring in or near an E7 quality of life and measuring its actions undertaken for improvement. city, including such potential hazards competitive advantages. Recognizing For example, we define Recycled as hurricanes, drought, earthquakes, the need to regulate adverse impacts Waste as the total waste diverted from floods, landslides and volcanic on the environment, enhance the municipal landfills. When calculating eruptions. According to this measure, efficiency of resource utilization the Air Pollution variable, we have Moscow, Beijing, Istanbul and São and create favourable conditions for included an air pollution index based Paulo are the safest cities. The most community life, cities may undertake on more current data from surveys comfortable climatic conditions are a number of actions that frequently as well as from the World Health found in Mexico City, São Paulo require large-scale investment. While Organization’s database. The Thermal and Istanbul. Although municipal they may strive to spur economic Comfort variable also underwent authorities cannot possibly influence growth and meet the growing needs some changes. It is calculated based the climate or the probability of natural of urban communities, many cities on maximum temperatures and disasters, safe and comfortable living fail to pay adequate attention to these evening humidity for four months conditions are of no small importance issues. Nonetheless, as modern society of the year, while in the previous to people when they decide on a becomes more demanding with respect edition, heat indices were calculated potential place of residence. Those to environmental sustainability, based on average temperatures cities where the risk of natural disaster clean, green and comfortable cities and average morning humidity for is high must pay careful attention to than succeed in implementing January and July. As a result, the cities’ developing and improving response environmentally friendly models will rankings for Sustainability and the systems that enable authorities to enjoy greater success. Natural Environment have changed minimise potential damage. dramatically. For instance, Mexico City, In the current edition of PwC’s Beijing and Istanbul have improved Mexico City has significantly improved From Moscow to São Paulo study, their rankings, while São Paulo, Mumbai its performance with respect to the Sustainability and the Natural and Jakarta have dropped down to the Recycled Waste, moving up to second Environment indicator is composed bottom spots. While Moscow is still a from fourth place, outpacing both of the same variables that were used leader, outperforming its peers in two Moscow and Jakarta. Mexico City’s in the first edition. However, some variables, the total scores indicate a municipal authorities are implementing methodological changes were made narrowing of its lead over other cities. a large-scale project to increase the to the calculations of three variables. volume of solid waste processing and
From Moscow to São Paulo | 27 recycling. In 2010, the biggest solid air pollution, with climatic conditions waste landfill in the Mexican capital and characteristics of the city and its was shut down. A few years before this suburban landscape also having a closure, the city launched a programme significant impact on air quality. Over to separate organic and inorganic the past few years, air quality has waste for subsequent recycling. The significantly deteriorated in Beijing, organic portion of waste is used to not only as a result of an increase in produce fertilisers and generate biogas. the emission of air pollutants, but also Another factor in the significant due to abnormal climatic conditions. reduction in the volume of waste going In addition, the city recorded an all- to landfills was the city's agreement time high for relative humidity and an with one of the world's largest building all-time low for wind speed6. Istanbul, materials and cement producers on a leader in this year's ranking, is now using the inorganic portion of solid implementing several initiatives waste as fuel for kilns. As a result to improve air quality, including of these goal-oriented actions, only modernization of heating systems and about 50% of all waste produced by moving them to more environmentally the city goes to local landfills. Mumbai friendly fuels, monitoring and ranked first in solid waste processing controlling emissions from various and recycling for two years in a row. pollution sources, upgrading its public Interestingly, the city’s informal sector vehicle fleet, and raising awareness of has made a significant contribution the adverse impact motor transport has to this process. In India, low-income on air quality. communities have long been engaged in collecting, separating and selling As was the case last year, Moscow, waste to processing facilities. Beijing and Jakarta are top performers in the Public Park Space variable. The Major changes in the cities’ ranking majority of the cities under review for Air Pollution were made this year. place great emphasis on developing Istanbul significantly improved its high-quality recreational areas. For ranking, whereas Moscow lost its lead example, dozens of new parks have and ranks among the three cities where been built over the past few years in residents suffer the worst air pollution. Moscow while large-scale programmes Motor vehicles and industrial are also under way in São Paulo and enterprises are the main sources of Jakarta.
6 The New York Times, 2014.
Sustainability and the natural environment
Highest rank in each variable
Rating Natural Thermal Recycled Public position disaster risk comfort waste Air pollution park space Score
1 Moscow 7 3 5 3 7 25
2 Mexico City 2 7 6 5 4 24
3 Beijing 6 4 3 1 6 20
3 Istanbul 5 5 2 7 1 20
3 São Paulo 5 6 1 6 2 20
6 Mumbai 3 3 7 2 3 18 7 Jakarta 2 1 4 4 5 16
28 | PwC Mumbai
Demographics and Livability
Today, the E7 cities are the world's used to calculate the Ease of Commute times, i.e. the zeitgeist. The Latin largest metropolitan areas surpassing variable. As part of the survey, PwC American cities in the E7 hold leading most of the developed countries' staff were asked to specify three cities positions in this variable. São Paulo's urban centres in terms of population. on the list of 30 Cities of Opportunity top spot comes as no surprise given the While population growth in developed (except for the one they live in) where large number of festivals and cultural countries has been, to a greater or they would prefer to work. The data events held in the city, as well as its lesser degree, in line with the pace of were used to calculate the Relocation many museums and diverse nightlife. urban infrastructure development and Attractiveness variable. Istanbul has slightly improved its modernization, developing cities have ranking this year. Over the past few experienced rapid growth over the past The addition of new variables has years, the city has sought to change its few decades and are facing multiple slightly changed the E7 cities’ rankings image from a major industrial centre challenges. In addition, these cities in this indicator. For instance, to a financial and cultural hub by must compete for highly skilled talent Istanbul received the highest score for developing culture as a key instrument and investment both with other urban Relocation Attractiveness and changed for boosting its attractiveness. In 2010, centres within their own countries and positions with São Paulo, moving Istanbul was the European Capital other global cities. In terms of comfort, from fifth to third place overall. of Culture. The effort to prepare the convenience and attractiveness, large Jakarta also improved its performance city for this event included large- metropolitan areas in developing against Mumbai. As was the case last scale restoration of cultural heritage countries still have significant room year, Moscow and Beijing remain the sites and renovation of historic urban for catching up with most developed best performers. Moscow received neighbourhoods. Private investors world cities, where a recent history of the highest scores in three variables compete to fund the development prosperity and stability has fostered a but performed slightly less well in of cultural facilities and events in strong level of livability. Relocation Attractiveness. Beijing Istanbul. Thus, both the business demonstrated poorer performance for community and city residents support When calculating the Demographics Cultural Vibrancy. the cultural development initiatives and Liveability indicator for this year, largely put forward by both the The Cultural Vibrancy variable is we added two new variables based on national government and municipal composed of several components a survey of 15,000 PwC employees. authorities, which, no doubt, has and includes residents' subjective We asked them to measure the ease strengthened Istanbul's role as a major perception of the essential elements of travelling between their homes and cultural centre and tourist destination of cultural life and how a city is able workplaces. The survey results were in Europe. to reflect and shape the spirit of the
From Moscow to São Paulo | 29 Compared with last year's results, These two cities have the highest there are no changes in the cities’ rates of auto use. For instance, in rankings for the composite variable Mexico City, at the end of the 1990s that analyses Quality of Living. The top the number of cars on city streets three performers here, Moscow, Beijing increased at a rate several times higher and São Paulo, can offer residents than that of its population growth. The more favourable living conditions as rapid growth of auto use was driven compared to their peers. The Chinese not only by an increase in household capital holds the lead in the Working income but largely by the success of Age Population variable. Indeed, Mexico’s domestic auto industry. The residents aged from 15 to 64 years old predominance of low-capacity vehicles account for almost 90% of the city's in providing urban transport services, total population. including over 150,000 taxicabs, has also contributed to traffic congestion in The leaders in the Traffic Congestion Mexico City. and the Ease of Commute variables are ranked as follows. In both variables, It is not surprising that Istanbul is Moscow finishes first, Beijing comes ranked as the top city for Relocation in second, and Istanbul third. Last Attractiveness. Nowhere else in the year, all cities in the ranking (except world are the cultures and traditions for the two Latin American cities) of East and West so closely intertwined demonstrated the same performance as in the city on the Golden Horn. As in Traffic Congestion. Each city under the fastest-growing urban economy, review has long experienced problems Beijing comes in second for this with traffic congestion and each of variable. In addition, PwC employees them is implementing policies to perceive Mumbai and Jakarta as the improve the situation. The fact that least attractive relocation destinations Mexico City and São Paulo are lagging among the E7 cities. behind their peers is understandable.
Demographics and livability
Highest rank in each variable
Rating Cultural Quality Working age Traffic Ease of Relocation position vibrancy of living* population congestion commute1 attractiveness1 Score
1 Beijing 3 6 7 6 6 6 34 1 Moscow 5 7 5 7 7 3 34 3 Istanbul 5 3 3 5 5 7 28 4 Mexico City 6 4 6 1 4 4 25 5 São Paulo 7 5 2 2 3 5 24 6 Jakarta 2 1 4 4 2 1 14 7 Mumbai 1 2 1 3 1 2 10
*Score based on more than 30 factors across five categories: socio-political stability, healthcare, culture and natural environment, education and infrastructure. Each city receives a rating of either “acceptable”, “tolerable”, “uncomfortable”, “undesirable” or “intolerable” for each variable. For qualitative indicators, ratings are awarded based on EIU analysts’ and in-city contributors’ judgements. For quantitative indicators, ratings are calculated based on cities’ relative performances on a number of external data points. Data produced by the EIU Liveability ranking.
1 Data based on the 2013 PwC Employee Survey
30 | PwC Economics
This section is designed to assess cities from a financial point of view, specifically their ability to ensure sustainable economic growth, provide attractive conditions for businesses, and promote their credibility as financial centres far beyond their own borders. Just as in the previous year’s study, Mexico City surpassed its competitors in the Ease of Doing Business indicator and took second and third place, respectively, in the Cost and Economic Clout indicators. Mexico’s capital city has once again confirmed that it is not one of the developing world’s biggest centres of finance and commerce by chance, and underscored its serious intention of becoming a worthy competitor to the developed cities in the international arena.
Beijing
From Moscow to São Paulo | 31 Economic Clout
This indicator measures not only the rates for three years instead of annual to Rate of Real GDP Growth. The maturity level of a city's economy but data. Other variables and calculation ranking of the other five cities has also the extent of its presence in the techniques remain unchanged. changed. Mexico City has significantly global economic system, how attractive improved its position, whereas it is for international investors and the As in the first edition of From Moscow Mumbai, São Paulo and Istanbul have extent of its economic influence on the to São Paulo, Beijing and Moscow all dropped in the rating as compared global economy. A developed economy performed exceptionally well, ranking to last year. None of the five remaining is a fundamental element of any city's far ahead of the other five cities in cities ranks No. 1 in any variable. As prosperity. Furthermore, a successful total scores across all variables. China's was the case last year, these cities economic policy is largely instrumental capital city not only demonstrates its perform relatively well in certain in increasing people's prosperity and economic clout among the E7 cities, variables but lag behind their peers in ensuring successful social and economic but also ranks second overall in this other areas. transformations, as well as urban indicator among the 30 cities in our development. In a highly competitive Cities of Opportunity 6 global study, This year, the most substantial changes environment, global urban centres lagging only behind London. In the have been in the Number of Global 500 can attract profitable investments and Cities of Opportunity 6 ranking, Headquarters variable. No other city people with the best skills by offering Moscow placed in the top half for in the E7 can come close to matching the most favourable conditions for Economic Clout, ranking at No. 11. Beijing in this variable. According doing business along with the best to the total number of companies The significant lead held by the two top working and living conditions. listed in Fortune magazine’s 2014 performers over their peers is due to Global 500 rating, China is behind The changes this year in our calculation their consistently strong results in most only the United States at the country methodology for Economic Clout were of the variables. Beijing finishes first level. Moreover, the majority of new minimal. The Attracting FDI variable in four out of five variables but lags entrants to the 2014 rating are Chinese essentially combines two variables significantly behind in Productivity. At companies. The rate of Global 500 measuring direct foreign investment, the same time, Moscow comes in first headquarters' presence in the other E7 i.e. the number of greenfield in this variable and second in Number cities is comparable, which explains projects and the total value of capital of Global 500 Headquarters, Financial the changes in the rankings this year. investments made. We also changed and Business Services Employment, Mexico City and Jakarta have improved the Rate of Real GDP Growth variable’s and Attracting FDI. However, Moscow their rankings, whereas São Paulo calculation to measure average growth lags behind most of its peers in regards scored fewer points.
Economic clout
Highest rank in each variable
Number of Financial and Rating Global 500 business services Attracting Rate of real position headquarters employment FDI Productivity GDP growth Score
1 Beijing 7 7 7 2 7 30
2 Moscow 6 6 6 7 2 27
3 Mexico City 5 4 2 6 3 20
4 Mumbai 5 3 4 1 5 18
5 São Paulo 2 5 5 4 1 17
6 Jakarta 3 2 2 3 6 16 7 Istanbul 2 1 3 5 4 15
32 | PwC Mexico City
Beijing, Moscow and São Paulo were the rapid inflow of foreign investment. The changes in the cities’ rankings in the top performers in Financial and While in the 1990s foreign investors the Rate of Real GDP Growth variable Business Services Employment7. tended to focus on export-oriented this year are minor. Mexico City Interestingly, Beijing is the only city industries, as well as the oil and real overtook Moscow as Russia's capital among the E7 where the number of estate sectors, these days a substantial city dropped to second-to-last place. As jobs in business and financial services amount of FDI goes into China's was the case last year, Beijing finished is higher than in any other sector. The services sector. Another major area of first, well ahead of the other six cities. number of jobs in business services foreign investment are the knowledge- GDP growth rates for the E7 cities is expected to steadily increase in intensive industries. are considerably higher than those of the city over the next decade. The the developed cities presented in our six other cities have high levels of Moscow managed to overtake Mexico global report. employment in the wholesale-retail City and finish first in the Productivity sector. Furthermore, Istanbul and variable this year. The five other cities' Thus, the results of our ranking Mumbai continue to be dominated by rankings remain unchanged. However, confirm that the developing cities serve manufacturing while Moscow and São in terms of Productivity, each of the as hubs for the emerging economies. Paulo have high levels of employment cities under review significantly lags They are aggressively integrating into in public services8,9. behind developed urban centres the global economy and their influence where productivity continues to grow reaches far beyond the borders of Beijing and Moscow are the most steadily despite resource constraints. their home countries. In future, these attractive cities for foreign investors. Nonetheless, enhancing productivity cities will need to focus on enhancing These two cities also perform is a top priority for municipal productivity and improving the exceptionally well against most economic development programmes. business environment in order further of the cities in the global Cities of Furthermore, national governments increase their competitiveness on Opportunities 6 report. China's and major cities are carrying out global markets. economic growth and policies for activities to develop transport attracting FDI and the country’s infrastructure while also encouraging accession to the World Trade development and innovation, as well Organization have all contributed to as promoting advanced technologies.
7 Business services include: real estate and rental activities; IT and computer-related activities; research and development; architectural and engineering services; legal, accounting, and bookkeeping services; advertising; and professional, scientific, and technical services. 8 From Moscow to São Paulo, 2013 edition 9 Public services include: public administration; education; and healthcare.
From Moscow to São Paulo | 33 Ease of Doing Business
This indicator characterises the by some cities in fostering a favourable In the Resolving Insolvency variable, E7 cities in terms of conditions for business climate. Istanbul, which took all cities retained the same positions as initiating and developing business. fourth place last year, rose this year last year. The three cities (countries) The considerable number of variables to second place, while Beijing shares showing the best results in terms of within this indicator allows, on the third place with São Paulo. Like last efficient bankruptcy regulations and one hand, taking into consideration year, Mexico City has a considerable procedures were Mexico City, Moscow and evaluating various aspects of the lead in the Ease of Doing Business and Beijing. The most noticeable business environment, while on the indicator. Even so, if just a year ago changes took place in how the cities other hand increasing the chances of this city showed the best results in ranked in the Employee Regulations each city to demonstrate their strengths five variables, in the current report variable, which evaluates the and track weaknesses compared to it leads only in Ease of Starting a regulatory framework from the point competitors. Those opportunities that Business and Resolving Insolvency, of view of the simplicity of hiring and a city provides to business directly yielding to competitors in three other terminating staff, as well as the rigidity impact its economic potential. Indeed, variables (Employee Regulations, of working hours. Moscow, São Paulo as illustrated by last year’s global Level of Shareholder Protection, and and Istanbul, which showed the worst Cities of Opportunity report, the Operational Risk Climate). result last year, this year have taken the cities showing the best results in the first three places. In contrast, Beijing Ease of Doing Business indicator also The Ease of Starting a Business variable lost its position, falling from third place turn out to be the more effective in assesses the complexity and cost of to next-to-last. terms of Economic Clout. In the case administrative procedures that an of the E7 cities, this interrelation is entrepreneur must complete when In terms of protecting the rights not so straightforward, however. incorporating and registering a new of minority shareholders, Istanbul Nevertheless, Mexico City and Beijing, company. This year, Moscow left materially improved its position which rank first and third, respectively, Istanbul behind, ranking second in this against last year, sharing first place in the Ease of Doing Business indicator, variable. To a great extent, in Moscow with Mumbai in Level of Shareholder also rank among the top three in the this change was due to the cancellation Protection; meanwhile, Jakarta and Economic Clout indicator. of the previous requirement for Mexico City fell to third and fourth obtaining a notarised bank signature place, respectively. The increased The composition of the variables card before opening a corporate bank focus on protecting investors’ rights in in this indicator and the method of account10. In Turkey, by contrast, the Turkey is largely due to the enactment their calculation have not changed rules for minimum charter capital of the new Turkish commercial code, much compared to last year. Shifts amount required for starting the which requires restitution of profits in rankings in certain variables company registration process were by corporate officers who are found demonstrate the visible progress made tightened11. liable for transaction-related damages
10, 11 Doing business, the World Bank Group, 2014
Ease of doing business
Highest rank in each variable Ease of entry: Rating Ease of starting Resolving Employee Number of countries Foreign embassies Level of shareholder Operational Workforce position a business2 insolvency2 regulations2 with visa waiver1 or consulates protection2 risk climate1 management risk Score
1 Mexico City 7 7 4 5 4 4 6 4 41
2 Beijing 5 3 6 6 3 7 5 1 36
3 Istanbul 3 5 2 2 7 2 7 7 35
3 São Paulo 4 2 6 7 2 3 5 6 35
5 Moscow 6 6 7 4 6 1 1 3 34
6 Mumbai 1 4 3 2 1 7 3 5 26 7 Jakarta 2 1 1 3 5 5 2 2 21
1 Country-level data 2 Вased on a country's most populous city
34 | PwC to another company. The new code also allows shareholders to commission independent audits to identify potential conflicts of interest.
The Operational Risk Climate variable is for evaluating, via qualitative and Mexico City quantitative indicators, the main factors affecting the profitability of a business in a given country. Compared to last year’s global Risk Briefing rating by the Economist Intelligence policies aimed at boosting the quality group, and their main urban centres, Unit (EIU), data from which was used of its labour resources. are taking measures to simplify to calculate variable values, China administrative procedures (reduce managed to surpass Mexico by one The most accessible cities for foreign “red tape”) and improve the business position. Turkey was also able to rise nationals in terms of simplicity of climate. Such efforts are reflected by one position and score the same border crossing are São Paulo, Istanbul in the cities’ respective rankings in amount of points as Brazil. Russia and Mexico City. In contrast, a visa international ratings. This year, based was the only country to lose several is required to enter China and India on the different components ranked in positions according to the global EIU for citizens of most countries around this indicator, Istanbul, which ranked rating, which explains Moscow’s last- the world, which explains Beijing and second, is separated from Moscow, place showing in the E7 rating for this Mumbai’s lagging positions in the ranking third from the bottom, by only variable. To a large degree, this was Ease of Entry: Number of Countries two points. Moreover, the possibility driven by increased macroeconomic with Visa Waiver variable. Beijing and that Istanbul, Beijing, São Paulo and and financial risks, as well as foreign Moscow boast the largest numbers Moscow could soon break ahead trade risk. under the Foreign Embassies or of Mexico City, the leader for two Consulates variable. years in a row, does not seem to be In terms of staff management risks, unrealistic. We would like to hope that Beijing showed the best results, having Our analysis of the E7 cities’ results improvement of the business climate moved far ahead of both São Paulo and according to the eight variables that will have an impact on the investment Mumbai. This result is not surprising come under the Ease of Doing Business attractiveness of these developing given that the absolute majority of indicator, and their comparison with cities, thus enabling them to boost Beijing residents are of working age, last year’s data, allows us to conclude their economic clout. and that China is actively pursuing that each of the countries in the E7
Ease of doing business
Highest rank in each variable Ease of entry: Rating Ease of starting Resolving Employee Number of countries Foreign embassies Level of shareholder Operational Workforce position a business2 insolvency2 regulations2 with visa waiver1 or consulates protection2 risk climate1 management risk Score
1 Mexico City 7 7 4 5 4 4 6 4 41
2 Beijing 5 3 6 6 3 7 5 1 36
3 Istanbul 3 5 2 2 7 2 7 7 35
3 São Paulo 4 2 6 7 2 3 5 6 35
5 Moscow 6 6 7 4 6 1 1 3 34
6 Mumbai 1 4 3 2 1 7 3 5 26 7 Jakarta 2 1 1 3 5 5 2 2 21
From Moscow to São Paulo | 35 Cost The composition of the Cost indicator’s companies’ main expenditures and one that can offer an optimal balance variables affirms our intention to directly affect the investment priorities between price and quality. reflect the costs of doing business in a of businesses. The Cost of Rent and given city. But when determining the Cost of Internet variables from last The Total Corporate Tax Rate variables, we assumed that competitive year’s study have been replaced by a variable assesses the total amount cities should not only be attractive single variable called Cost of Living. of taxes, as well as mandatory in terms of expense, but also that the To reflect the cost of urban living more charges and contributions, paid by income level of corporate employees accurately, the Cost indicator has been legal entities in the second year of in these cities should be sufficient supplemented with a Purchasing Power operations expressed as a percentage to satisfy a wide range of needs and variable. Instead of the iPod Index, this of commercial profits. The relevant provide for an adequate standard year we have used the iPhone Index. research was performed by PwC of living. In other words, a city that specialists together with the World is inexpensive for doing business Given the substantial changes in Bank. Within the framework of this is not necessarily more attractive if this indicator, shifts in the E7 cities’ project, they also took into account the quality of its labour resources is rankings were expected. Moscow deductions paid by employers to low and the city suffers from social rose to second place, which it shares non-state organizations, for instance inequality or unrest. with Mexico City this year; São Paulo employees’ private pension funds improved its position a little; and or insurance funds. To evaluate the This year, the Cost indicator also Mumbai and Beijing turned out to be amount of charges, a single profile of underwent some changes compared less cost-effective than last year. It is a company operating in the largest to last year’s report. The total number interesting to note that last year’s two business centre of the given country of variables was reduced – there are leaders – Mexico City and Istanbul – was used. Jakarta demonstrated now five instead of six – and some were able to hold their positions. As the best result in this variable, with modifications were made in the in last year’s rating, Turkey’s main city Istanbul taking second place, and method for calculating most of them. showed stable results in the majority Moscow third. The maximum amount Only two variables have not changed – of variables without leading in any of taxes and charges was recorded in Total Corporate Tax Rate and Cost of of them. This once again proves that São Paulo. Business Occupancy – as they reflect a more competitive city will often be
Cost
Highest rank in each variable
Rating Total corporate Cost of business Purchasing position tax rate occupancy Cost of living iPhone index power Score
1 Istanbul 6 4 3 5 5 23
2 Mexico City 4 7 5 3 3 22
2 Moscow 5 2 2 6 7 22
4 Jakarta 7 5 6 1 1 20
4 Mumbai 3 6 7 2 2 20
6 São Paulo 1 3 1 7 6 18 7 Beijing 2 1 4 4 4 15
36 | PwC Istanbul
Some changes took place in the variables. The populations of Mumbai distribution of the cities under the Cost and Jakarta have the least purchasing of Business Occupancy variable. The power. Thus, Jakarta residents on smallest values for this variable were average must save three times longer recorded in Mexico City and Mumbai. compared to São Paulo residents to be Thus, in Mumbai, which improved its able to buy an iPhone. position compared to last year while Jakarta and Istanbul moved down, Taken as a whole, in spite of the there was a significant reduction in relatively low cost of living in terms the values of the gross rental rate at of Purchasing Power, E7 cities the beginning of 2014: there was a significantly lag behind the majority of decrease in demand for real estate with developed cities. Moreover, based on a concurrent increase in supply. The the volume of taxes paid, charges and most expensive cities in terms of Cost business occupancy costs, developing of Business Occupancy are, as last year, cities, contrary to expectations, Moscow and Beijing. can also be less competitive in comparison to developed ones, which The Cost of Living variable compares is particularly vividly illustrated by the prices for basic goods and services in examples of São Paulo and Beijing. different cities without taking into account the income level of local residents. Thus, the best result in this variable will show the city with the lowest prices. The leading cities in this variable are Mumbai, Jakarta and Mexico City, while the highest prices are typical of Moscow and São Paulo. However, the latter two cities showed the best results in terms of purchasing power, taking the top ranking for the Purchasing Power and iPhone Index
From Moscow to São Paulo | 37 Mega-Events as a Catalyst for the Social and Economic Development of Emerging Cities
International mega-events attract of life. For example, “revitalisation tens of thousands of tourists as well without displacement” was one of the as a multi-million-person mass media main themes in Vancouver’s successful audience. However, the sheer scale bid for the 2010 Winter Games. This of such an event raises a fundamental implied that the conditions of life for question for the host country or the poor would not change for the city: Will it derive enough benefit worse as a result of gentrification from the event to cover the related and development of the economies of expense? The enormous amount of certain urban areas12. A major goal of public investment required, which the London Olympic Games in 2012 could often be spent on meeting was to give a new lease on life to one more pressing social and economic of southeast England’s poorest urban needs, is often the main argument put communities, thus contributing to forward by opponents of international the sustainable growth and further mega-events. For example, the 1976 prosperity of Great Britain’s capital Summer Olympic Games in Montreal city. Another notable example is represented one the most expensive provided by Liverpool, which was once lessons learned in the history of the one of the United Kingdom’s largest Olympic Movement, as the building transport and industrial centres. The and operating costs of Olympic venues city’s status as the 2008 European exceeded initial estimates by more Capital of Culture and a number of than four times, leaving a 30-year debt other major events hosted by the city repayment period once the Games have helped to significantly improve were over. the image of downtown Liverpool, making it possible to carry out a series Nevertheless, the success of the of major investment projects. Los Angeles and Barcelona Games has shown the entire world that the Developing countries are also now Olympic Games may contribute to increasingly considering the idea of greatly increased attractiveness for hosting major international mega- the host city among tourists, thus events. In addition to updating their promoting economic development. “physical infrastructure”, events Sydney was the first city to aim at on such a scale present a unique increased tourism as a result of its opportunity to draw the world’s Olympic Games in 2000. In the past attention to the host country, decade, the agenda of facilitators of showcasing its openness and readiness international events involves more to take on the most complex tasks. essential tasks for improving the The 2008 Olympic Games in Beijing quality of life in the local community. and the 2014 Winter Games in Sochi Major sports or cultural events are now provide ample proof of this. perceived as a catalyst for the social and economic development of the host So what is behind the fact that more territory, which allows for achieving and more developing countries are a multiplier effect in various spheres seeking to host major world-class
12 N. Edelson (2011), Inclusivity as an Olympic Event at the 2010 Vancouver Winter Games, Urban Geography, 32, pp 804-822
38 | PwC São Paulo
sporting, cultural or exhibition events? Our experience has shown that the constructed stadium in a city whose As the OECD pointed out in a recent success of a major international event, local football club had not been ranked report, major international events have which will have a long-term effect on in Brazil’s top national championship unique characteristics that distinguish the host territory’s social and economic division for years14. them from most other activities: development, depends on meeting three basic requirements. Another example of how a major • Their attendant deadlines mandate sports event can negatively impact the discipline and commitment. First, the aspiring host city or region host city’s reputation was provided should assess the extent to which by the 2010 Commonwealth Games • They offer rare opportunities for the scale of the proposed event and in Delhi, which were memorable for positioning in the spotlight of investment corresponds to the real the organisers’ failure to complete intense media attention. capabilities of its local economy. One construction on time and the low • They necessitate collaboration recent example of an unjustified risk quality of the venues and infrastructure. between various levels of has been the construction of a light Another ingredient for the success government. rail transport network in Cuiabá, the smallest of the Brazilian cities hosting of an international mega-event is • They require the public and private the 2014 FIFA World Cup. Carrying coordination of the event preparation sectors to cooperate. out just this one project required programme with the host’s long-term nearly half of the total projected strategy and social and economic • They mobilise national pride budget for preparing the city for the development priorities. The needs toward a common goal. Championships. Ultimately, the route of a host city, like those of a person, can vary significantly at different • They celebrate human that was supposed to connect the city stages of development. In order to achievement13. to the international airport was never commissioned. A similar situation better illustrate the process, we have However, as practice shows, not every occurred with a planned new airport adapted Maslow's hierarchy of needs city has sufficient resources to stage terminal for which, by May 2014, only to the development stages of a city. a major international mega-event, three-quarters of all scheduled work For instance, in the early stages, the and even winning the bid does not had been completed, according to city must ensure the basic needs of its guarantee that the host city will be able Fitch Ratings. Moreover, many experts residents in a safe environment, as well to obtain the expected benefits. questioned the necessity of a newly as provide access to healthcare and
13 Organization for Economic Cooperation and Development, Local Development Benefits from Staging Global Events: Achieving the Local Development Legacy from 2012, 2010. 14 ABC, 2014.
From Moscow to São Paulo | 39 Maslow’s basic infrastructure, i.e. clean water and hierarchy of sewage. Generally, it is precisely these tasks that become priorities at the initial needs for сities stages of development. The residents of progressive cities have higher requirements for quality of life, and, therefore, the priorities for developed cities typically include such tasks as Self introducing advanced technologies, Actualisation improving the environment and The ultimate aim Dreams & experience the resource efficiency of municipal services, involving citizens in the “Smart Cities” governance process at the local level, Status and preventing social exclusion of Type of (Maximising all capitals) Knowledge & Intelligence certain segments of society. “Smart society Developed Cities cities” endeavour to maximise the Belonging convenience and efficiency of all the (Environmental, Infrastructure, Social Integration, Cultural, ICT) Information basic components of urban life. The highest level of the pyramid represents Developing cities centres that set basic quality-of-life Safety and Security Needs trends and standards. Such cities (Safety, Security, Infrastructure, Education) Industrial always seek to provide something new Underdeveloped cities to their inhabitants and are ready to Basic Needs share their experience with other cities (Security, Health, Basic Infrastructure) around the world.
Source: PwC, Changing world, new relationships, 2013
How does a city or region decide which event to host?15
Overall Venue/s Intellectual Legacy Supporting readiness capital infrastructure
• What are the city’s or region’s • Does the city or region possess the venues • Does the city or region possess the • What type of legacy is the city or region seeking from this event? • Does the city or region possess the supporting infrastructure – top 3 to 5 objectives in hosting and facilities required to host a sports event of intellectual capital to plan, finance, transportation, temporary housing, utilities, sanitation, this event? scale, be it the Olympics, the Commonwealth build for, and host an event of this • If raising the national or international profile of the city or region is telecommunications – required to host an event of the scale Games or the Universiade? scale? the objective, how will this event achieve that objective? under consideration? • What are the top 3 to 5 main • What kind of long-term development goals is the city or region • If not, would city and state (and in some cases national advantages this particular city or • If not, would city and state (and in some cases • Has the city or region attempted to seeking to accomplish with this event? region has to offer as a host city, national government) officials be willing to host an event of this scale before? government) officials be willing to invest in making the required region, or country? invest in such an undertaking? • How best can the city or region plan ahead to ensure that the facilities improvements? • If that bid was successful, what can be and supporting infrastructure can be used beyond the event? • How closely would these improvements reflect the city’s or • Why is now a good time to embark • How best could financing be handled? duplicated from that effort? region’s long-term development plans? on this initiative? • What modifications will have to be made to the stadiums, housing • What role would public-private partnerships • If not, what lessons can that attempt facilities, and other infrastructure to ensure that they can successfully • How best could the event serve as a catalyst for accelerating • What metrics will city or regional play in this undertaking? offer? evolve from event-based to long-term use? the city or region’s long-term plan that’s already in place? officials use to measure success? • What sports legacy is the city or region seeking to deliver to the • How likely would the business community be to support the • How likely would the business community be to • What kind of external advisors would community from this event? support this initiative? What incentives would the city or region need to call upon to construction of supporting infrastructure? they need to get on board? plan, finance, build, and host an event • What intellectual capital legacy can the city or region leverage • What role would public-private partnerships play in this of this scale? for future events from having planned, financed, built infrastructure undertaking? • How likely would the local and regional for, and hosted this event? communities be to support such an initiative? • How likely would the local and regional communities be to What kind of public opinion effort would it take • What metrics will the city or region use to measure the success support such infrastructure improvements? What kind of public to get them on board? of its legacy? opinion effort would it take to get them on board?
15 PwC, It’s how you play the game, 2014
40 | PwC The best results from staging underwent some serious changes in The 2014 Olympic Games in Sochi international mega-events may be various areas, ranging from security were intended to upgrade not only the achieved where their preparation to transport services and restoration economy of Sochi itself, but to boost contributes to the host city’s of the city's environment. According the development of the surrounding priority tasks at its current stage of to Eduardo Paes, the Mayor of Rio de Krasnodar Region as a whole through development. Janeiro, “In about five years, the city large-scale development of engineering will implement investment intended and transport infrastructure, and Only about 5% of the total budget for almost 40 years.” He sees the inculcating and enhancing a culture for the 2014 World Cup was used Olympic Games and the FIFA World of hospitality. Before its selection as to build sporting venues, whereas Cup as representing “an excellent host city, Sochi’s underdeveloped nearly 53% was spent on developing opportunity to achieve fundamental infrastructure and low-quality services transport infrastructure, including changes that the city has been thirsting had caused the seaside resort to the construction and renovation of for”. Investments made in Rio de gradually lose its competitiveness airport systems. In Brazil, the local Janeiro have been aimed in particular compared to other, comparably population’s growing purchasing at revitalising the favelas, Brazil’s priced resort destinations in Turkey power has led to increased demand storied slums, as well as establishing and Egypt. The city had specialised for civil aviation services that, in turn, a high-speed bus system and restoring predominantly in summer beach have required significant expansion Rio’s port area. The municipal tourism, serving a target market of of terminal capacity and construction authorities hope that these changes lower- and middle-income Russian of new airports in those regions of will make a significant contribution visitors. With the Games came large- the country that had not previously to improving the lives of poor and scale construction of modern hotel enjoyed regular air transport links. disadvantaged citizens: “What is most resorts and a brand-new image for the important for me”, says Mayor Paes, “is city, which contributed to a gradual Due to the preparations for major to leave a higher standard of living as increase in the proportion of event- international events, Rio de Janeiro the legacy for Rio”16. related and business tourism, while
16 PwC, It’s how you play the game, 2014
Overall Venue/s Intellectual Legacy Supporting readiness capital infrastructure
• What are the city’s or region’s • Does the city or region possess the venues • Does the city or region possess the • What type of legacy is the city or region seeking from this event? • Does the city or region possess the supporting infrastructure – top 3 to 5 objectives in hosting and facilities required to host a sports event of intellectual capital to plan, finance, transportation, temporary housing, utilities, sanitation, this event? scale, be it the Olympics, the Commonwealth build for, and host an event of this • If raising the national or international profile of the city or region is telecommunications – required to host an event of the scale Games or the Universiade? scale? the objective, how will this event achieve that objective? under consideration? • What are the top 3 to 5 main • What kind of long-term development goals is the city or region • If not, would city and state (and in some cases national advantages this particular city or • If not, would city and state (and in some cases • Has the city or region attempted to seeking to accomplish with this event? region has to offer as a host city, national government) officials be willing to host an event of this scale before? government) officials be willing to invest in making the required region, or country? invest in such an undertaking? • How best can the city or region plan ahead to ensure that the facilities improvements? • If that bid was successful, what can be and supporting infrastructure can be used beyond the event? • How closely would these improvements reflect the city’s or • Why is now a good time to embark • How best could financing be handled? duplicated from that effort? region’s long-term development plans? on this initiative? • What modifications will have to be made to the stadiums, housing • What role would public-private partnerships • If not, what lessons can that attempt facilities, and other infrastructure to ensure that they can successfully • How best could the event serve as a catalyst for accelerating • What metrics will city or regional play in this undertaking? offer? evolve from event-based to long-term use? the city or region’s long-term plan that’s already in place? officials use to measure success? • What sports legacy is the city or region seeking to deliver to the • How likely would the business community be to support the • How likely would the business community be to • What kind of external advisors would community from this event? support this initiative? What incentives would the city or region need to call upon to construction of supporting infrastructure? they need to get on board? plan, finance, build, and host an event • What intellectual capital legacy can the city or region leverage • What role would public-private partnerships play in this of this scale? for future events from having planned, financed, built infrastructure undertaking? • How likely would the local and regional for, and hosted this event? communities be to support such an initiative? • How likely would the local and regional communities be to What kind of public opinion effort would it take • What metrics will the city or region use to measure the success support such infrastructure improvements? What kind of public to get them on board? of its legacy? opinion effort would it take to get them on board?
From Moscow to São Paulo | 41 the modern alpine infrastructure at enterprises must coordinate their plans 2010 European Capital of Culture neighbouring Krasnaya Polyana will and work together, since the private has brought an increase in the flow enable full achievement of the area’s sector’s earnings depend on the public of tourists to Istanbul and drawn potential to become a popular ski sector’s efforts to ensure the city’s the attention of local residents and resort. Moreover, Russia obtained attractiveness and popularity among foreign visitors alike to Turkey’s rich new sports training facilities that visitors. traditions and culture. What is even meet all modern requirements. The more important, this mega-event made development of event-related and In this respect, of particular interest it possible to create new jobs in the business tourism should help the city is the case of Istanbul, which was the industries of culture, management to overcome one of the most basic 2010 European Capital of Culture, and and mass media; it is estimated that in challenges for the local economy attained a unique opportunity to draw 2010, the number of companies in the – seasonality. The Games have also attention to its rich heritage and fast- creative industry increased by 23% in helped resolve electricity problems. developing modern culture. One part comparison to 200919. The Sochi region, which had of the preparations for Istanbul’s turn experienced power shortages for years, as European Capital of Culture was Thus, given proper planning and now enjoys additional power supplies, the large-scale renovation of historic efficient management, international which can be used to develop the areas of the city and the restoration mega-events can open up new surrounding areas17. of historic buildings, which were used opportunities for urban and regional as sites for various Capital of Culture development. Active support of Finally, the prospective mega- activities. For example, a number of such initiatives on the part of the event host city should have a clear music festivals and concerts were held general population and the business understanding of how it will use at historic buildings that are normally community is equally important. It and benefit from the legacy of any closed to the general public. As well, is indeed difficult to overestimate international events it conducts. New the opening of several museums was the enormous value of such events’ facilities created and owned by the timed to coincide with Istanbul’s year intangible legacy and the extensive municipality or private companies as European Capital of Culture. infrastructure transformation that can become a significant asset that major sports, cultural and exhibition can help spur further growth, or Cultural revival is another way of events can bring. However, to ensure they can become a costly burden demonstrating Istanbul’s new image the expected effect of the event, the that take precious resources away as open to the world and ready for host party should assess the risks from other pressing needs. In this change. However, this process was not involved and plan activities in line regard, close cooperation between just the result of progressive public with the host territory’s appropriate the public and private sectors for policy; it was largely initiated by the opportunities and needs at its current the effective use of a mega-event private sector. Today, commercial stage of development. Based on legacy is as critical after the event companies invest in the establishment our experience of working with the as it is during the preparations. For of new exhibition sites and actively organisers of some of the world’s example, hotel owners are interested sponsor different events and activities; largest international mega-events, we in high occupancy. At the same time, the geography of international cultural have developed a conceptual model the city and public enterprises end cooperation is expanding. As well, that can help cities and regions assess up owning venues that can barely culture and arts are often used to their capabilities and compare their generate any income comparable to promote a company’s corporate image. long-term development objectives with the cost of their upkeep and operation. The city is gradually overcoming the the required criteria for winning the In order to ensure effective use of isolation and provincialism that were right to hold specific mega-events. the facilities left by a tangible mega- the hallmarks of its cultural life in the 18 event legacy, the city and private 1980s and 1990s . Its status as the
17 Rossiyskaya Gazeta, 2013 18 LSE, Istanbul. City of intersections, 2009 19 Bulent Ozan, Can Unver, Exploring the impact for Istanbul of being a European Capital of Culture, 2010
42 | PwC Key to the Indicators and Variables
Intellectual Capital and Innovation
Libraries with Public Access Percent of Population a zeitgeist (analyst confidence) factor The number of libraries within each with Higher Education added and the score reduced to a city that are open to the public divided Number of people who have completed three-factor score for Cultural Assets, by the total population and then at least a university-level education Human Infrastructure and Networked multiplied by 100,000. divided by the total population. Markets. For city classification, these A university-level education is set scores were competitively graded Math/Science Skills equivalent to a Bachelor’s degree into five bands (Nexus, Hub, Node, Attainment* or higher from a US undergraduate Influencer, Upstart). The final graded Top performers’ combined mean institution. scores for the top 33% of Nexus and scores on the math and science Hub (and selected Node cities of future components of the Programme for World University Rankings interest) were ranked by analysts International Student Assessment The Times Higher Education World based on trends over a 2-5 year span. (PISA), an Organisation for Economic University Rankings 2013-2014 A Node ranking is considered globally Co-operation and Development (OECD) powered by Thomson Reuters competitive. assessment of 15-year-olds’ academic are the only global university preparedness. Top performers are performance tables to judge world Intellectual Property defined as those students who achieved class universities across all of their Protection* in the top two proficiency levels (Levels core missions – teaching, research, The responses of leading business 5 and 6) on the math and science knowledge transfer and international executives to the question in the World portions of the PISA test. Comparable outlook. The top universities rankings Economic Forum’s Executive Opinion examinations are used wherever employ 13 carefully calibrated Survey 2014 that asks, “In your possible to place cities not included in performance indicators to provide the country, how strong is the protection the OECD assessment. most comprehensive and balanced of intellectual property, including comparisons available, which are anti-counterfeiting measures? Literacy and Enrolment* trusted by students, academics, [1 = extremely weak; 7 = extremely Measurement of a country’s ability university leaders, industry and strong]”. The survey covers a random to generate, adopt and disseminate governments. sample of large and small companies knowledge. The World Bank’s in the agricultural, manufacturing, Knowledge Index is derived by Innovation Cities Index non-manufacturing, and service averaging a country’s normalised The 2Thinknow Innovation Cities™ sectors. performance scores on variables in index is comprised of 445 cities three categories—education and selected from among 1,540 cities based Entrepreneurial human resources, the innovation on basic factors of health, wealth, Environment* system, and information and population, and geography. The Measurement of the entrepreneurial communications technology. The selected cities had data extracted from attitudes, activity and aspirations variables that compose education and a city benchmarking data programme in a given country. The Global human resources are the adult literacy on 162 indicators. Each of the Entrepreneurship Index (GEINDEX) rate, secondary education enrolment benchmarking data points were scored integrates 31 variables, including and tertiary education enrolment. by analysts using the best available quantitative and qualitative measures qualitative analysis and quantitative and individual-level data. Adult Literacy Rate, UNESCO, refers to statistics. (Where data was unavailable, the percentage of people aged 15 and national or state estimates were used.) above who can, with understanding, Data were then trend balanced against read and write a short, simple 21 global trends. The final index had statement on their everyday life.
From Moscow to São Paulo | 43 Technology Readiness
Internet Access in Schools* Digital Economy Score* the World Bank KEI Index. Both fDi The responses of leading business The Economist Intelligence Unit’s indices weight a city’s performance executives to the question in the World Digital Economy Rankings 2010 – 70% based on the quality of the Economic Forum’s Executive Opinion Beyond E-readiness report provides an location and 30% based on the cost Survey 2014 that asks, “In your assessment of the quality of a country’s of the location. The software design country, how widespread is Internet information and communications index is based on an assessment of 120 access in schools? [1 = non-existent; technology (ICT) infrastructure and quality competitiveness indicators. 7 = extremely widespread]”. The the ability of its consumers, businesses These indicators include availability survey covers a random sample of large and governments to use ICT to their and track record in ICT, availability of and small companies in the agriculture, benefit. When a country uses ICT specialised-skills professionals such manufacturing, non-manufacturing, to conduct more of its activities, as scientists and engineers, access and service sectors. the economy can become more to venture capital, R&D capabilities, transparent and efficient. This ranking software experts, quality of ICT Broadband Quality allows governments to gauge the infrastructure and specialisation in Based on millions of recent test success of their technology initiatives software development. The multi- results from Pingtest.net, this global against those of other countries. It media design centre rankings are broadband index from Ookla compares also provides companies that wish based on an assessment of 120 quality and ranks consumer broadband to invest or trade internationally competitiveness indicators, including connection quality around the globe. with an overview of the world's most the size of the location’s leisure and Quality is reported in R-Factor, an promising business locations from an entertainment sector, its specialisation industry-standard measurement ICT perspective. and track record, information for connection quality — crucial for technology infrastructure, quality of applications that require a steady Software and Multi-Media life and skills availability. The World connection such as VOIP and online Development Design Bank KEI Index is noted as the simple gaming. The value is the mean R-Factor Combination of scores for each city average of normalised scores of three over the past 30 days. Only tests taken in fDi magazine’s Best Cities for key variables: telephone, computer within 300 miles of the server are Software Development, Best Cities and Internet penetrations (per 1,000 eligible for inclusion in the index. for Multi-Media Design Centres, and people).
City Gateway
Hotel Rooms been used as a proxy for the CoO6 international terminal of its busiest Count of all hotel rooms within each variable On-Time Flight Departures as airport in terms of international city. this data is generally unavailable for passenger traffic. Cities are categorised the airports overall in the E7 cities. according to whether a direct rail Number of International Tourists link exists; and, if so, the number of Annual international tourist arrivals Incoming/Outgoing transfers required; and, if not, whether for 100 cities collected by Euromonitor Passenger Flows there is a public express bus to the International. Euromonitor’s figures The total number of incoming and airport. Cities with direct rail links are include travellers who pass through a outgoing passengers, including preferred to those with express bus city, as well as actual visitors to the city. originating, terminating, transfer and services. Cities with rail links with the transit passengers in each of the major fewest transfers are ranked higher than Number of International airports serving a city. Transfer and those with more. Within categories, Association Meetings transit passengers are counted twice. cities are ranked against one another Number of international association Transit passengers are defined as air according to the cost of a single one- meetings per city per year which take travellers coming from different ports way, adult weekday trip and the length place on a regular basis and rotate of departure who stay at the airport for of the trip, with each factor weighted between a minimum of three countries. brief periods, usually one hour, with equally. Figures provided by the International the intention of proceeding to their Congress and Convention Association. first port of destination (includes sea, Top 100 Airports air and other transport hubs). Each city receives a score based on the On-Time Flight Arrivals ranking of that city's top airport in the The average percentage of on-time Airport to CBD Access 'World's Top 100 Airports' ranking, arrivals over three months (August - A measure of the ease of using public compiled by Skytrax. . October 2013) for the main hub airline transit to travel between a city’s at each city's airport. This data has central business district (CBD) and the
44 | PwC Transportation and Infrastructure
Public Transport Systems developed and developable portions of Property types include: apartment, This variable reflects the efficiency, a city’s land area. A city’s developable industrial, office, retail, hotel, seniors reliability and safety of public transport land area is derived by subtracting housing and care and development networks as defined and rated by the green space and governmentally sites. Transactions represent the 2013 Mercer Quality of Living report. protected nature conservation areas transfer of a controlling interest in a Cities also received additional points from total land area. property or portfolio of properties. for each multi-modal transport system Transactions are assumed to be fee available to the public including: Cost of Public Transport simple; leasehold and commercial subway, bus/bus rapid transit, taxi, The fare for the longest mass transit condominium interests are noted, if light rail, tram/trolley/streetcar, commuter rail trip from the most known. Transactions include asset commuter rail and bike share systems. distant point on the given city’s city sales and entity-level transactions. Each city received a tenth of a point limits to its CBD. The fare for a bus trip Sales of partial interest transactions for the modes of transport available is used in those cities with no urban will receive credit and be valued at the within the city to differentiate between commuter rail system. pro-rated share. Data as provided by the 1-10 scores awarded by Mercer. Real Capital Analytics (RCA). Licensed Taxis Cities that had a fully operational Bus Number of officially licensed taxis in Rapid Transit (BRT) system received Housing each city divided by the total population 0.05 points (in addition to the tenth Measure of availability, diversity, cost and then multiplied by 1,000. of a point for a public bus system). and quality of housing, household appliances and furniture, as well as Ferry systems were excluded so as to Volume of property household maintenance and repairs. not penalise land-locked cities for their transactions This measure is based on the Mercer absence. Volume of all types of property Quality of Living report 2013. transactions valued at 10 million
Mass Transit Coverage USD or greater, reported as either Ratio of kilometres of mass transit track 'in contract' or 'closed' in the past to every 100 square kilometres of the 6 months (June-November 2014).
Health, Safety and Security
Hospitals and Health End-of-Life Care* Political Environment Employment Ranking of countries according to Measure of a nation’s relationship with Combination of scores for: the ratio of their provision of end-of-life care. The foreign countries, internal stability, law all hospitals within each city accessible EIU’s Quality of Death Index scores enforcement, limitations on personal to international visitors for every countries across four categories: Basic freedom, and media censorship. Data is 100,000 inhabitants; and the ratio of End-of-Life Healthcare Environment; from the 2013 Mercer Quality of Living employment in the health sector per Availability of End-of-Life Care; Cost of report. 100,000 inhabitants as per Oxford End-of-Life Care; and Quality of End- Economics data. of-Life Care. These indicator categories are composed of 27 variables, Health System Performance* including quantitative, qualitative and Measurement of a country’s health “status” (whether or not something is system performance made by the case) data. The indicator data are comparing healthy life expectancy with aggregated, normalised, and weighted healthcare expenditures per capita to create the total index score. in that country, adjusted for average years of education (years of education Crime is strongly associated with the health Weighted combination of the Mercer of populations in both developed and Quality of Living report’s Crime score developing countries). PwC Global (50%), intentional homicide rate per Healthcare adapted the methodology 100,000 city residents (30%) and the from the 2001 report “Comparative Numbeo Crime Index, which is an efficiency of national health systems: estimate of the overall crime level in cross-national econometric analysis”. each city based on how safe citizens feel (20%).
From Moscow to São Paulo | 45 Sustainability and the Natural Environment
Natural Disaster Risk city’s heat index for each month and diameters or less, which reflect the Risk of natural disasters occurring in optimal room temperature and then degree to which urban populations are or near a city. Counted hazards include averaging the absolute values of these exposed to this fine matter. A lower hurricanes, drought, earthquakes, differences. weight has been attributed to the WHO floods, landslides and volcanic data as it is less current. The Numbeo eruptions. Recycled Waste Pollution Index is generated via survey- Percentage of municipal solid waste based data. Numbeo attributes the Thermal Comfort diverted from landfills. biggest weight to air pollution, then A thermal comfort score was created to water pollution/accessibility, as the Air Pollution for each city by calculating the two main pollution factors. A small A weighted combination of measures average deviation from optimal room weight is given to other pollution types. temperature (72 degrees Fahrenheit). with PM10 outdoor air pollution January, April, July and October levels (30%) from the World Health Public Park Space heat indices were calculated for Organisation (WHO) and the Numbeo Proportion of a city’s land area each city using an online tool that Pollution Index of overall pollution designated as public recreational and integrates average high temperature in each city (70%). The World Health green space to the total land area. This and corresponding relative evening Organisation’s Public Health and excludes rugged, undeveloped terrain humidity during each month. A final Environment database provides annual or wilderness areas that are either not thermal comfort score was derived by mean concentrations of particulate easily accessible or not conducive to first taking the difference between a matter 10 micrometres (PM10) in use as open public space.
Demographics and Livability
Cultural Vibrancy “undesirable” or “intolerable” for each Ease of Commute** A weighted combination of city variable. For qualitative indicators, PwC network employees working rankings based on: the quality and ratings are awarded based on EIU in each of the 30 cities studied were variety of restaurants, theatrical and analysts’ and in-city contributors’ asked: “On a scale from 1 to 10, where musical performances, and cinemas judgements. For quantitative indicators, 1 is difficult and 10 is easy, please rate within each city; which cities recently ratings are calculated based on cities’ your commute to work?” The average have defined the zeitgeist, or the relative performances on a number of score provided by the PwC Employee spirit of the times; and the number external data points. Data produced by Survey. of museums with an online presence the EIU Liveability ranking. within each city. The zeitgeist rankings Relocation Attractiveness** take into account cultural, social and Working Age Population PwC network employees working economic considerations. Proportion of a city’s population aged in each of the 30 cities studied were 15-64 to the total population of the city. asked: “Out of the other 29 cities in Quality of Living the Cities of Opportunity study, what Score based on more than 30 factors Traffic Congestion are the top three cities that you would across five categories: socio-political Measure of traffic congestion and most like to work in?” Data provided stability, healthcare, culture and congestion policies for each city scored by the PwC Employee Survey. natural environment, education and on the level of congestion as well as the infrastructure. Each city receives modernity, reliability and efficiency a rating of either “acceptable”, of public transport. Assessment based “tolerable”, “uncomfortable”, on the 2013 Mercer Quality of Living report and the PwC Employee Survey.
46 | PwC Economic Clout
Number of Global 500 technical services”, “legal, accounting, Productivity Headquarters bookkeeping and auditing services”, Productivity is calculated by dividing Number of Global 500 headquarters “tax and consultancy services”, the gross domestic product (GDP) located in each city. “advertising” and “professional, in 2013 US dollars by employment scientific and technical services, and in the city. Data provided by Oxford Financial and Business Services business services where not elsewhere Economics Employment classified”. Data sourced by Oxford The number of jobs in financial and Economics. Rate of Real GDP Growth business services as a share of total 2012-2014 gross domestic product employment in the city. Financial Attracting FDI (GDP) percentage growth rate in real services includes “banking and Combined variable ranking the number terms expressed in 2013 US dollars. finance”, “insurance and pension of greenfield (new job-creating) Data provided by Oxford Economics. funding” and “activities auxiliary to projects, plus the total USD value of financial intermediation”. Business greenfield capital investment activities services includes a mix of activities in a city that are funded by foreign across the following sub-sectors: “real direct investment (FDI). Data cover estate and rental activities”, “IT and the period from January 2003 through computer-related activities”, “R&D”, December 2013 provided by fDi “architectural, engineering and other Intelligence.
Cost
Total Corporate Tax Rate Cost of Business Occupancy iPhone Index ОThe total tax rate measures the amount Annual gross rent divided by square Number of working hours required to buy of taxes and mandatory contributions feet of Class A office space. Gross rent an iPhone 4S 16GB. Data sourced from payable by a business in the second includes lease rates, property taxes, and the 2012 UBS Prices and Earnings report. year of operation, expressed as a share maintenance and management costs. of commercial profits. The Total Tax Data produced by CBRE Global Office. Purchasing Power Tate variable is designed to provide a Rent amounts expressed in USD. Domestic purchasing power is measured comprehensive measure of the cost of by an index of net hourly wages (where all taxes a business is liable for. Data Cost of Living New York = 100) excluding rental costs. provided by PwC UK from Paying Taxes A relative measure of the price of Net hourly wages divided by the cost of 2014; taxes are accurate for the year consumer goods by location, including the entire basket of goods and services ended 31 December 2012. Some cities groceries, restaurants, transportation excluding rent. The basket of goods which were not included in the Paying and utilities. The CPI measure does not covers 122 goods and services. Data Taxes 2014 study were calculated include accommodation expenses such sourced from the 2012 UBS Prices and separately by our PwC local office using as rent or mortgage. Figures provided by Earnings report. the TTC methodology. The Paying Taxes Numbeo. 2014 report can be found at http:// www.pwc.com/gx/en/paying-taxes/.
From Moscow to São Paulo | 47 Ease of Doing Business
Ease of Starting a Business*** Employee Regulations*** Operational Assessment of the bureaucratic and Sum of rank scores collected from the Risk Climate* legal hurdles (“red tape”) that an World Bank’s Doing Business study Quantitative assessment of the risks entrepreneur must overcome to relating to the ratio of minimum to business profitability in each of the incorporate and register a new firm. wage to average value added per countries. Assessment accounts for Accounts for the number of procedures worker / notice period for redundancy present conditions and expectations required to register a firm; the amount dismissal (for a worker with 10 years for the next two years. The operational of time in days required to register of seniority, in salary weeks) / paid risk model considers 10 separate a firm; the cost (as a percentage of annual leave for a worker with 20 risk criteria: security, political per capita income) of official fees years of seniority (in working days). stability, government effectiveness, and fees for legally mandated legal Assessment scores gathered from the legal and regulatory environment, or professional services; and the 2014 Doing Business report by the macroeconomic risks, foreign trade minimum amount of capital (as a World Bank Group. and payment issues, labour markets, percentage of per capita income) that financial risks, tax policy, and standard an entrepreneur must deposit in a bank Ease of Entry: Number of of local infrastructure. The model uses or with a notary before registration Countries with Visa Waiver* 66 variables, of which about one-third and up to three months following Number of countries whose nationals are quantitative. Data produced by the incorporation. Assessment scores may enter the given country as a tourist EIU's Risk Briefing. gathered from the 2014 Doing Business or on business without a visa. Excludes report by the World Bank. those nationalities among which only Workforce holders of biometric, diplomatic or Management Risk Resolving insolvency*** official passports enjoy visa-free entry. Ranking based on staffing risk in each Assessment of the bureaucratic city associated with recruitment, and legal hurdles an entrepreneur Foreign Embassies and employment, restructuring, retirement must overcome to incorporate and Consulates and retrenchment. Risk was assessed register a new firm. Accounts for the Number of countries that are represented based on 30 factors grouped into five number of procedures required to by a consulate or embassy in each city. indicator areas: demographic risks register a firm; the amount of time in Figures sourced from GoAbroad.com. associated with labour supply, the days required to register a firm; the economy and the society; risks related Level of Shareholder cost (as a percentage of per capita to governmental policies that help or Protection*** income) of official fees and fees for hinder the management of people; Measurement of the strength of legally mandated legal or professional education risk factors associated minority shareholder protection against services; and the minimum amount of with finding qualified professionals misuse of corporate assets by directors capital (as a percentage of per capita in a given city; talent development for their personal gain. The Strength income) that an entrepreneur must risk factors related to the quality and of the Investor Protection Index is deposit in a bank or with a notary availability of recruiting and training the average of indices that measure before registration and up to three resources; and risks associated with “transparency of transactions”, “liability months following incorporation. employment practices. A lower score for self-dealing” and “shareholders’ Assessment scores gathered from indicates a lower degree of overall ability to sue officers and directors Doing Business 2014 report by the staffing risk. Rank scores sourced from for misconduct”. Assessment scores World Bank. the 2013 People Risk Index produced gathered from the 2014 Doing Business by Aon Consulting. report by the World Bank Group.
* Country-level data ** Data based on the 2013 PwC Employee Survey *** Data based on a country’s most populous city
48 | PwC For more information on this report or cities' development, please contact our specialists:
Hazem Galal Ekaterina Shapochka Vadim Khrapoun Partner, Partner, Partner, PwC's Cities & Local Government Government and Public Sector Services Advisory Leader PwC Russia Sector Global Leader (Doha, Qatar) Leader PwC Russia Tel.: +7 (495) 232 5408 Tel: +974 4419 2852 Tel.: +7 (495) 223 5002 [email protected] [email protected] [email protected]
Anastasia Okuneva Nadezhda Markova Sabrina McColgan Senior Consultant, Consultant, Manager, Government and Public Sector Services Government and Public Sector Services Research to Insight (r2i) PwC Russia PwC Russia Tel.: +44 (0) 28 90 41 5598 Tel.: +7 (495) 967 6000 Tel.: +7 (495) 967 6000 [email protected] [email protected] [email protected] www.pwc.ru/e7
© 2014 PricewaterhouseCoopers Russia B.V. All rights reserved.