5 June 2006
By Neil Fraser
GAUTENG Premier Mbhazima Shilowa announced quite some time ago that he had instigated an investigation into establishing a Gauteng city region. Last week he advised that the initiative would in fact be launched in August.
So, what drives the consideration of city region formation?
Overwhelmingly it has been the profound effect, good and bad, that globalisation has had on the economies of countries and cities. Consider some of the issues that have arisen as a result of globalisation:
- Increased global competition - service sectors that were previously shielded from international competition now face greater competition through the removal of trade barriers.
- The fast pace of technological change - new technologies are developing at a rapid rate making global communication almost instantaneous, enabling more goods and services to be traded. This in turn makes locational decisions of firms, investors, and individuals more complex.
- Access to new opportunities for business - resources are shifting away from traditional industries and into new ones where they can be put to more productive use. The rate of change is increasing as developing countries increase their share of world trade. Traditional industries are modernising and specialising at a faster rate than previously.
- Localised economic disparities - the widening gap in economic disparities caused by large scale industrial and agricultural change can be further exacerbated by the shift towards higher value and higher skill activities.
- Increased mobility of economic activity - this demands a greater understanding of the factors that drive business locations, and the associated decision of investors and workers about where to locate.
- The need for macroeconomic stability which allows firms, consumers, government, and regional organisations to plan more effectively for the long term and to react to change flexibly. Stability provides a platform for expanded and long-term investment in human and physical capital. Both help raise the long-term productivity potential. Stability and flexibility work together, not as opposites, but with one providing the context for the other.
Competitiveness is key
What has become clear from all this is that competitiveness is the key to global success.
We used to say that the role of government is merely to provide the environment within which business can operate efficiently and effectively.
In the new global economy that is even more critical but it also requires national and local economies to review continuously their comparative advantages and to see how they can provide a more effective environment for competitiveness to be enhanced. That in turn might mean being more than just the conductor of the orchestra, but providing extra wind or strings when and where needed.
It is also necessary to remember that comparative advantages for countries or a city change over time, especially as firms and individuals learn from interaction within the global economy.
This requires that a city region will need to:
- ensure that businesses can thrive in today's more intensively competitive global markets.
- remain (or become) an attractive location for business and investment over the long term.
- become a location that develops and retains capable and talented labour forces.
- identify how the shift towards higher value activity can be used to support the revitalisation of
disadvantaged areas.
- understand how to modernise those sectors that can continue to be productive, as well as how to open up new opportunities.
What has been found is that city regions are often the most effective structures at meeting these needs because:
- they are more able to benefit from agglomeration and/or clustering effects where firms from the same or related industries locate close to each other in order to score from the advantages of proximity such as denser and richer labour pools, supply chains, knowledge exchanges, shared infrastructures (e.g. digital), and access to customers and specialist services.
- once clusters are established and start to work successfully, they act like magnets attracting other business.
- economic geography underpins sustainability and quality of life.
- regional economies have particular institutional, cultural, and environmental conditions that shape how the drivers of growth and productivity (skills, enterprise, innovation, investment) can be promoted and the barriers that inhibit growth can be tackled.
Overseas perspective
That this is a strong global reaction to competitiveness can be seen from this concise overview of the state of city regions recently provided by an overseas colleague:
- German city regions are perceived the most competitive in Europe. They benefit from a multi-centred national economy (covering a large land mass and supported by a large population that fuels domestic demand) that enables many centres to flourish. They have built their economic rationales and functions during a long 20th century economic expansion, which generated exceptional resources for investment in infrastructure. They have made an effective transition to the knowledge-based economy, they operate with decentralised political system, and they are well positioned to benefit from the expansion of the European Union eastwards.
- US city regions are also supported by a very large population and domestic demand, are geographically spread out and benefit from a high degree of de-centralisation and major investment in the key institutional assets of the knowledge economy (universities, research/technology facilities, medical installations). The most competitive US city regions have overcome the limitations of fragmented governance and are taking regional approaches to land use, transport infrastructure, and environmental management. They are using fiscal freedoms to generate investment, not to cut costs.
- Within medium sized nations, the recent accent has been on improving metropolitan planning and co-ordination for city regions, and especially in raising the level of investment in infrastructure. This is true of London in the UK, Toronto in Canada, and Johannesburg in South Africa. In all cases a new metropolitan government has been created to do this, with varying degrees of success. But further reforms are being added to improve performance.
- In smaller nations such as Finland, Ireland, and Korea, where a single large metropolitan region (Helsinki, Dublin, Seoul) dominates the national economy, particular attention has been paid to investing to support growth and providing a metropolitan framework to plan investment and infrastructure. In the case of Seoul this is combined with attempts to minimise growth in non-essential company locations into Seoul (but this must be seen as a special case with over 11 000 000 people).
Healey & Baker Cushman Wakefield, in the
European Cities Monitor, emphasise the following factors that make a metro region a competitive location for businesses:
- Access to markets
- Communications
- Costs factors
- Qualified staff
Price Waterhouse Coopers in their report
Cities of the Future, global competition - local leadership, suggest the following ingredients for making city regions competitive or successful:
- Intellectual and social capital
- Democratic capital
- Cultural and leisure capital
- Environmental capital
Technical capital
- Financial capital
From some of the work done locally, the most successful global city regions exhibit a set of common features, viz.
- Clear leadership
- A vision and strategy
- Effective institutional relations
- Strong economic clusters, with a particular view to building new growth sectors
- Good telecommunications and business linkages
- Spatial coalitions' of partners working together - primarily government, business and social partners
- A balanced approach to development, that actively incorporates and seeks to spread benefit to the poor
Local government within Gauteng often appears to be wasteful in duplicating or wanting to duplicate 'ego type' facilities and infrastructure while not focusing jointly on real shared needs such as transportation and road networks that have profound effects on productivity and thus competitiveness.
The premier's desire to see the province and the 15 Gauteng municipalities plan and allocate resources in a co-ordinated manner should be supported.
All in all, I think that the move to a Gauteng city region makes sense although looking at these common features it's clear that we have quite a way to go.
I'm off to Addis Ababa, hope it's a bit warmer than here!
Cheers, Neil
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