PostIndustrial

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• Post-Industrial
• East Asian Cities

Shahid Yusuf World Bank January 30, 2007
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Urban Transition

• East Asia is urbanizing rapidly. Simultaneously,
  the pace of urban structural change in its major
  cities is accelerating The displacement of key
  manufacturing industries by other activities is
  occurring in decades as against centuries.
• East Asias mega-cities need to find new engines
  of growth and new ways of financing imports as
  their traditional manufactured exports diminish.
  Over the medium term, a citys current account
  (i.e. its transactions via trade and capital
  transfers with the rest of the world) must
  balance.

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What is Accelerating Change

• Rapidly rising wages and overheads in major
  cities are affecting competitiveness of labor
  intensive manufacturing industries.
• Global market integration, modularization and
  disintegration of the production process, and
  more efficient logistics are exacerbating
  pressures from lower cost producers.
• Technological advances are reducing the labor
  coefficients of manufacturing. Less labor is
  required and production is more skill intensive.
• Terms of trade are shifting against manufactured
  goods because of relatively higher productivity
  and because the changing composition of demand
  favors services.

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Why Focus on Urban Economies

• Salience of the urban economy Share of
  population and GDP is rising steeply.
• 85 of GDP is urban in high income countries, 55
  in low income countries.
• Importance of city size for agglomeration and
  scale economies which can contribute importantly
  to urban productivity.
• Major cities which are nodes of global urban
  network attractive for tradable business services
  (e.g. finance, legal, and accounting) and foreign
  direct investment.
• Demographic patterns currently a high percentage
  of the population is of working age source of
  human resources, dynamism, and entrepreneurship.
• Impact of cities on the environment, resource
  use, and health. In the United States, buildings
  account for 65 of electricity use, 36 of energy
  consumption and 30 of greenhouse gases.

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Which Cities Matter and Why

• The Asian industrial miracle was and is an urban
  phenomenon. Key players are a small number of
  cities, which over time have grown into
  mega-urban centers. Asias future linked to
  economic dynamism of these cities.
• Among the principal foci of Asian growth are
  Tokyo, Osaka, Nagoya, Seoul, Shanghai, Yangtze
  Delta Region, Bohai Region, the Pearl River
  Delta, Hong Kong, Bangkok, Taipei, Singapore,
  Jakarta, KL/Klang Valley.

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Share of National GDP
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City GDP in 2003 (US billions)
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What Brings New Industrial Engines to Life

• National/subnational policies
• Investment in tertiary level skills (especially
  science and technology manpower), measures to
  raise quality of skills, funding for research.
• Local incentives regime for industry fiscal
  (e.g., tax incentives and grants), labor market
  institutions which induce skill formation and
  efficient allocation, financial (ease of raising
  funds from local sources, e.g. from angel
  investors), and government purchases of goods and
  services (e.g. IT).
• Investment in and maintenance of high quality
  physical and IT infrastructure.

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What Brings New Industrial Engines to Life

• Coalition of supporting private interests, e.g.
  financiers, urban developers, NGOs, and
  industrial and professional bodies
• Industrial organization mix of large and small
  firms RD, organizational and marketing
  capabilities of large firms and innovativeness
  of small firms
• Open innovation systems and links with
  universities and research institutes
• Urban environment quality of amenities and
  public services and safety nets to minimize
  poverty/inequality and emergence of slums

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How are Cities Pursuing Industrial Opportunities

• The Tokyo case developing multifunctional
  robotic technologies
• The Singapore case creating a biotech sector
  through FDI and investment in RD infrastructure
• The Seoul case grooming an online videogames
  industry
• The Beijing case cultivating the electronics
  sector through FDI, skill development, RD and
  start-ups
• The Bangkok case developing the fashion and
  jewelry sector through investment in design and
  marketing
• The Shanghai Case enlarging the capabilities and
  export potential of the construction and
  engineering services sector

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How to Measure Impact and Potential of Emergent
Leading Sectors

• Growth and contribution to urban economic
  performance
• Industrial linkages
• Employment, skill intensity
• Technological dynamism Links with universities
  and research institutes
• Corporate capability
• International market penetration
• Future demand prospects Local and global

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Growing New Urban Industries Singapores Biotech
Sector

• In 2004, biomedical manufacturing (including
  pharmaceuticals and medical technology) accounted
  for 2.6 of employment, 9.1 of output, and 21.3
  of value-added in manufacturing.
• Singapore creating biotech cluster following the
  US model
• Universities, and linkages with businesses
• Star scientists as inventors and entrepreneurs
• Role of risk capital
• Large pharmaceutical firms
• Clusters around key hospitals, universities,
  government labs
• Urban amenities

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Singapores Biotech Sector

• The creation of Biopolis
• Investment of US286 million
• Houses five public institutes
• Close to NUS Hospital
• Place where researchers can work, live, play,
  and learn
• Attracting MNCs through FDI incentives (first for
  manufacturing, then gradually shifting to
  research activities).
• Global linkages to make Singapore as a
  cost-efficient clinical trial site.

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Singapores Biotech Sector

• Attracting star scientists from abroad
• Jackie Ying, Alan Coleman, Bernat Soria, Axel
  Ulrich, Sydney Brenner, Edison Liu, David Lane,
  Yoshiaki Ito.
• Taking advantage of English being the official
  language which facilitates communication among
  researchers from around the world.
• Investment in domestic human capital
• Establishment of specialized degree programs in
  Singapore.
• (bonded) Scholarship programs to provide overseas
  training.
• Modification of curriculum at tertiary and
  secondary school to include subjects on life
  sciences and entrepreneurship.

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Singapores Biotech Sector

• Venture funds backed by government
• Improving the quality of research at universities
• Stimulating University-Industry Linkages
• Teaching entrepreneurship

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Singapores Biotech Sector

• Competition Korea, Taiwan (China), China, and
  India.
• The growth opportunity is large but uncertain.
• US spends 16 of GDP on health care
• Other countries spend close to 6
• With aging and rising incomes in other countries,
  the opportunities for biotech sector is large,
  especially for medicine
• However,
• Rising costs of new product development, yet
  fewer blockbuster drugs in the pipeline.
• Possible backlash against rising medical costs in
  advanced countries and scandals with major drugs.
• Whether Singapore has enough scale.
• Heavy reliance on foreign firms and talents.

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Fashion Industry in Thailand

• Long history of sericulture, production of silk
  products, and of gemcraft. Often done by farming
  households to supplement their incomes.
• Establishment of Department of Silk Craftsmen in
  1903 marked the beginning of the modern
  sericulture in Thailand.
• Modern silk industry emerged in post-war period.
  The establishment of the Thai Silk Company by Jim
  Thompson, an important step.
• Introduced artificial dyes from Switzerland and
  Germany and printed silk fabric.
• Encouraged creation of indigenous designs.
• Marketed to tourists and overseas.
• Sorting, heat treatment, cutting, and setting of
  gemstones, local and imported has grown steadily.
• Cutting, polishing, and setting of imported
  diamonds started in 1990s.

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Fashion Industry in Thailand

• Fashion sector generates 12 billion in sales,
  employs 2 million workers, mainly in 20,000 SMEs.
• Garment sector employs 81,000 people, accounting
  for 3 of GDP, 7 of exports.
• But global share is less than 2.
• Textile and garment industry invested 12.5
  billion between 2001 and 2004 to upgrade dyeing,
  finishing, weaving, knitting, and spinning
  facilities.
• Bangkok the dominant player in the fashion
  industry accounting for 74 of jewelry, 48 of
  garments, and 41 of leather goods.

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Fashion Industry in Thailand

• Gem and jewelry industrys output is about 500
  million, employs 32,000, export ratio is about
  80.
• Headquarters of gem and jewelry firms mostly
  located in Bangkok.
• Strength in heat treatment (to enhance color and
  quality of gem stones) and synthetic gems.
• Silver jewelry, major export competes against
  high-end products from Italy and low-end from
  India and China.
• New technology (such as computerized sorting of
  gem stones) promises gains in productivity but
  threatens livelihood of rural workers.
• Gemopolis Industrial Estate to promote the
  jewelry industry in Thailand
• a complete supply-chain cluster.
• 50 manufacturers, more than 10,000 employed,
  exports of 500 million in 2003
• Fiscal incentives (exemption from corporate
  income taxes, import duties, value-added tax).

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Fashion Industry in Thailand

• Fashion Centers around the world
• Paris, New York, London, Tokyo, Milan
• Upgrading and adding value to garment and jewelry
  sector products becoming necessary because of
• Rising local costs.
• Increased competition from China, India, and
  other countries.
• The push by the Thai government to develop the
  fashion industry
• The Bangkok Fashion City initiative.
• Gemopolis Industrial Estate.
• Investment in technology and training.

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Fashion Industry in Thailand

• Favorable conditions
• Rising incomes in East Asia big middle class.
• Younger demographics in East Asia (70 of the
  population working age, average age less than
  40).
• Geographic shift of manufacturing to East Asia.
• Unfavorable conditions
• Consolidation of global brands.
• Absence of major firms and of local brands with
  regional or global recognition.
• Uncertainty over the global acceptance of local
  styles and motifs.

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Fashion Industry in Thailand

• Adding value and enlarging global market share
  requires
• Advances in design through development of local
  skills and outsourcing services.
• Links with famous fashion designers.
• Local and overseas exhibitions.
• Strong marketing efforts aided by
  publications/advertising industries.
• Strengthening of skills of workers.
• Advances in technology for designing, cutting,
  making, and finishing garments and in
  sorting/cutting gems and working with metals.
• Use of e-business for selling upscale clothing
  and jewelry.
• Creating viable urban clusters with the help of
  local governments, developers, and industry
  associations.

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Key Points

• Successful post-industrial cities will be ones
  that
• Fully develop and mobilize knowledge capabilities
  and capital from national and international
  sources
• Are globally linked and maintain open innovation
  systems
• Attract and retain dynamic and research-oriented
  firms
• And sustain an attractive physical and stable as
  well as creative social environment.

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Table of Contents

• Chapter 1 Emerging Cityscapes
• Chapter 2 Megacity Profiles
• Chapter 3 Disappearing Manufacturing
• Chapter 4 Deciphering the DNA of the
  Biotechnology Industry
• Chapter 5 Meet Astro Boy and Friends

• Chapter 6 Fun, Movies, and Videogames
• Chapter 7 Silk and Gems
• Chapter 8 Sculpting the Urban Skyline
• Chapter 9 Gold in Silicon
• Chapter 10 Summing Up

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Thank You