Moscow, 6 July 2017 – Tomorrow at the Moscow Urban Forum, PwC will present the results of its new report, Size Matters: First Global Ranking of Metropolitan Areas. Based on many years of urban research, the PwC global network has developed a benchmarking methodology that identifies those agglomerations that have used their existing resources with maximum efficiency and surpassed the average level of economic development in their countries. The study highlights these agglomerations’ strengths, weaknesses, and competitiveness strategies.
The study contains two separate rankings:
According to PwC research, the world’s largest agglomerations—those with a minimum population of 1.5 million — will be home to seven out of every ten urban residents and 24% of the world’s population by 2030, while the largest agglomerations’ share of global GDP will increase from 38% to 43%, thanks to population growth and increased productivity. The growth of GDP in the largest agglomerations will be achieved by population growth (60%) and increased labour productivity (40%).
The role of agglomerations in global and national economic growth
Agglomerations are the engines of economic development in their countries, outpacing countrywide averages on 11 of 13 indicators. Moreover, agglomerations are growing faster than their administrative borders. In this respect, having a single coordination and management body can play an important role in an agglomeration’s success.
The Moscow agglomeration is ranked second in the top 20 and significantly outpaces the rest of Russia on 11 of 13 indicators. Only the Beijing agglomeration has better results (12 0f 13). The Shanghai and Istanbul agglomerations are together with Moscow in second place (11 of 13).
From 2001 to 2016, average per capita income in agglomerations increased by more than USD 4,700 compared to country averages. Generally, agglomerations offer better working conditions than other areas and have a higher percentage of working people per 1,000 (+20).
Growth potential of agglomerations
Our survey uncovers the key drivers of growth in successful agglomerations:
The New-York agglomeration leads the growth potential ranking, as it encourages balanced development and has the highest social and economic development indicators. The Moscow agglomeration is ranked sixth and leads all other developing countries.
The Moscow agglomeration has a high level of human capital development, as confirmed by the strong performance of the educational system and the highest creative industry growth rates. Moscow leads in the number of jobs created outside the agglomeration and is making significant efforts to support entrepreneurship.
The sheer volume of consumption in the agglomeration has stimulated the development of other regions in the country. The agglomerations with the largest impact upon their national economies are Sydney (USD 7,300) and Moscow (USD 6,100), thanks to low levels of consumption of locally-produced and imported goods outside of these cities. Despite the small share of consumer goods (16%) in the overall consumption structure and large share of locally-produced goods (53%), the New York agglomeration is also among the top three agglomerations that impact their national economies (USD 4,200).
The Moscow agglomeration is the undisputed leader in terms of creating jobs in other parts of the country (for 3.5 mln people). This is primarily due to low level of productivity in other Russian regions. In contrast, the Sydney agglomeration creates only 0.08 jobs in other regions of Australia, due to the high average productivity levels in the Australian economy: fewer people are required to create the necessary volume of goods. Chinese agglomerations like those of Beijing and Shanghai interestingly create many jobs (0.12 and 0.09, respectively) with a relatively low economic impact (USD 1,600 and 1,200, respectively) due to the lower levels of productivity in the country.
The financial and business service sectors are critical to the economies of agglomerations. However, the largest growth in productivity has been observed in industry. Despite the fact that the share of the industrial sector in the global economy has been decreasing, it grew considerably across all surveyed agglomerations from 2001 to 2016 (from 31% in the Paris agglomeration to 595% in the Buenos Aires agglomeration). The Moscow agglomeration’s economic structure is dominated by financial and business services (37%), while the industrial sector is quite small (17%). However, given the radical transformations fuelled by environmentalism and the productivity increases from robotisation, the growth of industry’s share in the Moscow agglomeration’s GDP may contribute to overall productivity gains and make the economy more resilient and diversified.
A new engine of economic growth in agglomerations is the creative sector. In the vast majority of agglomerations, including Beijing, London, Moscow and New York, the growth in GDP generated by the creative industries has outpaced overall GDP growth over the past five years. The growth rate of the Moscow agglomeration’s creative sector (+22% per year) is 1.7 times higher than that of other economic sectors (+13%). Furthermore, the Moscow agglomeration has some of the most in-demand talent. Whereas in developed countries, agglomerations have a more balanced labour market, it is easier to find a creative-industry professional in Moscow than in the rest of Russia.
The Moscow agglomeration is among the leaders in terms of favourable conditions for entrepreneurship (19.6), as confirmed by the high rates of entrepreneurism (72 enterprises per 1,000 residents). The Moscow agglomeration leads in terms of consumer purchasing power and has a low cost of doing business. Seoul (38.7) and London (22.2) have the highest scores for business environment.
Moscow’s large territory (even when compared with the surveyed agglomerations) and the high concentration of economic activity creates challenges for daily commuters and negatively impacts Moscow’s productivity. When work places are evenly distributed across an agglomeration, people spend less time travelling to and from work and productivity is higher. In the Beijing, Shanghai and Moscow agglomerations, where the average time to work is more than 45 minutes, the majority of work places are concentrated in downtown areas.
Creating more work places along the periphery of the Moscow agglomeration to redirect people’s daily commutes from the city centre to suburban areas could have a positive impact on the transportation network as well as on productivity. Moscow is already putting significant effort into developing new employment centres in New Moscow and the Moscow Region, and the housing renovation programme will open up new opportunities to create jobs in existing residential neighbourhoods.
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