The Most Competitive Cities of the Future

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Singapore is currently the most competitive city in the world, beating out New York and London, according to the Economist Intelligence Unit (EIU), which focuses on global research. However, says the EIU, by 2025, New York City will be number one.

Citi commissioned the EIU to create a forward-looking research report that determines the competitiveness of 120 global cities in 2025. “Hot Spots 2025: Benchmarking the Future Competitiveness of Cities” was designed to enhance understanding of market competitiveness and help determine where growth, opportunity, and talent are likely to be found in the future. It also attempts to identify the ways in which cities can boost their competitiveness to enable economic progress and growth.

According to the report, in order for a city to be globally competitive, it must have a large and growing economy, a good legal system, an inviting and productive culture, good infrastructure and it must have good policy on things that determine long-term stability and success, like the environment. The EIU’s latest report attempts to identify those cities that, as of 2012, best embody each of those characteristics, and based on projections, where they will at the quarter century mark. Based on the report, these are the most competitive cities of the future.

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Eight of the 10 most competitive cities in 2012 are expected to remain in the top 10 through 2025, with Chicago and Stockholm joining the list in 2025 and Zurich and Frankfurt dropping off the list. “These are cities that, in effect, had a big head start,” Leo Abruzzese, global forecasting director with the EIU, said in an interview with 24/7 Wall St. He pointed to the fact that many of these cities have spent decades, even centuries, building robust infrastructure and have become, in essence, financial capitals of the world.

However, there was much greater change among cities outside of the top 10. Much of the competitiveness growth in the next 13 years is expected to take place in Asian cities, such as Doha, Qatar; Incheon, South Korea; and Mumbai, India. Meanwhile, cities such as Madrid, Spain, and Rome, Italy, are expected to fall significantly from 2012 to 2025, mostly due to a weakened European economy, according to Abruzzese.

The cities that top this list, not surprising, are among the wealthiest. “Usually, the cities that come near the top tend to be fairly advanced economies, so they tend to be economically strong,” Abruzzese said. Five of the top 10 most competitive cities in both 2012 and 2025 are in the top 10 for gross domestic product.

These cities tend to share some other crucial characteristics. All but three of the 10 most competitive cities for 2025 are expected to have among the best health care, while all but one of the cities are expected to have the best education. In addition, many of these cities rank high in terms of both international attractiveness and accessibility, along with having a rich and socially diverse culture. Abruzzese points out that these factors are important to attract talented people who often value working in a city that is diverse and offers much the way of nightlife and entertainment.

Based on the data on 120 of the world’s largest cities from the Economist Intelligence Unit, 24/7 Wall St. reviewed the 10 cities expected to be most competitive in the world in 2025. The EIU examined eight unequally weighted factors. The value next to each is its weighting in the competitiveness score:

  • Economic strength: This includes factors like gross domestic product GDP and GDP per capita. (30%)
  • Physical capital: The infrastructure of the city based on its roads, public transport, telecommunications and so on. (10%)
  • Financial maturity: The strength of a city’s financial institutions. (10%)
  • Institutional character: The electoral process and fiscal autonomy, among other factors. (15%)
  • Social and cultural character: Crime rates, freedom of expression and diversity. (5%)
  • Human capital: Population growth, education, and economic opportunity for women. (15%)
  • Environment and natural hazards: Risk of environmental and natural hazards, and the ability to manage hazards. (5%)
  • Global appeal: The number of international flights through the city, quality of higher education, among other factors. (10%)

In each of these areas, The Economist looked at several different factors and ranked each city out of 100. We also looked at factors such as the presence of big business, along with policies that have been implemented or are in the process of implementation to provide further context about these places. The population provided for each of these metro areas is based on the most recent data available. GDP figures are in 2005 dollars.

These are the most competitive cities of the future.