Hazem Galal "From Moscow to Sao Pãulo"

From Moscow to Sao PãuloEmerging 7 Cities of Opportunity Study 2013

Hazem GalalGlobal Leader for PwC´s State and Local Government Sector

Cities have become the economic engine of the modern world, and nowhere is this more true than in the seven leading emerging nations – Russia, Brazil, India, China, Mexico, Turkey and Indonesia.

The E7 Cities of Opportunity report provides a detailed, objective and timely study of the business, economic and cultural hubs of the emerging world – Moscow, São Paulo, Beijing, Mumbai, Mexico City, Istanbul and Jakarta. The report presents extensive quantitative research as well as analytical discussion on the health and well-being of each of these cities.

PwC Russia

Emerging 7 countries and cities

From Moscow to Sao Pãulo

3

December 2013

Moscow

Beijing

Jakarta

Istanbul

Mexico City

São Paulo

Mumbai

Economic growth shifts to emerging countries

Russia should overtake Germany to become the largest European economy before 2020 in purchasing power parity

China will overtake the US as the largest economy by 2017 in purchasing power parity

India should become the third global economic giant by 2050

Source: PwC report “World in 2050 - BRICs and Beyond: Prospects, challenges and opportunities”

PwC Russia 4

We measured the cities against 10 categories and 60 variables

Tools for a changing world

Intellectual capital & innovation

Technology readiness City gateway

• Classroom size

• Libraries with public access

• Math/science skills attainment

• Literacy and enrollment

• Percent of population with higher education

• Research performance of top universities

• Innovation Cities Index

• Intellectual property protection

• Entrepreneurial environment

• Internet access in schools

• Broadband quality score

• Digital economy score

• Software development and multimedia design

• Hotel rooms

• International tourists

• Number of international association meetings

• Aircraft movements

• Incoming/outgoing passenger flows

• Airport to CBD access

Economics

Economic cloutEase of doingbusiness Cost

• Number of Global 500 headquarters

• Financial and business services employment

• Productivity

• Attracting FDI: Number of greenfield projects

• Attracting FDI: Capital investment

• Rate of real GDP growth

• Ease of starting a business

• Resolving insolvency

• Employee regulations

• Ease of entry: Number of countries with visa waiver

• Flexibility of visa travel

• Foreign embassies or consulates

• Level of shareholder protection

• Operational risk climate

• Workforce management risk

• Total tax rate

• Cost of business occupancy

• Cost of rent

• Consumer price index

• Cost of Internet

• iPhone index

Quality of life

Transportation &infrastructure

Health, safety& security

Sustainability& the naturalenvironment

Demographics& livability

• Public transport systems

• Mass transit coverage

• Cost of public transport

• Licensed taxis

• Major construction activity

• Housing

• Hospitals

• Health system performance

• End-of-life care

• Crime

• Political environment

• Natural disaster risk

• Thermal comfort

• Recycled waste

• Air pollution

• Public park space

• Cultural vibrancy

• Quality of living

• Working age population

• Traffic congestion

From Moscow to Sao Pãulo December 2013

E7 Cities of Opportunity today

PwC Russia 6

How the E7 Cities of Opportunity rank

December 2013From Moscow to Sao Pãulo

Intellectual capitaland innovation

Technologyreadiness

Transportationand infrastructure

Health, safetyand security

Sustainabilityand the naturalenvironment

Economicclout

Ease of doingbusiness

Cost Demographicsand livability

Citygateway

Score

Beijing 297

Moscow 283

Mexico City 273

Istanbul 233

São Paulo 223

Mumbai 209

Jakarta 192

32

40

21

13

15

12

47

45

44

33

22

27

36

14

20

19

17

15

13

14

18

26

28

28

16

33

19

23

15

23

28

19

21

20

14

21

25

30

23

21

22

21

27

20

20

15

16

18

1

2

3

4

5

6

7

38

32

27

35

39

17

29

18

10

18

30 27

19 37

19

35

54

23

29

19

23

23

1 Rating position

Highest rank in each indicator

PwC Russia

Intellectual capital and innovationMoscow consistently ranks No. 1 in education


7

December 2013

Classroom size

Libraries with public access

Math / Science skills attainment *

Literacy and enrollment *

Percent of population with higher education

Research performance of top universities

Innovation Cities Index

Intellectual property protection *

Entrepreneurial environment *

Score

Moscow 47

Beijing 45

Mexico City 44

São Paulo 36

Istanbul 33

Mumbai 27

Jakarta 22

4

6

6

1

3

7

2

7

1

6

5

3

2

4

6

7

2

5

1

3

4

1

6

5

3

2

4

7

4

6

5

3

2

2

7

7

6

5

1

3

2

4

5

7

6

1

2

4

3

7

6

5

1

2

4

3

1

2

3

4

5

6

7

If there is one principle on which virtually all economists concur, regardless of disagreements over other aspects of economic policy, it is that education, research, and scientific and technological innovation serve as the basis of economic and social development.

6

3

1

2

4

7

5

*Country-level data.

PwC Russia

City gatewayBeijing dominates this indicator with an almost perfect score


8

December 2013

This indicator tries to quantify a city’s international connections and its attraction beyond its own region – its “magnetism”worldwide both economically and culturally

Hotel rooms International tourists Number of International Association Meetings

Aircraft movements Incoming /Outgoing passenger flows

Airport to CBD access

Score

Beijing 40

Moscow 32

Istanbul 29

Mexico City 21

São Paulo 18

Jakarta 18

Mumbai 10

7

6

3

2

1

4

5

6

7

5

4

3

2

1

7

5

4

1

3

2

6

7

6

4

3

5

2

1

7

3

2

1

4

5

6

6

3

5

4

1

2

7

1

2

3

4

5

5

7

PwC Russia

Technology readinessBeijing ranks first, with Moscow a very strong second


9

December 2013

Internet access in schools * Broadband quality score Digital economy score * Software development and multi-media design

Score

Beijing 20

Moscow 19

Istanbul 17

Jakarta 15

Mexico City 14

São Paulo 14

Mumbai 13

1

2

3

4

5

5

7

Given the speed of “creative destruction” in current technological innovation, the point for emerging economies is not necessarily to be first out of the blocks in technology products, but to adopt the technology best suited to one’s needs.

7

4

5

6

3

1

2

5

6

7

1

2

4

3

4

7

1

3

5

2

62

6

3

1

7

5

4


PwC Russia

Health, safety and security


10

December 2013

This indicator affects emerging cities even more deeply than mature ones because the former also have to contend with a general skepticism – both from outsiders and their own residents – regarding any shortcomings, inadequacies, and lack of capacity in these areas of public policy.

Hospitals Health system performance *

End-of-life care * Crime Political environment

Score

Beijing 27

Mexico City 27

Istanbul 20

Mumbai 20

Moscow 18

São Paulo 16

Jakarta 15

5

7

1

6

2

3

4

7

6

5

1

3

4

2

4

7

3

1

6

6

2

4

5

2

3

1

6

7

7

6

3

1

5

5

3

1

1

3

3

5

6

7

Beijing and Mexico City share the top rank, well ahead of the other E7


PwC Russia

Transportation and infrastructureBeijing and Mexico City tie for first place


11

December 2013

There is no greater threat to the viability of emerging cities than excessively growing populations overwhelming infrastructural capacity.

Public transport systems

Mass transit coverage Cost of public transport Licensed taxis Major construction activity

Housing Score

Beijing 30

Mexico City 30

Moscow 25

Mumbai 23

Istanbul 22

Jakarta 21

São Paulo 21

6

3

7

1

4

2

6

5

6

4

7

3

1

2

7

5

2

5

6

5

1

1

5

3

6

4

7

2

5

6

7

1

4

2

3

6

3

4

2

5

1

7

1

1

3

4

5

6

6

PwC Russia

Sustainability and the natural environmentMoscow No. 1, significantly surpassing its peers


12

December 2013

In fact, Moscow’s achievements in this indicator go much deeper than are apparent. The Russian capital does exceptionally well not only against the emerging cities. It also ranks No. 7 overall in sustainability and the natural environment in the complete rankings of all 27 Cities of Opportunity, tied with Paris and just below Stockholm.

Natural disaster risk Thermal comfort Recycled waste Air pollution Public park space Score

Moscow 28

São Paulo 21

Jakarta 21

Mumbai 20

Beijing 19

Mexico City 19

Istanbul 14

7

5

2

3

5

2

6

1

4

7

6

3

5

2

7

2

5

6

4

3

1

6

1

4

2

7

3

5

7

1

5

4

3

2

6

1

2

2

4

5

5

7

PwC Russia

Demographics and livabilityBeijing and Moscow tie for No. 1


13

December 2013

Cultural vibrancy Quality of living Working age population Traffic congestion Score

Beijing 23

Moscow 23

São Paulo 19

Mexico City 17

Istanbul 15

Mumbai 13

Jakarta 12

1

1

3

4

5

6

7

While the world’s emerging cities are undeniably dynamic economic centres, they’ve also increasingly become difficult places in which to live. Emerging cities cannot continue to grow in, or attract, the numbers of people they have until now without at some point overwhelming their infrastructure and their own citizens.

3

5

7

6

2

1

4

6

5

7

4

1

2

3

7

1

2

7

7

7

74

3

2

6

1

5

7

PwC Russia

Economic clout


14

December 2013

What is being measured here is not only the aggregate strength of a city’s economy, but the extent of that strength, how far beyond its limits a city’s economic influence reaches, not just regionally or nationally, but globally – a city’s “ability to translate urban strength into a global economic presence.”

Beijing tops the rankings, both for the E7 and globally, with Moscow close behind

Number of Global 500 headquarters

Financial and business services employment

Attracting FDI: Number of greenfield projects

Attracting FDI: Capital investment

Productivity Rate of real GDP growth

Score

Beijing 37

Moscow 33

Mumbai 23

São Paulo 23

Istanbul 19

Mexico City 19

Jakarta 15

7

6

6

4

1

3

2

7

3

6

5

2

4

1

7

3

5

2

6

4

1

2

6

1

5

7

4

3

7

6

2

1

4

3

5

7

5

3

1

2

4

6

1

2

3

3

5

5

7

PwC Russia

Ease of doing businessMexico City tops the rankings, way ahead of the field


15

December 2013

Ease of starting a business **

Resolving insolvency **

Employee regulations **

Ease of entry: Number of countries with visa waiver *

Flexibility of visa travel *

Foreign embassies or consulates

Level of shareholder protection **

Operational risk climate *

Workforce management risk

Score

Mexico City 54

São Paulo 39

Beijing 38

Istanbul 35

Moscow 35

Mumbai 32

Jakarta 27

4

6

7

5

1

3

2

7

4

3

6

2

1

5

7

5

2

3

1

4

6

7

1

3

6

2

4

5

4

2

6

1

5

7

3

6

7

2

4

3

5

2

7

3

6

4

3

3

5

5

6

2

2

3

4

7

1

2

3

4

4

6

7

The fact that Mexico City does so well in these nine variables illustrates its evident and unquestionable success in attracting global financial and human capital.

7

7

7

4

2

3

1

*Country-level data.**Based on most populous city.

PwC Russia

CostIstanbul ranks first, just ahead of Mexico City and Mumbai


16

December 2013

There are no surprises in this indicator. If anything, the data confirm most of the media commentary and expert analysis of the past couple of years regarding on-going developments in the economies of the emerging cities and the emerging world as a whole.

Total tax rate Cost of business occupancy

Cost of rent Consumer price index

Cost of internet iPhone index Score

Istanbul 29

Mexico City 28

Mumbai 28

Jakarta 26

Moscow 23

Beijing 18

São Paulo 16

6

4

3

7

1

2

5

5

4

7

6

3

1

2

5

3

2

4

7

6

1

4

3

5

7

6

2

1

5

6

2

3

4

1

7

4

6

7

3

1

2

5

1

2

2

4

5

6

7

E7 Cities of Opportunityfrom 2013 to 2025

PwC Russia


18

Population

December 2013

Moscow and Mexico City find themselves in the best position to limit the environmental, social and economic burdens of continual population growth. Stable populations, or even incremental growth, allow for more systematic planning and for passing on the benefits of economic expansion to urban residents.

2,998

1,083 1,102892

633123 192

Moscow Beijing MexicoCity

SãoPaolo

IstanbulJakartaMumbai

Average annual growth rate

0.1% 1.4% 0.2% 0.8% 0.7% 0.7% 0.4%

Aggregate population growth, 2013 – 2025* Thousands

* Moscow figures are based on publicly available data and do not include data on some newly attached to the city territories (so called New Moscow)

PwC Russia


19

0

5

10

15

20

December 2013

General employment

This chart illustrates the impact on economic development of ceaseless population growth: the two cities that currently have the largest number of inhabitants, and will continue to have them in 2025, also demonstrate the consequences of very large populations. Beijing will not be able to maintain its current employment-to-population percentage of 61% in the future.

Population vs. employment


SãoPaolo

Istanbul Jakarta Mumbai

58% 58%

61%

58%

47%54%

51%

57%

35%

39%51%

61%

39%

45%

% of employment comparedto total population

Employed in 2013 2025 employment forecast

* Moscow figures are based on publicly available data and do not include data on some newly attached to the city territories (so called New Moscow)

Mil

lion

peop

le

PwC Russia 20

Employment in E7 cities’ group by industry


0%

5%

10%

15%

20%

25%

2013 2025 forecast

Wh

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reta

il

Min

ing

Bu

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Ma

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Wholesale-retail will remain the largest sector in 2025, maintaining its 18% of total employment, while public services will also continue as a significant sector, dropping only 1% from its current level to 14% in 12 years, just below manufacturing.

PwC Russia 21

These numbers are striking!

As opposed to the forecast annual growth of 3-6% among our E7 cities, the average GDP growth of the OECD* group of 34 (wealthy) countries between 2008 and 2012 was 0.62%!

That represents almost a tenth of Mumbai’s GDP growth over the next 12 years and a bit more than a fifth of Moscow’s.

Economic growth from 2013 to 2025 (1/2)


GD

P,

US

$b

n


3.1% 5.9% 4.2% 3.1% 5.0% 5.7% 6.4%


SãoPaolo


547

455

310272

339

247

123

379

228189 188 188

126

58

2013 2025 forecast

* Organisation for Economic Co-operation and Development

December 2013

PwC Russia


22

December 2013

GD

P p

er

cap

ita,

US

$ 0

00s,

2013 p

rices


3.0% 4.4% 3.4% 2.9% 4.3% 5.0% 6.0%


SãoPaolo


46

24 2530

23 23

9,3

32

1417

21

14 13

4,6

2013 2025 forecast

This GDP per capita chart is even more striking. Mumbai increases its wealth by 100%, Jakarta by 79%, Beijing by almost 70%, Istanbul by 66%, and São Paulo, Mexico City and Moscow by roughly 43-47% each.

Economic growth from 2013 to 2025 (2/2)

Let’s discuss this!

PwC Russia 24

For an in-depth discussion aboutthe E7 Cities of Opportunity, please, contact:


Vadim KhrapounPartner

Hazem GalalPartner

Markets LeaderPwC Russia

Tel.: +7 (495) 232 [email protected]

PwC's Cities & Local Government Sector Global Leader (Doha, Qatar)Tel: +974 4419 [email protected]

Ekaterina ShapochkaPartner

Government and Public SectorServices LeaderPwC RussiaTel.: +7 (495) 223 [email protected]

www.pwc.ru/en/e7

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, [insert legal name of the PwC firm], its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

PwC Russia (www.pwc.ru) provides industry-focused assurance, tax, legal and advisory services. Over 2,400 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Krasnodar, Voronezh, Yuzhno- Sakhalinsk and Vladikavkaz share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. The global network of PwC firms brings together more than 184,000 people in 157 countries.

* PwC refers to PricewaterhouseCoopers Russia B.V. or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity.

© 2013 PricewaterhouseCoopers Russia B.V. All rights reserved.

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Hazem Galal "From Moscow to Sao Pãulo"