ADB-CAF Regional Competitiveness of Cities in Asia and Latin America (Kamiya/Roberts et.al.)

Regional Competitiveness of Cities
in Asia and Latin America
May 2013
Preliminary Summary Report

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iii
Contents
Acknowledgmentsiv
Introduction1
The Regional Comparison of Cities Study 2
Analyzing the Competitiveness of City and Industry Clusters 3
Findings of the Study 4
Asian Cities: Case Study Summaries 6
Dhaka, Bangladesh 6
Nanning, People’s Republic of China 9
Ho Chi Minh City, Viet Nam 12
Seoul, Republic of Korea 15
Latin American Cities: Case Study Summaries 18
Bogotá, Colombia 18
Curitiba, Brazil 21
Guayaquil, Ecuador 24
Lima, Peru 26
Trade Corridors of Asia and Latin America 29
Preliminary Findings 31
Asian Cities Case Studies 31
Latin American Cities Case Studies 33
Next Steps 35

iv
Acknowledgments
This joint study is implemented within the framework of the memorandum of understanding signed
between the Asian Development Bank (ADB) and the Corporación Andina de Fomento (CAF) on
20 January 2011 and cofinanced by both organizations.
At ADB, this joint study was implemented as a subproject of the regional technical assistance “Enhancing
Knowledge Sharing and South–South Cooperation between Asia and Latin America” under the Strategy
and Policy Department. The operation of this joint study was led at ADB by the Regional and Sustainable
Development Department in conjunction with the Strategy and Policy Department. Five consultants were
involved in the four Asian country case studies while regional departments in ADB contributed to the
study by providing peer reviews and facilitating coordination with their counterparts in these countries.
At CAF, this study was implemented by the Direction of Public Policy and Competitiveness, under the
Vice Presidency of Development Strategies and Public Policies. Five institutions worked on the consultancy
reports in Latin America, and a network of different stakeholders in the region provided support and
peer review.
Coordination was provided by Jinsu Mun, Gil-Hong Kim, Kiyoshi Nakamitsu, and Indu Bhushan at ADB;
and by Marco Kamiya and Michael Penfold at CAF. Technical support to the project has been provided by
the international consultant, Brian Roberts of Land Equity International Australia, along with inputs from
national consultants involved in preparing case studies from Bangladesh, the People’s Republic of China,
the Republic of Korea, and Viet Nam in Asia; and Colombia, Brazil, Ecuador, and Peru in Latin America.
The contribution of Lloyd Wright and Ko Sakamoto in providing photos; and Carolyn D. Cabrera and
Carina Arciaga for proofreading is also acknowledged.

1
Introduction
are to develop and grow, they must take steps to
enhance their competitiveness.
The common interest to find ways to enhance
the competitiveness of cities and the strategic
infrastructure needed to support their
development has brought together the Asian
Development Bank (ADB) and Corporación
Andina de Fomento (CAF)—the Development
Bank of Latin America—to collaborate on a
research project involving a regional comparison
of cities (RCC) in Asia and Latin America. There
is also a growing interest by governments in the
two regions to improve the competitiveness of
their cities and to develop trade and investment
in areas along national and international trade
corridors between cities.
Improving the competitiveness and sustainability
of development of cities in Asia and Latin
America is important if their standards of living
are to improve and the problems associated with
poverty, urbanization, low income, and wealth
disparity are to be overcome. Governments will
have a key role in shaping these policies, along
with the regional development banks that
will be funding the development of strategic
infrastructure and providing the capital needed
to support the development initiatives.
ADB is supporting the City Cluster Economic
Development (CCED) initiatives in several Asian
cities. The CCED enables cities to develop a
deeper understanding of the factors that can
make them more competitive, recognize the
key role industry clusters can play in enhancing
the development of local economies, and
undertake initiatives in attracting investment and
In an age of increasing global competition for
trade, investment, knowledge, and human capital,
there is growing interest among governments and
business on how to make cities more competitive.
An estimated 80% of gross domestic product (GDP)
is produced in cities, of which 14% come from
megacities. Firms and companies actively seek
to locate in cities that offer them competitive
advantage in terms of production and access to
markets. There is, thus, greater competition among
cities to develop smart infrastructure and systems to
attract investment, expand trade, and create jobs.
Competitive cities are those with good economic
governance, human capital, infrastructure, logistics,
and dynamic business systems. Governments in
many cities around the world have begun working
closely with local business and communities to
identify what makes their city competitive and the
strategic infrastructure necessary to ensure that they
maintain their competitive advantage.
For most of the world’s cities, especially those in
developing countries and regions, the struggle to
become more competitive is a significant challenge.
Many acknowledge the importance of becoming
more competitive but are not sure how to go about
achievingit.Theneedtoimprovethecompetitiveness
of their cities has never been more apparent and
acutely recognized than in the two fastest-growing
regions of the world: Asia and Latin America. Many
cities in these regions are struggling to overcome
problems of providing basic infrastructure and
services, and to deal with pollution and poor
governance problems. Despite these problems, in
a few decades, both regions especially Asia, have
become manufacturing powerhouses—supplying a
wide range of products to global markets. However,
cities in these two regions recognize that if they

2
Regional Competitiveness of Cities in Asia and Latin America
creating jobs. ADB uses CCED to help improve the
design, targeting, integration, packaging, and
delivery of urban sector projects. ADB is also
conducting studies to help support investment,
development, and competitiveness in cities located
along trade corridors.
CAF is implementing the initiative “Cities
with Future” where an integrated approach
combining infrastructure, social development, and
competitiveness is proposed for selected cities.
Assessments and a tool kit are applied to identify
the needs of the cities in the medium and long term.
On the competitiveness component of “Cities with
Future,” two tasks are included, first, an institutional
capacity to assess the strength of the public sector to
design and monitor business development services,
and second, a quantitative value-chain analysis to
support productive transformation.
In Latin America, there is a growing interest in
the competitiveness of cities, with several studies
showing the region lagging Asian cities and
economies. The weaknesses in the drivers of
competitiveness in Latin American cities are low
labor productivity, weak business dynamics, and
poor interregional infrastructure. This situation
is dampening trade development and economic
growthopportunitiesamongcountriesintheregion.
The economic development of Latin American cities
is being driven by the expansion of resources and
agriculture products, whereas the development
of Asian cities is being driven by export-oriented
manufacturing and services. Consequently, the
growth rate of many large cities in Latin America
is falling below national growth rates, whereas in
Asia, it is the other way round.
There is a growing interest in Asia and Latin America
to develop trade corridors and city-to-city linkages
to support the development of cities among the
two regions. Much of the international trade in the
two regions still occurs through shipping, but there
is increasing interconnectedness of countries along
the road and rail corridors. There are significant
opportunities to leverage the development of
trade corridors to support the growth of secondary
cities and towns, which could become important
subcenters or logistic hubs for the collection and
distribution of goods, or as value-adding centers
integrated into industry supply chain systems
that are dependent on land or river transport
systems connecting large cities across countries
and continents.
This preliminary report provides a brief overview
of the Asia and Latin America RCC project, to
date. The study aims to learn more about the
factors that make cities competitive and drive their
development. The results will be used to inform
the two organizations—ADB and CAF—on how
they could improve their lending operations in
the two regions to enhance the competitiveness
and development of cities. Many opportunities
exist for cross-learning and sharing of ideas from
the findings of this research and how these can
be shared among the cities of the two regions.
The Regional Comparison
of Cities Study
There are many studies on the competitiveness
of Asian and Latin American countries and cities.
Most show they are falling behind in critical areas
of infrastructure, human capital development,
and quality of life. For cities in these two regions
to become more competitive, more in-depth
studies are needed to identify specific deficiencies
in strategic infrastructure, governance, business
dynamics, and supply chain systems that underpin
the development and performance of city
economies. These studies need to investigate the
role of industry clusters and how governments
and businesses can work collaboratively to reduce
externality costs for firms in clusters, and how to
add value to local industry supply chains.
The new urban operational plan of ADB
recognizes that the development of sustainable
cities will require ADB to focus on strategies
and initiatives that support the development
of competitive, green, and inclusive cities. CAF
has a similar goal—to promote the sustainable
development of cities and regional integration
programs for cities. These important themes
are addressed in the case studies of the selected
cities commissioned by national consultants in
both regions. The findings will be used to direct
future economic policy and development plans
to enhance city competitiveness and sustainable
development. The study will also enable the
two organizations to learn from each other,
which could lead to improvements in project
identification, design, and lending operations,
and to future opportunities for collaboration.

3
Introduction
The RCC study is the first of its kind to undertake a
comparative study of cities in the two continents.
To provide a common platform for the comparative
analysis, a common methodology was developed
for the research teams undertaking case studies
in both regions. The ADB and CAF research
teams in different countries have been working
collaboratively to develop the framework for the
study and its objective outcomes.
This study aims to understand the process of birth,
growth, and consolidation of regional competitive
cities. The four Asian cities are Dhaka, Bangladesh;
Nanning, People’s Republic of China (PRC); Seoul,
Republic of Korea; and Ho Chi Minh City, Viet Nam.
The four Latin American cities are Curitiba, Brazil;
Bogotá, Colombia; Guayaquil, Ecuador; and Lima,
Peru. The study will have a particular focus on
productivity, development, and competitive policies
in the eight selected cities. This study will also review
existing practices on competitiveness, focusing on
the design and delivery of policies for enterprise
development analyzing institutional arrangements,
historical evolution and background, and policy
design and policy instruments. This will be done with
a standard methodology. The cities were selected by
ADB and CAF operations management as these cities
have past or developing associations with the two
organizations, and they showed a keen interest in
participating in the research program.
The study involves a combination of primary and
secondary research, drawing on findings from the
eight city cases and two regional trade corridor
studies. In the context of the research, the report
explores the importance of cities as drivers of
economic growth and development. The study raises
and addresses the following questions:
(i) How can cities make a difference in the
development of nations?
(ii) What justifies a larger role for cities in local
economic development?
(iii) What kind of market failures and coordination
problems can local governments address?
(iv) What policy areas and instruments for promoting
economic development (e.g., innovation, cluster
development, investment promotion, small and
medium-sizedenterprise(SME)businesssupport,
business-related infrastructure, and others) are
important for nations and the two regions
to develop?
Analyzing the
Competitiveness of City
and Industry Clusters
Most studies on the competitiveness of
cities used an analytical framework and
tools to evaluate attributes of key drivers of
competitiveness in the development of cities and
industry clusters. The basic framework used for
the RCC study was developed by ADB for the
CCED work on South Asian cities in 2009. This
work is documented in the book Competitive
Cities in the 21st Century: Cluster-Based Local
Economic Development, published by ADB
in 2011.
Two sets of analyses were used to measure the
drivers of competitiveness underpinning the
development of cities. The first is a citywide
analysis of competitiveness. This involved the use
of qualitative analysis to measure 56 attributes of
competitivenesslistedundersixkeycompetitiveness
drivers. The analysis was undertaken by expert
reference groups and panels comprising
government officials, industry experts, academics,
and members of professional associations. The
panels were asked to evaluate—on a scale of
1–5—the strength of the 56 attributes for the six
key drivers of competitiveness listed below:
„„ Cost of doing business (taxes, informal fees,
utilities, labor costs, and property rentals).
„„ Dynamics of local economy (growth and
performance, innovation, and access to finance).
„„ Human resources and training (skills,
competences, and personnel).
„„ Infrastructure (transport, logistics, utilities, and
environmental waste management),
„„ Responsiveness of government to business needs
(transparency, governance, and regulations).
„„ Quality of life (health, peace and order,
and environment).
The second analysis was a competitive gap analysis
of two industry clusters in each city studied. The
analysis used Michael Porter’s diamond technique
to evaluate the competitiveness of the clusters.
Some 40 attributes of competitiveness were
measured for the following five drivers in the
Porter model:

4
„„ Factor conditions (labor, infrastructure,
resources, and social environment).
„„ Demand conditions (markets, new products,
and business practices).
„„ Strategy of a firm and rivalry (industry structure
and collaboration)
„„ Related supporting industries (supply chains and
value adding).
„„ Government (regulations, incentives, and
research and development).
The framework used to prepare the case studies
involved a seven-step process. It is designed
to examine a city’s competitiveness from a
holistic perspective, using tools and techniques
designed to identify deficiencies in attributes
of competitiveness, which require attention,
to improve the performance of city clusters.
The process intends to provide an outline of a
framework of international and global policies
that shapes the economy of the country and the
city under analysis. Some factors, such as world
heritage listing or special economic zone status,
can have a significant impact on the development
of city economies.
A range of statistical and qualitative techniques is
used to gather information and to build a profile
of the city’s economy and its dynamics. The
competitiveness of the city’s economy is analyzed
using the city competitiveness analytical tools,
as described earlier. The patterns of industry
agglomeration and the spatial nature of industry
clusters are mapped using geographic information
system and other techniques. The analysis is used
to identify two industry clusters that demonstrate
the strongest growth prospects for the economy
that are then analyzed using the second of the
competitive techniques described earlier. Strategies
and actions to enhance the competitiveness of the
industry clusters are described in each case study.
This report includes summaries of the initial findings
of the eight case studies.
The study includes research on the competitiveness
of trade corridors and the development of cities
along these corridors. It examines the emergence
of these cities and corridors in the context of the
two regions. Case studies are being undertaken
for the Ho Chi Minh–Bangkok, Mumbai–Delhi,
Kuala Lumpur–Singapore, and the Pearl River
Delta1
economic development corridors. The
study explores the potential of the development
proposals in these corridors aimed at encouraging
and stimulating the development, growth,
and competitiveness of secondary city growth
poles. In Latin America, the case studies will
include the trans-Andean Highways, including
the Trans-Oceanic corridor from Brazil to Peru,
the MERCOSUR–Chile corridor, and the México–
United States corridor.
Findings of the Study
This preliminary report outlines some initial
findings and lessons from the study, which is still
in progress. The learning outcomes from the final
study report will be used to develop more detailed
strategic directions for the future operations,
especially to enhance the formulation of urban
sector projects and activities funded by the two
development banks. Opportunities to advance
cross-learning and information-sharing initiatives
between cities and development banks in the two
regions will be outlined in the final report. The
final report will cover the following:
„„ Cities, Competitiveness, and Productive
Transformation
„„ Comparative Framework for Analyzing City
Competitiveness in Asia and Latin American
Countries (LAC)
„„ Competitiveness of Cities and Clusters in
Asian Cities
„„ Competitiveness of Cities and Clusters in Latin
American Cities
„„ Trade Corridors and Development of Competitive
Cities in Asia and LAC
„„ Cities in Asia and LAC: Lessons and the
Road Ahead
The final report will present the results of a
substantial research effort done by a team of
dedicated researchers from institutions and
1
The Pearl River Delta Corridor, a megalopolis with 100 million
population, is an increasingly integrated urban cluster
comprising the PRC’s densely populated urban areas covering
Shenzhen and Guangzhou in the north and Zhuhai and
Macao, China in the west.

5
Introduction
organizations from 10 countries. It will make an
important contribution to the partnership between
ADB and CAF in improving the knowledge about
cities in the two regions, and in ways to improve
the targeting of their investment and technical
support to enhance the competitiveness of cities
to stimulate investment, economic development,
and job creation. The lessons and insights gained
from the study are expected go well beyond
ADB and CAF, and will have wider application in
the way international development finance can
contribute more to creating competitive and
sustainable cities.
The summaries are presented here to provide
some details on the eight case studies, including
initial findings on the competitiveness of cities
and selected industry clusters. Informative details
provide readers some learning on the investment
needs in strategic infrastructure to enhance the
competitiveness and development of the cities
studied. A brief summary is also given on trade
corridors, and the initial findings and lessons
gained from the research to date. An outline
of the next steps is given at the end of the
summary report.

6
Asian Cities: Case Study Summaries
Dhaka, Bangladesh
Basic Facts
National population 150 million
DCR* population 23.5 million
Metropolitan population 8.9 million
DCR area 7,440 km2
Metropolitan area 360 km2
DCR 2,688 people
Metropolitan 24,722 people
GDP (2011) Bangladesh $118 billion
GDP (2011) Dhaka City $36 billion
GDP/per capita (2011)
Bangladesh
$735
DCR $1,800
Urban Employment Structure
Total employment 12 million (Est.)
Primary 4.5%
Manufacturing 40.0%
Services 55.5%
Main export industries Ready-made
garments,
manpower
World Bank’s Doing
Business Indicator
45th
DCR = Dhaka Capital Region, GDP = gross domestic product,
km2
= square kilometer.
Source: World Bank. 2012. World Development Indicators.
Rapid urbanization is an important contributor
to growth and development of Bangladesh,
but it has also put enormous strain on existing
services and the ability of authorities to protect the
natural environment. About 25% of the country’s
population live in urban areas, and these areas
contribute more than 60% to GDP. However,
there are significant geographic differences in
the levels of development, wealth, and poverty
occurring among cities and rural districts in
the country.
In recent years, Bangladesh has experienced rapid
economic growth and development, with a GDP
growth rate of around 6% per annum. Much
of this is due to the rapid development of the
Dhaka Capital Region (DCR), the largest urban
agglomeration in the country with a population
of over 23.5 million. It drives the development of
the national and export economies of Bangladesh.

7
The DCR is a major generator of jobs and is one
of the largest textile and garments manufacturing
centers in the world. It also plays a key role
in supporting health, higher education, and
social welfare in the country. The DCR has many
competitive advantages over cities in other parts of
the country.
The study undertaken for ADB on the DCR shows
there are high levels of firm agglomeration
occurring in the manufacturing and service sectors.
A new form of economic geography is emerging in
the region with many firms and factories moving
and expanding to the periphery of Dhaka where
land is cheaper, services better, and with less
traffic congestion. Export firms in the DCR are
also experiencing greater competition in trade,
local business, and labor. As figures in Table 1
show, the DCR is a dynamic place, especially for
micro business, but it has many deficiencies in
terms of infrastructure, on the responsiveness of
government to business needs, and the quality of
life it offers to residents and investors. The response
of the government and development authorities,
and much of the business sector to these issues
leave much to be desired. The important question
is how to encourage the government and the
business sector to initiate the necessary changes
especially on ways to boost productivity and
resolve inefficiencies in the economy to make
the DCR a more competitive place for business
and investment.
The current study identifies the need for the DCR to
adopt best practices and embrace innovative ideas
to deliver a vision and urban infrastructure services
to the region. Policies and key infrastructure
needed to create stronger business and enabling
environments to support investment and jobs in
the DCR are also required.
Initiatives to Enhance
Competitiveness
The government has taken measures to enhance
the competitiveness of the city by supporting
an ADB project to strengthen regional planning
and governance. At the empirical level, there is
a lack of coherent policy measures to raise the
competitiveness of the DCR. Opportunities for the
further expansion of export processing zones are
extremely limited, there is no gas supply for new
industrial units, and connectivity to Chittagong
seaport is fragile. In addition, there are no integrated
environmental and land development policies,
which led to livelihood degradation.
The following are required to enhance the city’s
competitiveness:
„„ Develop export processing zones.
„„ Implement policies supportive to textile and
garment manufacturing.
„„ Upgrade major arterial road network from the
international airport to the city center.
„„ Improve industrial gas supplies to the DCR to
support industrial development.
„„ Facilitate industrial, commercial, and residential
land development and public housing.
„„ Set up a textile and fashion design university.
Cluster Development
Two industry clusters selected by the study have
strong potential to attract investment and create
jobs in the DCR.
Textile and Ready-Made Garment (RMG)
Cluster
The textile and ready-made garment sector is
the largest export industry in the DCR and in
Table 1. Key Drivers of Competitiveness:
Dhaka Capital Region
Key Drivers
Ranking
1–5
Cost of doing business 2.33
Dynamics of local economy 4.13
Human resources and training 2.25
Infrastructure 1.65
Responsiveness of government to
business needs
1.43
Quality of life 1.73
Overall average index ranking 2.25
1= Very low level of competitiveness, 5 = Very competitive.
Source: ADB. 2011. Competitiveness of Cities in the 21st
Century. Manila.

8
the country. It employs over 1.77 million people
in the DCR (2010 data). The sector gains its
competitiveness from the large pool of cheap labor,
low transport costs, and generous government
subsidies to the sector. However, high land cost,
lack of land for site expansion, high rents, and
traffic congestion are making the cluster less
competitive. To make the sector more sustainable
and globally competitive, the study of Dhaka by
an ADB national consultant identifies the need to
remove bottlenecks in the supply chains, reduce
transaction costs, encourage innovation and new
ideas, and design and diversify products in the
sector. Poor compliance to implementing policies,
plans, regulations, and quality assurance are major
constraints to development, productivity, and
management of a sustainable environment. Better
spatial development plans and new special zones
for garment factories are needed. Government
needs to work more closely with the business sector
for planned industrial—urbanization initiatives in
the DCR that will address problems as a result of
an overloaded transport and logistics system.
Knowledge Industry Cluster
The knowledge industry cluster in Dhaka,
made up of higher education, information
and research institutions, and businesses, is
beginning to flourish. This is in response to the
demand for increased knowledge-based and
technology-driven services needed to support the
development and improve the competitiveness
of the city’s economy. The DCR is the hub of the
knowledge industry for the country and generates
140,000 jobs annually. The knowledge industry
cluster study is attempting to map the elements
of supply chains in this cluster and to outline a
knowledge-based development framework for
the DCR. For these two goals, the first step is to
create a demand-based understanding of the
levels of scientific manpower and skills needed to
maintain the development of the DCR economy.
This is expected to lead to the development of a
program of hard and soft infrastructure needed to
develop the knowledge industry—especially the
higher education and industry research sectors.

9
Nanning, People’s Republic of China
Basic Facts
Metropolitan population 7,073,000
Metropolitan area 22,112 km2
Urban density 319 people/km2
GDP (2010) People’s
Republic of China (PRC)
$6.04 trillion
GDP (2010) Nanning $27.3 billion
GDP per capita (2010) PRC $4,514
GDP per capita (2010)
Nanning
$3,869
GDP per hectare $12,346
GDP structure
Total GDP $27.3 billion
Primary 13.58%
Secondary 36.26%
Tertiary 50.16%
Total rural employment 3,030,000
Total employment 705,500
Primary 2.18%
Secondary 31.85%
Tertiary 65.97%
Main export industries Earphone, earplug,
ADPE accessory,
rosin, frozen tilapia
fillets, and chemical
products
Business Indicator
91th
GDP = gross domestic product, km2
= square kilometer,
ADPE = Auxiliary Data Processing Equipment.
Nanning is the capital and the center of
government, economy, and culture of the Guangxi
Zhuang Autonomous Region in the People’s
Republic of China (PRC). It is the largest city in
Guangxi Zhuang Autonomous Region with a
population of more than 7 million people. Known
as a “Green City,” it has been listed as one of the
“Ten Livable Cities in [the People’s Republic of]
China.” Its environmental assets are a significant
factor in attracting an increasing the number of
tourists to the city.
With the reforms and opening up of the PRC
economy over the past 2 decades, Nanning
has sought to capitalize on these changes and
has undergone significant structural changes
to modernize the city’s economy. Its GDP has
increased over 10% annually since 2000, with
Guangxi Zhuang Autonomous Region ranked
as one of the better-performing regions in the
PRC. It has come to be established as a major
regional center of southwest PRC, with many new
technology-based industries developing in the city.
Competitiveness of the City
The ADB study on Nanning’s competitiveness is
still in progress. The study seeks to measure the
key drivers and attributes of competitiveness that
underpin the development of the city’s economy.
According to the research done by the Chinese
Academy of Social Sciences (CASS), Nanning,
in 2011, ranked 57 out of 294 cities in the PRC
in terms of city competitiveness. Factors that
add to the city’s competitiveness are the quality
of its environment, good local government,
and low labor costs compared to the larger
cities in the coastal provinces. The weaknesses
identified include inadequacy and cost of strategic
infrastructure, low skills development of the city’s
labor force, poor access to working capital to
support new industry development, and the need
to further streamline local business regulations
and approval processes. The city has worked hard

10
to develop its trade and networks internationally
to attract business and investment, but because
of geographic location, transport costs, access
to markets, and links to major transport logistics
centers and ports along the south coast of the PRC
and Viet Nam are proving to be hindrances.
Initiatives to Enhance the
City’s Competitiveness
The Government of Nanning City has supported a
range of policy and project initiatives to enhance
the development and competitiveness of the
city. ADB and the World Bank have supported
important urban development and infrastructure
projects including the Guangxi Nanning Urban
Infrastructure Development Project (2004),
Guangxi Nanning Urban Environmental
Upgrading Project (2006), Guangxi Nanning–
Yunnan Kunming Railway Project (2007), Guangxi
Southwestern Cities Development Project (2010),
and Guangxi Beibu Gulf Cities Development Project
(2011), which are boosting the development of
the Nanning and Guangxi economies.
In 2009, the World Bank and the Government
of the PRC entered into a loan agreement
to construct a railway project and an urban
environment improvement program for Nanning.
The amount of $300 million is allocated for the
Nanning–Guangzhou railway project, which aims
to enhance transport capacity and reduce travel
time between the less-developed southwestern
region and the relatively more developed Pearl
River Delta region. As the capital city of the
Guangxi Zhuang Autonomous Region, Nanning
has expanded its area three times since 2001.
As part of the 11th Five-Year Development Plan,
Nanning has focused on urban area improvements,
built several new urban districts, and extended
urban infrastructure.
Institutional Initiatives
In 2000, the Guangxi Zhuang Autonomous
Region received special policy support under the
government’s “Go West” Western Development
Strategy. In 2008, the State Council approved
the Beibu Gulf Economic Rim, also known as
Gulf of Tonkin Economic Belt, as part of an
economic region around the PRC’s southwestern
coastal region and cities on the Gulf of Tonkin.
This economic belt covers Guangdong, Hainan
and the Guangxi Zhuang Autonomous Region,
and northern and central Viet Nam. The
implementation of the initiative has resulted in
many new construction projects in cities around
the Beibu Gulf Rim, especially Nanning. Nanning
has also benefited from the new PRC–ASEAN
cooperation agreement, with Viet Nam, which is
cooperating in the development of this economic
zone. Since the establishment of the Beibu Gulf
Economic Rim initiative, Nanning, as the capital
of the Guangxi Zhuang Autonomous Region,
has received strong fiscal support and direct
investment from the Government of the Guangxi
Zhuang Autonomous Region to develop critical
infrastructure projects to develop the city and the
province. Since 2004, Nanning has hosted many
events that attracted investors from within the PRC
and overseas, including hosting the PRC–ASEAN
Business and Investment Summit.
Industry Cluster Development
There are a several industry clusters that are
developing in Nanning. Two clusters that have
significance and have development potential are
food processing and tourism.
Food Industry Cluster
Nanning is a major food processing center in the
PRC, forming an important export-driven food
industry cluster in the PRC. Since the beginning of
2012, the Nanning–ASEAN Economic Development
Zone has actively expanded the development of
the food processing industry. The goal is to build
an industry-supported satellite city suitable for
industry, commerce, and a settlement that will form
a new town in Nanning to support the development
of the food industry. Two large international food
conglomerates have established food processing
plants in the industrial park cluster, the largest
food processing place in the Guangxi Zhuang
Autonomous Region, which further promoted the
development of the food industry cluster. In total,
there are over 40 well-known companies investing
in the food industrial park. The ADB study of the
food industry cluster in Nanning will identify and
map critical drivers of competitiveness, with a view
to identifying strategic investments required to

11
support further the development of a competitive
food industry cluster in this city.
Tourism Industry Cluster
Inland cities in the PRC, especially Nanning,
are becoming increasingly popular destination
for domestic and foreign tourists. In 2010, the
Guangxi Zhuang Autonomous Region reaped a
total revenue of CNY95.3 billion ($15.3 billion)
from tourism, increased revenue by 36% per
annum, contributing over 10% of the city’s GDP.
New international flights are expected to bring
about a significant expansion of the industry, so it
is necessary to develop competitive infrastructure,
services, and tourism products, and improve the
labor skills and management capabilities to develop
the tourism cluster in Nanning. The study of the
tourism industry cluster in Nanning will identify
the critical drivers of competitiveness that need
improvement to support the further development
of the tourism industry cluster, especially focusing
on the hotel and catering services.

12
Ho Chi Minh City, Viet Nam
Ho Chi Minh City (HCMC) is one of the fastest-
growing cities in Southeast Asia. Forming part of
the Southern Focal Economic Zone, it has become
a large commercial and manufacturing center of
almost 8 million people. It is the southern gateway
of Viet Nam to the outside the world.
HCMC’s development since the Doi Moi reforms
of 1986 have been remarkable, spurred on by
substantial foreign direct investments (FDI) into
the manufacturing, tourism, and offshore oil and
gas sectors. The GDP per capita of $3,260 (2011)
is more than double that of the nation. The city’s
contribution to the GDP of the national economy is
equivalent to 21.1%, 30.0% in terms of exports, and
35.2% in terms of budget revenue.
In recent years, the service sector has grown,
accounting for its increasing share in the GDP of
the city’s economy. Tourism is a major industry for
the city. There has also been a steady increase in
the proportion of GDP that is generated by the
private and foreign investment sectors. This has
helped to improve the competitiveness of business
in the global marketplace, but the city still ranks
behind other cities in the region. About 70% of
Basic Facts
Urban population 6,250,963
Urban area 494 km2
Urban density 12,449 people/km2
GDP (2011) Viet Nam $121.3 billion
GDP (2011) HCMC $24.4 billion
GDP per capita (2011)
Viet Nam
$1,400
GDP (2011) HCMC $3,260
GDP per hectare $117,100
Total employment (HCMC) 3,950,000
Primary 2.3%
Manufacturing 43.3%
Service 54.4%
GDP = gross domestic product, HCMC = Ho Chi Minh City,
km2
= square kilometer.
inputs used in industry production in HCMC are
imported. Most industry activities involve assembly
resulting in lost opportunities to add value to local
industry supply chains.
Competitiveness of the city
The survey of city competitiveness shows that HCMC
is weak relative to other Asian cities. This is confirmed
by other independent surveys. Infrastructure,
dynamicsofthelocalhumancapitaldevelopment,and
quality of life are average and require improvement.
Economic governance in terms of responsiveness to
business needs and cost of doing business caused
by administrative issues, traffic congestion, and low
productivity require improvement to enhance the
city’s competitiveness (Table 2).

13
Initiatives to Improve City
Competitiveness
Urban Development
Under the policy of modernization, HCMC has
planned and delivered new large-scale urban
development projects such as the Sai Gon South,
Thu Thiem, Northwest, and Hiep Phuoc Port Urban
Area. The Phu My Hung New Urban Area of Saigon
South has been developed in partnership with a
foreign investor. Thu Thiem New Urban Area is
planned as a major financial and business center of
Southeast Asia. Transport and telecommunication
in the HCMC expanded rapidly over the last 5 years.
Since individual means of transport (especially
motorbike) leads to severe traffic congestion—the
use of public transport is low and accounts for only
7.8% of total transport usage—the city authority
plans to invest in seven lines of a metropolitan rail
transport system.
Institutional Reforms
HCMC is in the process of streamlining its
management system with a new administrative
model to strengthen the authority of the People
Council and to streamline decision making in
the city. The central government has introduced
many decentralization policies designed to give
HCMC and other cities more authority, clarity,
and responsibility in functions between the
Table 2. Ranking of Key Drivers of
Competitiveness: Ho Chi Minh City
Key Drivers
Ranking
1–5
Infrastructure 3.12
Responsiveness of government
to business needs
2.97
Source: ADB. 2013. National Consultant Study of
Ho Chi Minh City. Manila.
central and local government. To capture and
diversify investment resources, national reforms
have facilitated more private investments under
the public–private partnership (PPP) model. The
legal framework of PPP implementation has been
gradually improved by the central government to
support infrastructure investment in HCMC. Several
PPP projects have been completed under the HCMC
Investment Fund for urban development.
Cluster Development
Opportunities
Tourism Industry Cluster
The tourism industry cluster in HCMC plays an
important role in the city’s economy, contributing
10.0% to the city’s GDP (2011), and accounting
for 42.5% of the national annual tourism revenue.
Tourism is a sector that offers potential for
employment and income generation in HCMC,
especially if it is linked more closely with the
industry in surrounding provinces. The study of the
tourism industry cluster shows the need for more
investments in infrastructure and the upgrading of
some tourist destinations. Support to strengthen
the HCMC Tourist Association—especially
collaboration with other domestic, regional, and
world tourist associations—is essential. It is also
essential to focus on improving the integration
of industry supply chains and addressing the
language barrier.
Garment and Textile Industry Cluster
The textile and garment industry cluster consists
of two main activities, the (i) fiber, textile, and
dyeing industry; and (ii) garment industry. This
cluster contributes about 12%–13% of total
manufacturing production value to the city and
is a high generator of employment and exports.
The competitiveness study of the industry
indicates that HCMC needs to develop a strategy
for better integration of the supply chains and to
improve the operations and development of the
cluster. Currently, inner-city land and transaction
costs are rising and production plants are being
transferred or developed at the outskirts of the
city or surrounding provinces. The beneficial
effects of spatial agglomeration are being lost as

14
the industry becomes more dispersed spatially.
This is adding to business transaction costs and
undermining the industry’s competitiveness.
A technical fashion training center is needed in
HCMC to enhance design techniques and the
skills of the labor force. Government support
is needed for modernizing production and
providing tax breaks for new investment.

15
Seoul, Republic of Korea
Basic Facts
Metropolitan population
(2010)
10,312,545
Urban growth rate
(2000–2010)
0.01%
Urban area 605.25 km2
GDP (2010) Korea $1,080 billion
GDP (2010) Seoul $250.18 billion
GDP per capita (2010) Korea $21,381
GDP per capita (2010) Seoul $24,261
GDP/hectare $41,336
Total employment 4,487,357
Primary 0.02%
Manufacturing 6.06%
Services 84.99%
Others 8.91%
Main export industries Transport
equipment,
machinery, and
chemicals
Business Indicator
8th
= square kilometer.
Seoul, as the capital of the Republic of Korea, has
been the primary driver of national development.
The city, with a population of over 10 million
(21% of national population) contributes
roughly a quarter of the national GDP. The total
employment of Seoul is roughly a quarter of
national employment. Economic, cultural, and
political activities have been disproportionately
concentrated in Seoul.
The economies of the Republic of Korea and
Seoul have undergone significant transformations
in recent years, with the employment structure
of Seoul shifting toward growth in the tertiary
sectors. The primary and secondary sectors
have steadily declined, while the tertiary sector
has grown predominantly. In particular, the
GDP shares of information and communication
industries and finance and insurance activities have
increased remarkably. However, Seoul’s transport
equipment, machinery, and chemical industries
still play a significant role as major export sectors
of the country.
Competitiveness of the Economy
Seoul is one of the most competitive cities in
the world. However, as a manufacturing center,
it is losing competitiveness as rising wages and
operational costs are forcing Korean companies
to move offshore. The survey on Seoul’s six key
drivers of city competitiveness indicates that
infrastructure, quality of life, human resource
development, and the dynamics of the local
economy ranked well, but identifies a gap in
business, hence, the need to strengthen human
development and the government’s responsiveness

16
to business to enhance the overall competitiveness
of the economy. The cost of doing business and
responsiveness of government to business needs
are below average, requiring attention, such as
initiating regulation reforms, improving planning
for development, offering investment incentives,
improving productivity, and stabilizing rental
and land costs, which have become expensive
compared to other capital cities in the region
(Table 3).
Initiatives to Improve City
Competitiveness
Governments have undertaken several measures
to develop and improve the city’s competitiveness.
Urban Development
Seoul has a comprehensive strategy to develop the
economy and minimize negative externalities to
surrounding regions. To deal with these challenges,
Seoul’s policies have targeted three goals:
(i) developing knowledge-intensive industries,
(ii) shaping an innovative business environment,
and (iii) attracting FDI. Seoul has designated the
following as “6 New Growth Engine Industries”:
(i) digital content, (ii) information and
communication technology (ICT), (iii) bio/nano
technology, (iv) financial services, (v) design
and fashion, and (vi) tourism and conventions.
To promote these, areas were designated as
Table 3. Ranking of Key Drivers of Competitiveness: Seoul
Key Competitiveness Drivers Current Status Desired Status
Competitiveness
Gap
Cost of doing business 2.68 3.33 (0.65)
Dynamics of local economy 3.31 4.11 (0.80)
Human resources and training 3.38 4.33 (0.95)
Infrastructure 3.71 4.33 (0.62)
Responsiveness of government to business
needs
2.96 3.93 (0.97)
Quality of life 3.54 4.00 (0.46)
Overall average index ranking 3.26 4.00 (0.74)
1= Very low level of competitiveness, 5 = Very competitive, ( ) = negative figure.
Source: ADB. 2013. National Consultants Study on Korea. Manila.
special districts with deregulatory measures and
infrastructure, such as the downtown area for
business services, Yeoido for financial services, and
Teheran Road in Gangnam for ICT.
Seoul has developed new business parks and
research and development centers to boost
knowledge-based industries and provide enabling
business-friendly environments. The Digital Media
City is a high-technology digital media and
entertainment cluster under construction in the
Sangam District. The Seoul International Financial
Center in Yeouido was constructed for the
development and expansion of the financial district.
Magok area, in the southwestern part of Seoul, is
being developed as a high-technology industry
RD cluster for ICT and bio/nano technology that
will cater to international businesses.
Institutional Framework
ThePresidentialCouncilonNationalCompetitiveness
was established in 2008. The council was a public–
private regulatory reform task force set up to
monitor and resolve difficulties in doing businesses.
The Seoul Business Agency (SBA) was established
to support innovation and entrepreneurship. The
SBA has encouraged the development of strategic
industries, including the Seoul Fashion Center and
the Animation and Game Center. It also operates
the Seoul Trade Exhibition Convention and the
convention centers, exhibition stores for small
and medium-sized enterprises, and facilitates
their participation in domestic and international

17
exhibitions. The SBA supports international trading,
and attracts overseas investments by organizing
trade delegations and market pioneering teams,
and managing the Promotion Gallery and the Seoul
Trade Center in Beijing.
Cluster Development
Information and Communication
Technology Cluster
ICT was the most significant contributor to Seoul’s
economic growth during the period 2000–2010.
Employment in ITC grew 663% during the period,
with its gross regional domestic product (GRDP)
contribution increasing near 80%. The Seoul
competitiveness survey reveals that government-
driven ICT infrastructure investment, coupled with
improved access to various finances, played a pivotal
role in its growth surge, along with well-trained
human resources, reduced informal fees, and the
development of the Sangam Digital Media City.
Financial and Insurance Cluster
One of the fastest-growing sectors of Seoul’s
economy has been the financial and insurance
cluster. It accounted for over 15% of Seoul’s GRDP
in 2010, growing over 127% during 2000–2010.
Its increasing importance to Seoul is associated
with the changing dynamics of the local economy,
as access to bank finance and venture capital has
became vital to Seoul’s competitiveness. Taking
advantage of the Cheonggyecheon restoration
in downtown area, the city designated this as a
Finance Development Promotion District, providing
software and hardware support, including
mitigating building regulation and offering
professional management consultancy.

18
Latin American Cities:
Case Study Summaries
Bogotá, Colombia
Bogotá, the largest city, is the country’s capital
and is the economic, political, educational,
and cultural center of Colombia. Such an
agglomeration has led to the dynamism of the city,
evidenced by its inclusion in the league of global
cities.2
Most companies operating in the country
are based or have representations in Bogotá,
and these generate a quarter of Colombia’s
GDP and account for 15% of its FDI. Bogotá is
2
Economist Intelligence Unit (2012) and America
Economía (2011).
Basic Facts
Urban area 384 km2
Urban density 19,531 people/
km2
GDP (2011) Colombia $328.42 billion
GDP (2011) Bogota $74.25 billion
Colombia
$7,131
Bogota
$9,943
GDP/hectare $2,876.5
Primary 0.7%
Manufacturing 21.5%
Services 76.5%
Main export industries Planes and aircrafts,
coffee, flowers,
medicines
Business Indicator
45th
GDP= gross domestic product, km2
= square kilometer.
also an attractive location for people from other
regions seeking job opportunities or for starting
a business. Although the city is known for its
industrial production, it is gradually transforming
into a service-oriented economy.

Latin American Cities: Case Study Summaries
19
City Competitiveness
The main challenge for Bogotá is its transformation
from a manufacturing to services economy, which
is underway. The government formulates a strategy
toward a more technology-intensive economy,
and this needs more skilled labor, require better
training and education, and a framework for
innovation. In the key drivers of competitiveness,
the cost of doing business indicator is weak at
2.90 because of high cost of public services. As
to the responsiveness of government to business
needs, based on qualitative indicators, the index
is poor at 2.55, with public sector affecting rather
than promoting business environment (Table 4).
Urban Development
Bogotá has in place a plan to increase the density of
the city; consequently, land is scarce and becoming
more expensive. Residential and commercial
projects are taking up most available urban land,
to the detriment of industry. In addition, poor road
infrastructure and fleet growth is increasing traffic
congestion in the city, especially in industrial areas.
This trend is also transforming the city’s suburban
populations into urban conglomerates boosting
their development in different areas.
Poor urban planning is one of the critical problems
of the city, which requires a reform focused
on improved access of goods, the provision of
efficient and affordable public transport, and the
availability of housing and recreation facilities.
A revamped governance model for Bogota
emphasizing strategic planning and long-term
development goals is needed. It should result in
an inclusive growth and collective commitment
to attain sustainability, good quality of life,
and enhanced competitiveness; and one that
attracts investment.
Bogotá is the capital district of the country
that is administratively equivalent to a state
within a federation, which provides flexibility and
priority on fiscal, budgetary, and administrative
matters.
Competitiveness: Bogotá
Key Drivers
Ranking
1–5
Infrastructure 2.70
to business needs
2.55
Source: CAF. 2012. National Consultants Study of Colombia.
Caracas.
The local government has made significant efforts
to attract investments by creating an agency Invest
in Bolgotá to promote international investment,
restructuring the Chamber of Commerce to
promote the competitiveness of the city’s
entrepreneurs, and commissioning the Bogotá
Connect to promote technology entrepreneurship.
The Commission of Regional Competitiveness (CRC)
is predominantly a technical organization that
includes public, private, and civil sector players.
It has managed to achieve stability regardless of
the political situation, making a region particularly
attractive for investment and ensuring the use
of effective approaches for large-scale strategic
initiatives. While the CRC has high potential to
mobilize influences and resources, it faces the
challenges of formalizing and strengthening
its governance system. The Bogotá Chamber of
Commerce serves as the technical secretariat
of the CRC, which aims to strengthen business
skills to enhance competitiveness and to create
shared business values among companies in the
region. The creation and consolidation of industry
clusters is now a priority for the Bogotá Chamber
of Commerce.
Although other initiatives of public–private sector
integration exist, relations between the two sectors
are not particularly strong. In general, the private
sector sees the city as a client, rather than as a
collaborating partner with whom to develop joint
projects.

20
Industry Clusters
Software Cluster
The software cluster in Bogotá is composed mainly
of micro and small enterprises (95%) devoted
to the development of business personnel and
entertainment applications, custom software, and
the provision of services related to information
technology and related fields. Companies in
general are highly technical, equipped with
competent human resources, and have a good
reputation abroad. Bogotá offers advantageous
conditions for this cluster’s development in terms
of costs, infrastructure, and business environment.
Fashion Cluster
Bogotá is host to approximately half of all clothing,
footwear,leathergoods,andjewelrymanufacturers
in Colombia. The products are exported mainly to
South and North American markets. The fashion
cluster is likely to develop leadership in the sector
at the regional level, although it is recognized
that Brazil and Peru are also major competitors.
The overall competitiveness analysis of the
cluster identifies the strengths as (i) sophisticated
demand, (ii) large market size around Bogotá,
(iii) availability of skilled labor, and (iv) production
capacity. The cluster’s main weakness is the limited
sophistication of the garment, mostly focused on
producing generic items.

21
Curitiba, Brazil
Curitiba is one of the most vibrant cities in Brazil. It
performs well above the national average in most
social and economic factors and its environment is
conducive to sustainable economic development.
The city’s GDP has grown very rapidly during the last
decade, coinciding with a gradual transformation
into a services-oriented economy. Its logistical
conditions are conducive for exporting activities
as it benefits from infrastructure such as major
highways, ports, and airports that connect the city
Basic Facts
Urban growth rate 10.36%
(2000–2010)
Urban area 43,527 hectares
Urban density 40.24
GDP (2009) Brazil $1.62 trillion
GDP (2009) Curitiba $18.98 billion
GDP/capita (Brazil) $8,472
GDP/capita (Curitiba) $12,379
GDP/hectare $435,960.28
Total employment 833.585
Primary 0.2%
Manufacturing and
building
17%
Services and trade 82.8%
Main export industries Cars and tractors
(including parts
and components),
agricultural
machinery,
integrated circuits
Business Indicator
130th
= square kilometer.
to the other economic centers of Brazil and to the
most relevant MERCOSUL3
countries, a Southern
Common Market—an economic and political
agreement that promotes free trade and the fluid
movement of goods, people, and currency.
Curitiba ranks well in most of the key driver
indicators of competitiveness with an overall index
score of 2.96. The indicators that scored lower
than expected were human resources and training,
with companies perceived to lack adequate
management, skilled technical labor force, and
weak ability to perform in other languages aside
from Portuguese. In all the other key drivers of
competitiveness, however, the city performed high
when compared with other cities in Latin America
(Table 5).
3
MERCOSUR, a free trade agreement among Argentina,
Brazil, Paraguay, and Uruguay.

22
Development Initiatives
Urban Development
Curitiba has prioritized programs to foster
technology-based industries, and has designed
policies to attract and support the creation of these
types of companies. These policies complement
the federal programs that promote priority
sectors, such as semiconductors, pharmaceuticals,
software, and capital assets, in order to offer them
more favorable conditions in terms of regulation,
investment, financing, higher and technical
education, infrastructure, and others.
The strategies and actions used to develop local
competitiveness at the state level are stated in
the Multi-Year Planning of the State Government,
which covers a 4-year period. The plan establishes
guidelines, objectives, targets, programs,
and projects focused on state administration,
equalization of territorial differences, and the
socialization of opportunities. In the Multi-Year
Planning of the State Government, 2012–2015,
two programs of special interest that focus
on the development of local capabilities and
on competitive advantages are the (i) Paraná
Competitive Program, which aims to attract
investment in industrial establishments already
based or that may settle in the territory of
Paraná, and (ii) Paraná Innovative Program, which
intends to allocate approximately $27 million
in 2012 for strategic projects of research and
innovation through the TECPAR company and the
Araucaria Foundation.
At the state level, the actions of the Department
of Industry, Trade and MERCOSUL Affairs seek
to encourage the creation of companies and
export promotion firms to transform the cities,
which comprise the Metropolitan Region of
Curitiba (RMC, in its Portuguese acronym), into
the main hub of Brazilian companies exporting
products to member countries of the LAC
economic bloc.
At the municipal level, the Curitiba Development
Agency aims to promote economic activity
through the development of infrastructure,
business networks, and science and technology
with emphasis on PPP. The agency advises
investors and companies interested in installing
or expanding their activities in the city, offering
technical, socioeconomic, and environmental
information, among others. The main programs of
the agency are related to tax incentive, such that
Tecnoparque is for the exemption and reduction of
taxes, municipal fees, and contributions in order
to stimulate the development of high-technology
industries; and ISS Tecnológico is for enterprises
and service providers that promote research,
scientific, and technological development in the
city, allowing the deduction of service tax.
The regional innovation system of Curitiba is
composed of 157 institutions (laboratories,
associations, institutes, agencies, and incubators)
attached to the Ministry of Science, Technology
and Innovation that provide institutional support
and infrastructure for developing research and
development, and support for innovation and
quality assurance. While there are many strong
academic and research institutions in the city and
its surrounding areas, they are quite detached from
the production sector. This could be easily changed
if they work in a more coordinated manner. Figures
demonstrate the importance of higher education
and research and development activities to the
city’s economy. It is worth noting that the leading
universities of Curitiba are responsible for the
incubation of a significant number of technology
Competitiveness: Curitiba
Key Drivers
Ranking
1–5
Infrastructure 2.72
to business needs
2.69
Source: CAF. 2012. National Consultants Study on Brazil.
Caracas.

23
firms in the region, as in the case of Bematech.
Curitiba has a set of actors that are focused on
developing the business environment, including
several agencies and two trade federations,
Fecomércio and Faciap, which are also based in the
city. The Brazilian Service of Support for Micro and
Small Enterprises (Sebrae)—a nonprofit institution
that assists entrepreneurs in opening, planning,
and in the maintenance of their companies—offers
solutions, lectures, and trainings at its Paraná chapter.
Cluster Developments
Medical, Hospital, and Dental
Products Cluster
Curitiba manufactures and markets a wide range
of high technology products that are offered
mainly by micro and small enterprises. Links
between companies could be strengthened so
they could engage in joint ventures more often.
Since export capacity is still fragile, production is
aimed at meeting domestic demand by both the
private and public sectors.
Software Cluster
This cluster is composed of small businesses with
a more mature level of articulation, with frequent
joint venture activities and a network of diversified
supporters. Its main competitive strengths are
(i)theconditionsofinfrastructureandenvironment;
(ii) the strategy, structure, and rivalry of companies;
and (iii) support industries related to the cluster.
Its main weaknesses are (i) shortage of skilled
labor, (ii) demand conditions composed of firms
requiring these products or services (especially
those related to new products), (iii) procedures
and rules set by the government, and (iv) inability
to enter international market due to its relatively
small scale.

24
Guayaquil, Ecuador
Guayaquil City has been an important trade
center for centuries, in part because it houses the
country’s main port, which accounts for 65% of the
goods traded in Ecuador. The city is the economic
capital of the country, accounting for about 30%
of national GDP. It is home to 40% of the country’s
largest firms. It has the largest population and per
capita income in the country. The city is currently
undergoing a period of strong economic growth,
which is being driven by construction, tourism,
and agriculture. Over 20% of the city’s businesses
export products to international markets.
The city has competitive advantages in its transport
infrastructure and in some areas of business such
as business dynamics. However, some aspects of
administration and economic governance, such as
constraints in registering a business, and high cost
of labor, undermine the city’s competitiveness.
In general, however, the key drivers of city
competitiveness (Table 6) rank above other Latin
American cities.
Basic Facts
Urban growth rate 2%
Urban area 344.5 km2
Urban density 7,227/km2
Real gross production
(2010) Ecuador per capita
$1,101.28
Real gross production
(2010) Guayaquil per capita
$2,536.71
Real gross production/hectare $8,757.67
Total employment 780,000
Primary 15.7%
Manufacturing 18.4%
Services 65.9%
Main export industries Banana, seafood,
fish, and cocoa
Business Indicator
139th
km2
= square kilometer.
Competitiveness: Guayaquil
Key Drivers
Ranking
1–5
Infrastructure 3.63
to business needs
3.16
Source: CAF. 2012. National Consultants Study on Ecuador.
Caracas.

25
In the last decade, the number of new firm
establishments has been twice than in the rest of
Ecuador. Most of the indicators are higher than
in other cities in Ecuador, except security; though
perception is that it is not worse than in urban
areas in Latin America, it is a major concern in
Guayaquil.
Urban Development
The city boasts of a well-developed infrastructure
in transport (ports and roads), tourism, leisure,
education, and others, which contribute to a
relatively high standard of living.
In the last few years, residential areas (including
social housing) have grown more than industrial
areas. Large investments have been made to
regenerate the downtown area, which has created
business opportunities and attracted more visitors
to this area.
Urban planning and housing programs are
managed by the city administration. Guayaquil
should establish a planning strategy for long-
term development involving the private and public
sectors to achieve a more efficient use of resources
and increase the attractiveness of the city for
business people, tourists, and its citizens.
The subnational government has been primarily
responsible for the city’s positioning as a regional
reference for doing business. It has sought
to encourage foreign investment (either for
large projects or large companies to settle in)
by, among other actions, establishing a proper
legal framework.
The city government requested the transfer of the
powers of public goods that were not adequately
provided or administered by national and state
institutions. Guayaquil is known for its successful
privatization of most public services, which made
these services more efficient and economical.
The city competitiveness is hindered by the weak
performance of Ecuador in almost all categories
of Doing Business Index, as the country is among
those Latin American countries whose regulation
is less conducive to encouraging investment. For
example, the tax structure is rigid, centralized,
and prevents cities and regions from choosing
more competitive systems (although they may
exempt businesses from paying municipal taxes).
It is suggested that the city, which is noted for
its transparency and accountability, should move
toward greater decentralization of powers.
Industry Clusters
Commercial Services Cluster
This cluster was included because of the intensity
of commercial activity in Guayaquil, coupled
with the importance given to it by the chamber
of commerce and business associations. Local
authorities keep their intervention in markets to a
minimum, allowing this to be a strong and dynamic
activity. Nevertheless, there is a need to conduct
training for lower-skilled workers, reduce the level
of informal employment, and improve working
conditions (as many workers are immigrants from
poorer regions).
Cocoa Products Cluster
The produce in the Guayas region has a superior
quality due to the unique characteristics of its land
and climate. Cocoa-related exports generate a
great deal of economic activity in rural areas and
bring dollars to the country. The government is well
aware of the competitive advantage of Ecuador
in this sector and has supported producers (with
subsidies and equipment) and scientific research
(with seeds, varieties, growing techniques,
and others).

26
Lima, Peru
The city’s economy reflects the sound Peruvian
macroeconomic conditions, as the country has
grown steadily over the last 15 years as a result
of the deep structural reforms undertaken. Lima
is the center of economic, political, and cultural
life in Peru since colonial times. The city is host to
most of the country’s economic activity (accounts
for approximately 45% of GDP), although Lima’s
relative importance has declined in recent years due
to the growth of other cities. Most relevant activities
are related to services (trade, restaurants and hotels,
government services, and others). The importance
of manufacture has declined in recent years due
to the decentralization process that the country is
experiencing and to the dynamism of other regions.
Lima accounts for a third of the country’s exports,
partly due to its better infrastructures vis-à-vis other
Peruvian regions.
The Peruvian economy has been growing for
the last decade, ranking 21st in the index of
macroeconomic stability according to World
Economic Forum (WEF). However, its key drivers
Basic Facts
Urban growth rate 2.1%
Urban area 2,670.4 km2
Real gross product
(2011) Peru
$157.05 billion
Real gross product
(2011) Lima
$69.54 billion
Real gross product/hectare $1,998.00
Primary 3.9%
Manufacturing 16.3%
Services 54.0%
Main export industries Traditional mining,
oil, and gas, textiles
km2
= square kilometer.
for competitiveness are weak. Though the
dynamics of the local economy is relatively strong,
all other indicators are below 1. In terms of the
government’s capacity to support business, rules
and regulations represent a heavy burden on
businesses and the public sector does not promote
the local economy as it should (Table 7).
Urban Development
The municipality is organized into gerencias
(boards) with specific mandates, and all these
require intensive coordination. Major projects
are not directly addressed by these gerencias,
but by supporting institutes dependent on the
Municipal Council. For example, the Metropolitan
Planning Institute is responsible for defining the

27
Coordinated Regional Development Plan, 2012–
2025, which includes the set of actions to increase
the city’s competitiveness, to be implemented by
some gerencias.
The Business Development Gerencia is responsible
for the development and promotion of clusters
of micro and small enterprises in the city (which
constitute52%ofthesmallandmediumenterprises
in Peru) and for the establishment of training
programs for human resources. The Promotion
of Private Investment Gerencia is responsible for
promoting high-impact projects located within
its territorial jurisdiction. Projects are handled
through PPP in two forms: self-sustaining (which
comprise mainly highway concessions and are
funded solely by private capital), and cofinanced
(requiring additional counterpart from the city).
While Lima is the center of Peru’s highway system,
the city has few expressways relative to its size and
there are major bottlenecks. It also has a limited
public transport system.
National reforms have prioritized the facilitation
of private investments. These entailed redesigning
the legal framework to provide a set of incentives
that would attract investors, especially on
natural resources and public services. A set of
guidelines and principles was even added to the
country’s Constitution. Proinversión is a national
agency created with the objective of promoting
private investment, competitiveness, sustainable
development, and social welfare.
The city has a special administrative regime
that allows the city to exercise its duties while
simultaneously fulfilling the functions of the
regional government. To facilitate coordination
between the city of Lima and the other
municipalities, meetings are arranged with
Development Gerencias to set priorities. Through
the so-called Participatory Budgeting, funds are
allocated for research and innovation projects
through the Peru Innova program. These funds
finance universities that address specific problems
of the city, although this is a pilot program with
small amounts of budget. Coordination channels
between the city and the private sector are still
incipient.Whiletherehavebeencontactswithsome
business associations on specific issues (such as the
use of city resources), there is no institutionalized
mechanism for a formal collaboration.
Industry Clusters
Culinary Cluster
The competitiveness of this cluster is determined
by the rich Peruvian culinary traditions and
the availability of a wide range of high-quality
domestic products. The capital is full of restaurants
of different styles that cater to the growing local
demand (which expects good quality and service)
and culinary tourism. This sector accounts for
more than $1.5 billion annually and has become
a vehicle to promote local entrepreneurship and
Peruvian investment abroad. It is a dynamic cluster
because it is based on collective efficiency, and is
based on constant innovation with technological
components.
Gamarra Area’s Textile Cluster
The textile cluster known as the Gamarra area
consists of a traditional industrial agglomeration
of businesses engaged in the production and
distribution of clothing located in La Victoria
district. The cluster is considered underdeveloped
because there are no institutions that will help
Competitiveness: Lima
Key Drivers
Ranking
1–5
Infrastructure 2.93
to business needs
2.86
Source: CAF. 2012. National Consultants Study on Peru.
Caracas.

28
it grow sustainably. In order to reach a maturity
stage, it should focus on improving joint action,
cooperative competition, technological innovation,
social capital, and developing stronger formal
procedures and institutions. The government has
launched an initiative to promote this cluster.

29
Trade Corridors of Asia
and Latin America
As cities develop, trade and communications along
the major land, sea, and river transport corridors
connecting them also grow. In recent years, this
phenomenon has given rise to a growing interest
in the emergence of economic or trade corridors,
some of which transit across many countries. A
feature of trade corridors is they geographically
link two or more large cities, but there are often
many smaller secondary city nodes that have
developed along transport corridors, which
benefit from the flow of freight and passengers
along them. Improving the connectivity of firms
and industries between secondary and primary
cities along trade corridors offers opportunities for
smaller primary production in secondary cities to
capitalize on the increasing trade flows occurring
along land and river transport corridors. However,
the poor level of connectivity at the nodes means
many opportunities for local businesses located
in secondary cities to feed into the supply chains
of firms located at either end of the corridor are
being lost.
The ADB–CAF Asia and Latin America Regional
Competitiveness of Cities study examines several
existing and emerging trade corridors in the
two regions. Trade corridors have at least three
characteristics that distinguish them from simple
groupings of cities and surrounding areas with or
without roads or rail connections to the nearest
seaport. Trade corridors have (i) production
functions that make available basic goods and
services, (ii) transformation functions that add
value to the basic goods and services, and
(iii) logistical functions that provide opportunities
for firms to have access to national and
international markets.
A feature of trade corridors is they are
transnational, or in larger countries they are
trans-subnational corridors of economic trade,
cooperation, and development. The ability
to unlock the competitiveness of cities along
trade corridors is crucial in supporting regional
economic development and helping to diversify
the economies of secondary cities. Developing
new infrastructure, linkages, and transformation
components is critical to supporting the supply
chain development and tapping markets of large
cities located along trade corridors.
Two studies, also by ADB–CAF, are being conducted
to identify what could be done to develop the
potential of cities along economic development
corridors in Asia and Latin America. These studies
aim to find out how to enhance the cities’
competitiveness to attract investment, create new
employment, and take advantage of investment
opportunities. A key component of these studies
is to identify key factors of competitiveness that
underpinned the economic development of trade
corridorcities,andwhysomecitiesinthesecorridors
are more successful than others in capitalizing on
trade and economic development opportunities
the corridors create. The study will include vignette
case studies of corridors development to identify
what is necessary to improve the formulation of
policies to the development the corridors.
Several case studies of economic development
corridors are being undertaken in Asia by ADB.
These case studies cover the Ho Chi Minh–
Bangkok, Kuala Lumpur–Singapore, Mumbai–
Delhi, Tianjin–Beijing, and Pearl River Delta
economic development corridors. These studies

30
will describe policies and incentives agreed upon
by governments to develop the trade corridors
and an indication of the benefits that may be
gained from promoting and supporting this type
of development.
The case studies selected for Latin America
include (i) MERCOSUL (Brazil, Paraguay, Uruguay,
and Argentina) and Chile; (ii) the Central Inter-
Ocean from Brazil to Peru; and (iii) the México–
United States corridor. These studies will
emphasize the role that cities and urban and
industrial agglomeration have to accomplish to
achieve physical integration and supply chain
strengthening in the region.

31
Preliminary Findings
Asian Cities Case Studies
Competitiveness of Cities
The preliminary findings of the research for Asia
show significant differences in the strength of
drivers of competitiveness for the cities and
clusters studied between the developed and
developing parts of the region. Other studies on
the competitiveness of cities in the region confirm
similar findings.
Seoul—A Transforming Economy
with Many New Challenges
Seoul is the most advanced economy of the four
city case studies. As an advanced economy, it is
losing competitiveness. The global financial crisis
has had a significant impact on the development
of the export sector of Seoul and on other cities
of the Republic of Korea. The rising cost of
doing business, especially labor, land, and utility
costs—as the country imports much of its energy
needs—are significant factors undermining
competitiveness. This has forced structural changes
to the city’s economy by moving away from
heavier manufacturing to ICT; finance; and new
service sector industries. In response to this move,
the national and local governments have focused
their efforts on building human capital, developing
strategic infrastructure, enhancing business
dynamics and regulation reforms to enable the
city to compete for new global services business.
Seoul’s quality of life is high, which remains
a factor in pulling in skills and investment into
the economy.
Dhaka, Ho Chi Minh, Nanning—
Better Infrastructure, Human
Capital, and Business Dynamics
The case studies of Dhaka, Ho Chi Minh, and
Nanning cities show economies at various stages
of development. Nanning has the relatively
advanced economy, with recent initiatives to
develop infrastructure being supported by
the three levels of government, adding to the
competitiveness of the city’s economy. The
studies on the competitiveness of the drivers of
economic development in the three cities show
clearly that infrastructure shortfalls are adding
to the direct and indirect costs of business.
However, poor development of human capital,
the lack of responsiveness of government in
streamlining economic governance, and business
approval systems are significant factors that
constrain investment and job creation. Quality of
life is also an important indicator as these cities
have a wide range of community, education,
and health services attractive to investment and
skilled labor.
Environmental Issues and Inner
Area Revitalization
Environmentalrisksassociatedwithclimatechange,
air and water pollution, environmental wastes,
and reduced quality in the built environment in

32
urban areas are issues of concern in all four cities.
Seoul and Nanning, and to a lesser extent Ho Chi
Minh City, are giving attention to addressing these
issues. How to revitalize inner-city areas is a major
challenge. These areas are experiencing high levels
of congestion, rising land and rental costs, poor
quality housing, and a decline in investment and
jobs. Collectively, these factors have caused many
firms to expand their businesses on the periphery
of cities or offshore, as in the case of Seoul. There
is a need for substantial reinvestment in inner city
revitalization projects to enhance the quality of
the urban fabric and generate new types of jobs
conducive to endogenous economic growth.
Industry Clusters
The case studies have identified several industry
clusters in each city that are important drivers
of economic activity and employment. Industry
clusters comprise spatial agglomeration of
firms, which help foster competition; reduce
externalization and business transaction costs;
and stimulate local innovation, collaborative
marketing, and business development. The studies
of industry clusters have identified a number of
common competitiveness issues.
Weakness in Fostering
Industry Agglomeration
and Cluster Development
All four case studies have shown that all the
cities have developed industrial areas and special
economic zones to enable their local economies
to grow. However, little attempt has been
made to encourage industry specialization and
agglomeration in these zones, either through
planning or other initiatives. The case studies
reveal that the initial core of most industry
clusters in inner-city areas is moving and firms
are becoming more dispersed across
metropolitan areas. This reduces agglomeration
and is leading to increased transaction costs.
Encouraging spatial agglomeration is important to
enhancing competitiveness.
Poor Knowledge of Industry
Supply Chains
There is poor knowledge of the nature of industry
supply chains supporting the operations of firms
in key industry sectors in the cities studied. This
results in a significant loss of opportunities to add
value to local economies through the expansion
of local industry supply chains. The mapping of
clusters and supply chains conducted for the case
studies has identified opportunities to expand
industry supply chains, and to measure deficiencies
in competitive attributes underpinning them.
Small innovations and improvements to supply
chain systems and management could lead to big
increases to productivity, employment, and wealth
creation for clusters.
Weakness of Government and
Business–Enabling Environments
There is good cooperation between governments
and business on industry development in the four
cities studied; however, the enabling environment,
especially access to funds and bureaucratic
processes are constraints to attracting investment
and development in the clusters. Nanning has been
successful in streamlining many of its regulatory
requirements and is attracting international
firms into its new enterprise zones. The level of
networking and collaboration between businesses
is weak, leading to low levels of research and
innovation. Increasing the level of inter-firm rivalry
and collaboration is an important factor in reducing
risks and developing costs for new products and
services offered by firms forming part of a cluster.
Inadequate Focus on Human
Capital Development
All clusters, except Seoul, report significant
shortages of skilled labor and competencies,
particularly in high-level management and
professional fields.

Preliminary Findings
33
Provision of Strategic Infrastructure
Governments are attempting to address basic
infrastructure problems in Nanning, Ho Chi Minh,
and Dhaka cities; however, other elements of
strategic infrastructure, such as specialized support
facilities for testing, research and development,
training, and marketing are not available. This is
constraining the development and growth of the
clusters studied.
Latin American City
Case Studies
Competitiveness of Cities
The studies of the Latin American cities show
the differences between capital cities (Lima and
Bogota) and non-capital cities (Guayaquil and
Curitiba). It can be argued that the attributes that
make these cities competitive vary depending
on their status. For example, the capital cities
are attractive for investors because most of the
political and institutional actors are concentrated
in these areas.
Curitiba—Keeping Leadership in
Urban Planning and Productive
Transformation
As one of the leading cities in Brazil, it performs
above the national average in most social and
economic factors. Its environment proves conducive
to sustainable economic development. While it
is gradually transforming into a service-oriented
economy, its logistical conditions are privileged for
exporting activities, as Paraná State benefits from
strong infrastructures which connect it with other
economic centers of Brazil and the main MERCOSUR
countries. Moreover, Curitiba has prioritized
programs to foster technology-based industries,
designing policies to attract investment and support
the creation of companies in these sectors. There
is a strong regional innovation system with more
than 150 institutions (laboratories, associations,
institutes, agencies, incubators, universities, etc.).
Lima and Bogota—
Economic Growth Supported
by Institutional Capacity and
Cluster Development
Both Lima and Bogota are dynamic capital cities
that have made extensive reforms to facilitate
business. Although their economic base was
traditionally manufacturing, they are gradually
becoming service-oriented economies. Lima and
Bogotá have experienced strong growth and have
received large inflows of FDI. Most large and
international companies operating in Peru and
Colombia are headquartered in these capital cities,
which are also attractive locations for people from
other regions seeking job opportunities or starting
businesses. Quality of life indicators are important,
as these cities offer a wide range of education
and health services. Being capital cities, they have
advantages in terms of fiscal and budgetary outlays.
Institutional arrangements are complex making it
difficult to streamline economic governance and the
provisions on the issue of business permits. Studies
on the competitiveness of the drivers of economic
development in both cities show that shortfalls in
infrastructure, human capital development, and
availability of skilled labor add to the direct and
indirect costs of doing business.
Guayaquil—Setting a Model
for Competitiveness
Guayaquil, the economic capital of Ecuador, has the
largest population and per capita income among the
four LAC cities studied. Quality of life is relatively high,
which makes it an attractive place for investment and
skilled labor. The city is currently undergoing a period
of strong growth and the main economic activities
are construction, tourism, and agriculture. Over
20% of the city’s businesses export their products to
international markets, partly because of the relevance
of its port. The subnational government has been
primarily responsible for the city’s positioning as a
regional reference for doing business, encouraging
private investments, and privatizing public services.
The city’s competitiveness, however, is hindered
by the weak performance of Ecuador in almost all
categories of the World Bank’s Doing Business Index.

34
Industry Clusters
The case studies identified several industry clusters
in each city that are important drivers of economic
activity and employment. The clusters studied
compose mainly of small and medium firms with
a relatively high level of specialization. Some are
based on special characteristics of the regions
where these are located (gastronomy and cocoa
clusters) or factor endowments (software and
medical, hospital, and dental products clusters).
Most of them have an export focus, which reflects
the importance of being competitive to trade
goods and services in the international markets.
The studies of industry clusters have identified a
number of common competitiveness issues that
should be tackled.
Policies for Cluster Development
All four cities studied have developed industrial
areas although overall, public planning and
initiatives to encourage industry specialization
and agglomeration in these zones have not
been prominent, except for the case of Curitiba.
Guayaquil has done a good work in facilitating
business creation and attracting investments but not
so much in promoting cluster development. Lima
and Bogota have launched initiatives to enhance
competitiveness and promote investments, which
are still being developed.
Industry Supply Chains
The study reflects the overall weakness of local
supply chains, due to the scarcity of structural
productive transformation processes. A large
part of growth experienced in the region is led by
external demand (i.e., Asia effect).
Weakness of Government and
Business–Enabling Environments
Cooperation between policy makers and businesses
in the region is not well institutionalized. Except
for Curitiba, networking and collaboration among
firms and industry associations is still relatively
weak within the clusters studied. International
market entry is still a barrier to overcome due to
the relatively small-scale nature of the clusters.
Poor Innovation
All four cities studied have prestigious educational
and research institutions, which are not always
linked to industrial clusters to support them in
their innovation and technological transformations.
All studies report significant shortages of skilled
labor and competencies, particularly in high-level
management and technical fields to fill positions in
their clusters. Training programs need to be more
tailored to industry needs. Guayaquil and Lima
should improve working conditions (many of them
are immigrants from other regions) and reduce
informality of many business activities and improve
the level of business tax collection.
Provision of Strategic Infrastructure
Despite having received heavy investments in
infrastructure in recent years, there is still a deficit in
integration between cities (except for Curitiba and
Guayaquil). This lack of connectivity in the urban
systems in and between cities (especially trade and
logistics systems) has had a negative effect on the
competitivenessofcitiesandontheregionasawhole.
An agenda to focus on the development of strategic
infrastructure led by multilateral development banks,
in this regard, is thus a matter of urgency.

35
Next Steps
The Asian Development Bank–Corporación Andina
de Fomento’s (ADB–CAF) RCC research project on
thecompetitivenessoftheAsianandLatinAmerican
cities is in the middle stage. The two trade corridor
studies for Asia and Latin America are already
in an advanced stage and initial results indicate
there are opportunities to foster the development
of secondary city development nodes along
trade corridors.
The preliminary result of this study indicates a
need for more holistic and integrated approaches
to be taken by governments in the way a strategic
infrastructure is planned and developed to support
the development of local economies, if they are
to become more sustainable. This will require
governments and the regional development banks
in the two regions to shift away from the more
traditional sector approaches to infrastructure
and other urban sector projects to support the
development and environmental improvements of
cities toward a more strategic and system-based
approach to the planning, design, implementation,
operations and maintenance of ADB- and CAF-
funded projects. There is now a greater need for
including environmental, social, and governance
issues in the design of projects that support the
development of cities.
An important outcome of the research is to
embed the learning outcomes of these case
studies into the operations programs of the two
banks in the cities of these two regions. This
may involve new lending modalities and project
design approaches that are holistic, systems,
and performance driven. The knowledge and
learning outcomes may also need to be widely
disseminated so that these can be captured
by a wider audience among these cities in the
two regions.
The next steps in the project will be the following:
„„ Finalize the results of the eight case studies.
„„ Conduct a workshop with the national
consultants to present the findings of the city
case studies and to synthesize the results of
the research into a series of learning outcomes.
„„ Develop a framework to operationalize the
results of the research, for application by ADB
and CAF.
„„ Prepare a report on the findings and
recommendations of the research to be
published in English, Spanish, and Portuguese.
„„ Prepare a program of activities to disseminate
the learning outcomes and to apply the
research results in designing sustainable urban
development projects in the Asian and Latin
American regions.

ADB-CAF Regional Competitiveness of Cities in Asia and Latin America (Kamiya/Roberts et.al.)

ADB-CAF Regional Competitiveness of Cities in Asia and Latin America (Kamiya/Roberts et.al.)

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