The 2015 PPI Asia Roundtable focused on a concept called the “new economic geography” which refers to the growing power of cities and municipalities around the world to address challenges through pragmatic decision-making at the local level. Urbanization has and will continue to intensify the power of mega-cities around the world which account for an ever-increasing proportion of global GDP and population growth. The roundtable sought to examine the thesis that cities, rather than countries, are effectively the preponderant force in global finance and economics. Many of the speakers aimed to redefine the parameters for investing in a country, calling for a greater emphasis on the growth trajectory, politics, and security of cities as opposed to the nation as a whole.
As evidence of the growing power of urban centers around the world, several speakers looked to the growth and influence of special economic zones and “urban archipelagos.” This is especially true for economies in the Asia-Pacific region. China’s adoption of numerous special economic zones (SEZs) to concentrate special industries, to promote exports, and to attract foreign capital is well-known. While this policy is driven at the national level, the results are at once local and global. These SEZs account for a key element in China’s growth story; in 2014, SEZ’s accounted for twenty-two percent of Chinese GDP and forty-six percent of foreign direct investment, according to one speaker. Another mentioned that these zones have innovated in ways that national governments have not; labor market flexibility and ownership of land are two areas in which SEZs have provided a “stepping stone” for broader reforms.
With this tremendous growth in economic heft and influence of urban centers in Asia and around the world, a new methodology for looking at cities may be required for institutional investors.
PPI is grateful for the support of our in-country hosts, Government Pension Investment Fund, Japan (GPIF) and the Ministry of Health, Labour and Welfare, and the generosity of our sponsors: Fidelity Charitable Gift Fund, FountainVest Partners (Asia), Goldman Sachs Asset Management, Macquarie Infrastructure and Real Assets, Mitsubishi Corporation, Morgan Stanley Investment Management, Nikko Asset Management Co., and Unison Capital.
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