Post-Industrial
East Asian Cities
Shahid Yusuf
World Bank
September 25, 20061

Urban Transition
East Asia is urbanizing rapidly. Simultaneously, thepace of urban structural change in its major cities isaccelerating: The displacement of key manufacturingindustries by other activities is occurring in decades asagainst centuries.
East Asia’s mega-cities need to find new ways offinancing ‘imports’ as their traditional manufactured
exports diminish. Over the medium term, a city’s‘current account’ (i.e. its transactions via trade andcapital transfers with the rest of the world) must balance.
2What is Accelerating ChangeRapidly rising wages and overheads in major cities are affecting
competitiveness of labor intensive manufacturing industries.
Global market integration, production networking, and more
efficient logistics are exacerbating pressures from lower costproducers.
Technological advances are reducing the labor coefficients ofmanufacturing. Less labor is required and production is more skill
intensive.
Terms of trade are shifting against manufactured goods because of
relatively higher productivity and because the changing
composition of demand favors services.

3

Why Focus on Urban Economies
Salience of the urban economy: Share of population
and GDP is rising steeply.
Importance of city size for agglomeration and scaleeconomies.
Global networking of cities, especially large ones.
Demographic patterns: currently a high percentage ofthe population is of working age; in the future, therewill be many more old people.
Impact of cities on the environment, resource use,and health.
4

Which Cities Matter and Why
The Asian miracle was and is an urban
phenomenon. Key players are a small numberof cities, which over time have grown intomega-urban centers. Asia’s future linked toeconomic dynamism of these cities.
 The principal foci of Asian growth are: Tokyo,Seoul, Shanghai, Beijing, the Pearl River
Delta, Hong Kong, Bangkok, Taipei,Singapore, Jakarta, KL/Klang Valley.
5

Which Cities Matter and Why
Why these: Administrative centers of“dirigiste” economic systems, past history androle, initial size, location, human capital,
infrastructure—and virtuous spirals.
 Recent East Asian industrial revolutions
geographically localized, mainly in capitalcities.
6

Share of National GDP
City

1985

1990

1995

2000

2003

Bangkok

35.94

40.5

39.08

36.31

--

Beijing

2.1

2.7

2.4

2.8

3.1

Seoul

24.9

25.3

24.9

24

24.1

Shanghai

5.2

4.1

4.2

5.1

5.3

Singapore

100

100

100

100

100

Tokyo

--

17.6

16.1

16.6

--

7

City GDP in 2003 (US$ billions)

City

BangkokBeijing

Seoul

GDP

4.46

44.26

146.9

Shanghai Singapore
75.52

94.61

Tokyo
764.178

What Does Post-Industrialism Imply
Traditional manufacturing migrating out.
Partially replaced by more skill andtechnology intensive manufacturing.
 Overall share of manufacturing in urban GDP
and employment shrinking fast. Process mostapparent in Tokyo, Seoul, Hong Kong,Singapore, and Beijing. Also quickly
surfacing in Shanghai and Bangkok.
9

What Does Post-Industrialism Imply
Traditional bases for competitiveness—lowcost labor slipping away.
 Sustaining growth—in fact, even maintaining
current income levels—and achieving abalanced current account calls for new
industrial engines and new sources of highvalue adding employment.

10

What Brings New IndustrialEngines to LifeNational/subnational policies towards industry
Skill and design intensity reliant on local innovation
system and local supply of skills
Local incentives regime: fiscal (e.g., tax incentives,intergovernmental fiscal transfers), labor market
related (e.g., regulatory institutions), financial (easeof raising funds from local sources), government
purchases of goods and services, and social (e.g.,poverty, income distribution)
11

What Brings New Industrial
Engines to Life
Industrial organization, especially the mix oflarge and small firms and linkages with
universities/research institutes Coalition of supporting interests, e.g.
financiers, urban developers and politicians Regional or global orientation of industry andits effect on growth Urban environment: quality of amenities andpublic services12New Leading Industrial Sectors
for East Asian cities
Robotics and animation: Tokyo Biotechnology: Singapore
 Electronics and IT: Beijing
 Movies and online videogames: Seoul Fashion garments and jewelry: Bangkok
 Construction services: Shanghai13How are Cities Pursuing IndustrialTransitions

The Tokyo case: developing multifunctional robotictechnologiesThe Singapore case: creating a biotech sector
The Seoul case: the recipe for an online videogames industry
The Beijing case: cultivating the innovation capabilities in theelectronics sector
The Bangkok case: developing the fashion and jewelry sector
The Shanghai Case: enlarging the capabilities and export
potential of the construction and engineering services sector

14

How to Measure Impact and Potentialof Emergent Leading Sectors





Growth and contribution to urban economic
performance
Industrial linkages
Employment, skill intensity
Technological dynamism: Links with universities andresearch institutes
Corporate capability
International market penetration
Future demand prospects: Local and global
15

The Future of Robotics
Multiple applications: Industrial applications,household use, medical, underwater and airborne
vehicles, space exploration, mine clearing, andreactor decommissioning.
Builds on broad industrial capabilities that took rootin the 1970s and 1980s, many localized in the Tokyoarea.
Promotes and leverages research in mechanical,
sensor, optical, power supply, remote control, and AI
technology. High tech, skill intensive, high value
adding industry ideally suited for Tokyo’s diversified
industrial base.
16

The Future of Robotics
Multiple linkages to universities and research
institutes, many different kinds of supplier andmany different kinds of military and civilian
uses. Basic technologies can be widely
applied e.g. in cars and smart houses.
 If accepted as an “essential” consumer item,
robotic devices could displace consumer
electronic and entertainment products as themainstay of Japan’s leading industrial firms.
17Lessons for Emerging Post-industrial
East Asia

Models:New York? Few leading sectors
London? Attracts FDI, high costs
San Francisco? Amenities, Silicon Valley,
universities
Paris? Creative industries
Tokyo? Broad-based, size, high costs

18

Thank You19