Cities as driving competitors

The role of cities is very quickly becoming one of the most important parts of the whole discussion on how competition functions and how economic development comes about in our globalised world. Contrary to the situation during most of the 20th century when competition was dominated by the national perspective - it is increasingly about and between cities and regions regardless of national borders. The welfare of a country is becoming more dependent on how successful its cities are.

A few figures from the Stockholm Region underline this argument very clearly:

• it has 21% of the population of Sweden
  
• it produces almost 30 % of our GNP
  
• it pays 40 % of all taxes in the country, and o it accounts for around 40 % of the total annual growth of our GNP.

In the international environment characterized by a growing mobility of people, goods, capital and ideas, the basis for competitiveness becomes more and more local / regional. There is abundant empirical evidence to support this view. Given an open economy this is not that astounding. Competitiveness or its lack depends at the end of the day on people and on what they do. People live, work and run businesses locally.

Cities have always been places for commerce and thus they always are catalysts for development - good or bad
- that depends on our actions. But a city is not only a place for exchange of goods
- it is before everything else - a place for exchange of ideas - a place for creativity and innovation. The cities thus have the

potential for competitiveness and thereby for economic growth and development of our communities. The question is - How do we make use of this potential?
What can cities - that is their political leaders and their institutions - do to promote the cities' or their regions' competitiveness? There is of course a row of important factors that play a role, but the key factors in my opinion are:

• good and well functioning institutions - good governance;
  
• an environment that stimulates and accept innovation with an open mind;
• good climate for investment, and
  
• a city's responsible and comprehensive investment - policy.

The first point demands that local independence regarding responsibilities in designated areas - that is the legal competence for the local and regional level - is for real and not only a beautiful democratic decoration. Simply said - if the mayor cannot really do anything why vote for him. Efficient, professionally competent and impartial city administration is in this context equally important as the public institutions on the national level.The second point is not as clearcut and concrete but has much to do with open channels of information and communication between the city, business and the academic world - triple helix. It is to a considerable extent about discovering what is new and what will affect the position of the city and its competitiveness in the future. The general investment climate has as always to do with well-known things such as taxes, fees, the amount and complexity of regulations, etc.

The fourth point is perhaps more difficult to handle, especially if we are talking of the EU - country subject to the rules of the inner market, the public tendering process, etc. What is the role of a city regarding investment? To simplify matters it could be divided into two parts:

- basic infrastructure - such as water-supply, sewage treatment, waste management, roads, ports, public transport, etc.
This can be done exclusively by the city - or as so called PPP's - or by contract tendered out to private companies. The vital element here is that there should always be municipal responsibility based on the legal competence laid down in the law of the land.

- Investment in other areas - but under what circumstances?
A city can often have valid reasons for trying to promote commercial investment in order to stimulate local and regional economic development - meaning jobs and rising welfare for the citizens. In this context the trick is to avoid distorting competition on the free market and unduly favour certain private companies. To use a metaphor - this can be done by the city acting as a "midwife" for certain strategic investments. We can assist in the birth of the baby. But we will not feed and raise the child.

The instruments are among other things: land-policy, adapting and organizing schools and education to stimulate the creation of a competent labour-force, keeping the infrastructure and planning process in an efficient shape. In rare cases it can also be the role of the city to be a direct investor as long as one does not come into conflict with the EU's competition and public procurement-laws.

Sometimes such a simple thing as an efficient, service-minded and fair city its administration goes a long way to help desired private investments to be realised. In order to illustrate these principles I can again use Stockholm as an example. Stockholm has a clear need for investment in infrastructure and housing if we are to catch up with the rapid growth of the city during the nineties and the first years of this century.

With the support of the government - roughly 2 billion EURO will be spent during the next 8-9 years on ring roads and the Mälartunnel - the railway tunnel under the central part of Stockholm. These projects are done in order to raise the capacity for public transport - commuter trains and trains in the Mälarregion as well as the national railway system.

The city has in political unity established the goal to see to that 22.000 apartments are built the next 4-5 years - a tough task. The city is also taking its role as midwife seriously when working together with private actors and the academic world to formulate a common vision and subsequent action plans for certain strategic areas in Stockholm.

The first one - adopted by the City Council - the Kista-Vision is aimed at constituting commonly agreed guidelines for all, the actors in Kista - a suburb 12 km NW of the city-centre and one of the most important world centres for development in the field of mobile information technology.

In the "Vision-Department" it is also worth mentioning the plan for a biotech - R.A.D Centre - at or rather on top of the old freight train station in the northern part of the inner - city. This is close to the Karolinska Institutet - the institution that chooses the winners of the Nobel-Prize for Medicine.

Finally, the city sees the need for investment in competence and professional skills among its own employees. To recruit and keep the right employees will be crucial in the future if a city is to be competitive. To that end we have allocated the fund of 2 billion SEK (220 mill. Euro) to be spent to train and educate employees and developing our working methods.

To sum up:

• Investments should be made in close cooperation with other actors in society so as to make the most of them.
  
• As far as possible - the level of investment should be stable over a long term period - meaning that they can be well planned and efficiently procured from an economic and technical point of view.

If you want, you could list a number of rules of thumb for what a city and its leaders can do in cooperation with private business for their city to become and remain competitive for the wellbeing of its citizens. The 10 golden rules for success would be:

1. an elaborate strategy built on an evaluation of strengthens and weaknesses of your city,
   
2. define if and where you have clusters with a critical mass - or in which areas you may be able to create them,
   
3. a visionary political leadership - that is a transparent policy with clear intentions that are easily understood,
   
4. foster an open and tolerant intellectual environment that stimulates curiosity vis a vis new ideas,
5. create the right incentives for innovators and entrepreneurs,
6. create markets as deregulated as realistically possible,
7. establish a physical infrastructure at the forefront - and maintain it - but realize that it will never be completed,
   
8. give much attention to the educational system, both for business and the public sector,
   
9. keep your city administration modern, competent and adaptable,
10. 10. make the active and committed companies in your city like it and become ambassadors for it.

A city that succeeds with this will be competitive in our future world.

Carl Cederschiöld
Mayor Emeritus
City of Stockholm