What we can learn from successful city clusters

Silicon Valley is an enviable model of city cluster success. And although it’s not easily emulated, there are steps Asian governments can take to help develop similar clusters.

San Francisco and San Jose are number one and number six respectively in terms of innovation globally, according to JLL’s Innovation Geographies report. Tokyo came second, with Singapore third and Beijing fourth. But while these cities hold a competitive edge in today’s technology-driven world, they are yet to replicate Silicon Valley’s economy.

How can a country build a cluster?

As with Silicon Valley, a gathering of talent encourages entrepreneurship, as does mobility of human capital, information and resources. Education, investment in high-tech industries, and expenditure on research and development are also key.

Based on this, China is making steady progress. Its super-city clusters in the Greater Bay Region, Beijing-Tianjin-Hebei, and the Yangtze River Delta are focused on great universities in Hong Kong, Beijing and Shanghai. And to enable easier mobility of talent, the Chinese government has built a high-speed train line linking Guangzhou, Shenzhen and Hong Kong, further integrating these cities and cutting commuting time.

The role of private and public sectors

The proliferation of smart cities presents an opportunity to create infrastructure for a city cluster. In this case, the technology companies that occupy these cities can use their know-how to enable them. In Silicon Valley, public-private partnerships make cities more liveable and more attractive to corporations and start-ups. For example, tech giant Facebook and start-up Common Networks are providing 5G Wi-Fi to the rural suburbs of San Jose.

The private sector will also be essential in Asia. India’s 100 Smart Cities initiative is born from a need to cope with rapid growth in the urban population. But only 16% of India’s cities are able to self-fund the projects, according to Deloitte.

This creates opportunities for real estate and technology companies to work together. For example, Indian developer M3M has reportedly signed a deal with Swedish engineering firm Urban Systems urbs AB to develop India’s first climate-neutral smart city project in Gurugram. If successful, it could pave the way for similar projects across the National Capital Region around Delhi.

Cities with strong innovation capabilities and concentrations of talent have outperformed economically over the last two decades, revealing a robust link between innovation, talent-rich cities and real estate performance.

If a city gets it right, it will achieve economic growth by attracting investors and companies. Fukuoka is a good example. Driven by mayor Soichiro Takashima, Japan’s fastest-growing city in terms of population has a burgeoning tech start-up scene. It wooed start-ups from Tokyo through tax incentives, investing in infrastructure and creating spaces for new companies. The city is now expanding its reach, with its rail network extending to serve a wider population. Physical and technological infrastructure combined with access to talent and liveability will allow more city clusters to emerge in Asia. Corporations and investors should act now before the maps are drawn.

• The article originally appeared in the Q1 2020 edition of Modus APAC