10 Facts about Emerging-market Cities 46%

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1 10 Facts about Emerging-market Cities Chart 1 - World s population in emerging-market cities 1. Urban population is soaring. Over 90% of urban growth is taking place in the developing world, where an estimated 70 million new residents migrate to urban areas each year. The rural-urban migration trend that has already occurred in many Latin American countries is now accelerating in other parts of the world. For instance, during the next two decades, the urban population of the world s two poorest regions South Asia and Sub- Saharan Africa is expected to double. Urban population in emerging markets represents a concentrated opportunity. Cities comprise large markets and can provide an entry point into national markets % Emergingmarket Cities % Emergingmarket Cities 2. Economic growth is closely linked with urbanization. The population density associated with cities is an important factor for economic success, since large urban areas catalyze innovation and increase economies of scale. Emerging-market cities are following the trend seen in developed markets cities, which became wealthy as they urbanized. 3. Nearly half of the world s population will live in emerging-market cities by Today, one-third of the world s population, 2.6 billion people, live in emergingmarket cities. By 2030, emerging-market cities will hold 46% of the world s population, while only 12% will live in developed-market cities. Sixteen out of the world s 25 largest megacities 1 are in emerging markets, and the total Companies can benefit from the urbanization trend in emerging markets through an ability to target many different market segments in a smaller geographic area. population of the top 25 emerging-markets cities is roughly the same as that of the United States. Two of the fastest growing megacities in the world - Lagos, A collection of emerging-market megacities represents a market that rivals the United States or Europe in size. These rapidly growing cities will increasingly demand a wide variety of goods and services. Nigeria and Dhaka, Bangladesh - have doubled in size since Dhaka will be larger than Mexico City, Shanghai or New York by Megacities are defined as cities with a population of more than 10 million in their metropolitan area. 10 Facts About Emerging-market Cities 1

2 Lagos, Nigeria Dhaka, Bangladesh Megacities like Lagos and Dhaka have doubled in size in the past 20 years 4. Consumption in emerging-market cities is on the rise. According to a recent report from the Boston Consulting Group, emerging-market cities will account for 30% of global private consumption by 2015, with private consumption growing at a rate of 11% per year. This growth rate is in part a reflection of increasing disposable income and wealth concentration in emerging-market cities. By 2025, there will be more urban households in emerging-market cites with income above $20,000 than in developed markets. Chart 2 - Top 25 emerging-market cities (map on following page) Rank City Est. Population 2010 (000) Est. Population 2025 (000) Est. GDP in 2010 ($bn at 2005 PPPs) As consumers in these cities become more influential, multinationals will benefit from understanding and addressing their needs with new products and services. Est. GDP in 2025 ($bn at 2005 PPPs) Est. GDP PPP per Capita in 2010 (at 2005 PPPs) 1 Mumbai 1 20,072 26, $11,766 $22,513 2 Sao Paulo 1 19,582 21, $21,513 $36,494 3 Mexico City 1 19,485 21, $21,607 $35,461 4 Delhi 1 17,015 22, $11,111 $21,424 5 Shanghai 1 15,789 19, $16,769 $35,648 6 Kolkata 1 15,577 20, $7,558 $14,494 7 Dhaka 1 14,796 22, $5,946 $9,766 8 Buenos Aires 1 13,089 13, $29,627 $47,284 9 Karachi 1 13,052 19, $6,652 $10, Cairo 1 12,503 15, $12,786 $21, Rio de Janeiro 1 12,171 13, $17,931 $30, Beijing 1 11,741 14, $16,097 $34, Manila (Metro) 1 11,662 14, $14,006 $21, Lagos 1 10,572 15, $3,748 $6, Istanbul 1 10,530 12, $18,766 $30, Moscow 1 10,495 10, $32,575 $51, Jakarta 2 9,703 12, $10,553 $18, Guangzhou 2 9,447 11, $17,266 $37, Kinshasa 2 9,052 16, $2,122 $2, Lima 8,375 9, $14,077 $22, Bogota 8,320 9, $12,975 $20, Tehran 8,221 9, $16,741 $25, Chennai 2 7,559 10, $9,903 $18, Wuhan 7,542 9, $7,472 $10, Tianjin 7,468 9, $11,260 $23,585 1 Classified as a megacity 2 Will be a megacity by 2025 Source: Vital Wave Consulting Est. GDP PPP per Capita in 2025 (at 2005 PPPs) 10 Facts About Emerging-market Cities 2

3 Chart 3 - Map of the top 25 emerging-market cities Moscow Mexico City Bogota Istanbul Cairo Lagos Tehran Beijing Delhi Wuhan Karachi Dhaka Mumbai Kolkata Chennai Tianjin Shanghai Guangzhou Manila Kinshasa Jakarta Lima Rio de Janeiro Sao Paulo Buenos Aires Nearly half of Top-25 emerging-market cities are in BRIC countries 5. Midsized emerging-market cities should not be overlooked. Over the next 15 years, 400 midsized cities in emerging markets those with less than 2 million inhabitants will generate more growth than developed markets and the largest emerging-market megacities combined. This will amount to over 40 percent of global economic growth. Midsized cities, such as Xi an, China and Fortaleza, Brazil, are often overlooked in favor of better-known cities like Shanghai and São Paulo, but they may offer larger opportunities in a less intense competitive environment. Managers who take a closer look at some of these mid-sized cities might find a diamond in the rough, and discover market opportunities that give them a competitive edge. 6. Passenger travel through airports in emerging-market cities is skyrocketing. In 2000, there were no emerging-market airports on the list of the world s 20 busiest airports. Today, emergingmarket airports claim five positions on this list, whereas the US has lost seven spots. Beijing s international airport, which was not even among the 30 busiest in 2000, jumped to the number 2 position by All of the emerging-market airports These major shifts over a relatively short time span indicate that emerging-market cities are rapidly becoming hubs of commerce. in the top 20, including Bangkok and Jakarta, are located in Asia. Moreover, in terms of total passengers, the city-to-city air connections of Beijing-Shanghai, São Paulo-Rio de Janeiro, and Mumbai-Delhi are among the ten busiest in the world. 10 Facts About Emerging-market Cities 3

4 Chart 4 - World s busiest airports and 2010 World's Busiest Airports Atlanta Hartsfield-Jackson 1 Atlanta Hartsfield-Jackson 2 Chicago O'Hare 2 Beijing Capital 3 Los Angeles International 3 Chicago O'Hare 4 London Heathrow 4 London Heathrow 5 Dallas-Fort Worth 5 Tokyo International 6 Tokyo International 6 Los Angeles International 7 Frankfurt 7 Paris Charles de Gaulle 8 Paris Charles de Gaulle 8 Dallas-Fort Worth 9 San Francisco International 9 Frankfurt 10 Amsterdam Schiphol 10 Denver International 11 Denver International 11 Hong Kong International 12 Las Vegas McCarran 12 Madrid-Barajas 13 Minneapolis-Saint Paul 13 Dubai International 14 Seoul Gimpo 14 New York JFK 15 Phoenix Sky Harbor 15 Amsterdam Schiphol 16 Detroit 16 Jakarta Soekarno-Hatta 17 Houston George Bush 17 Bangkok Suvarnabhumi 18 Newark Liberty 18 Singapore Changi 19 Miami International 19 Guangzhou Baiyun 20 Madrid-Barajas 20 Shanghai Pudong Developed-market airports Emerging-market airports 7. China dominates rankings of emerging-market cities on IT connectivity. The top 10 emerging-market cities ranked by IT connectivity and education are all Chinese. This result comes in part from high nationwide standards for education and very high numbers of broadband and mobile phone subscribers throughout the country. In China and elsewhere, forward-thinking municipal governments are seeing access to broadband as a key driver of economic growth and have invested heavily in their broadband infrastructure. For instance, ambitious broadband infrastructure projects are currently in the works in Johannesburg, Rio de Janeiro and Bogota attempts to transform these locations into digital cities. While emerging-markets cities are engines of regional growth, their potential is shaped by the market environments of the countries in which they are located. 10 Facts About Emerging-market Cities 4

5 8. Emerging-market cities are economically diverse. Cities in Latin America and sub-saharan African have some of the highest rates of urban inequality in the world. Conversely, cities in Asia have comparatively lower rates of urban inequality, with There is not a one-size-fits-all strategy for emerging-market cities. Understanding distinct customer segments within cities helps to open up new opportunities, such as increasing BoP marketing in cities with high levels of inequality. Beijing boasting the lowest rate of urban inequality in the world. This contrast illustrates the fact that not all emerging market cities are created equal. Each city s demographic characteristics are unique, and consumers within those environments differ from city to city. 9. Emerging-market cities represent market opportunities and risks. Shanghai was the only emerging-market city to make the list of the top 40 cities designated as worldwide center of commerce in a recent study by MasterCard Worldwide. The Worldwide Centers of Commerce Index, which ranks cities by economic, social and political indicators, suggests that managers should still tread with caution when dealing with emerging-market cities. Although emerging-market cities are experiencing high rates of population and economic growth, they might lack the legal and political framework or economic stability that make more established markets so attractive for conducting business. In many emerging-market cities, such as in Rio de Janeiro, poverty and wealth coexist in close proximity While there are tremendous growth opportunities in emerging-market cities, there are hazards as well that need to be mitigated, such as ease of doing business and livability. 10. Booming infrastructure investment in emerging-market cities signals growth. The infrastructure investment in emerging-market cities is forecast at $30 trillion to $40 trillion cumulatively over the next 20 years. Investment in infrastructure is also a main driver of population growth, especially in Asia and Africa. This investment feeds economic growth, since, not surprisingly, the construction and maintenance of transport systems determine whether or not cities will succeed economically. In many cities infrastructure is not keeping up with population growth and this represents Infrastructure is key to growth. Cities that are investing in different types of infrastructure may represent more favorable growth environments for multinational companies. one of the biggest challenges to doing business in these markets. In Latin America, investment in information technology is the most important driver for population growth. Emerging markets will account for over half of the total infrastructure spending in the next two decades 10 Facts About Emerging-market Cities 5

6 About Vital Wave Consulting Vital Wave Consulting engages multinational organizations to increase revenues and maximize value at the global, regional and local levels in emerging markets. As a world leader in emerging-market business growth, the company has executed projects across a broad range of high-growth industries and customer segments, including small and medium business (SMB), enterprise, public sector, and consumer segments. Drawing on decades of direct experience in developing countries, proven research and analytical methods, and best-in-class global and local partnerships, Vital Wave Consulting helps its clients to achieve scale and growth in emerging markets. Call or visit vitalwaveconsulting.com to learn more. Vital Wave Consulting 555 Bryant St. #226, Palo Alto, CA Tel: (US) Fax: (US) info@vitalwaveconsulting.com 10 Facts About Emerging-market Cities 6