From 2003 to 2009, FDI enjoyed year-on-year growth until suffering the effects of the global financial crisis. A slight recovery led to a peak in global FDI in 2011, but this has been followed by a period of stagnation and slight decline. During this time, more than one-third of global FDI went to the 130 locations analysed for fDi’s Global Cities of the Future 2014/15 ranking, which pitted regional FDI giants against each other.

Singapore’s software success

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Of the 130 locations analysed, Singapore reigned supreme as fDi’s Global City of the Future for 2014/15. According to greenfield FDI monitor fDi Markets, between 2008 and 2013 Singapore was the number one destination for FDI projects, with almost 2000 recorded. There was year-on-year growth in the software and IT sector between 2009 and 2013, with investment projects increasing on average 16% annually. An attractive investment location, Singapore ranked first for both Economic Potential and Business Friendliness. The city, which enjoys low rates of unemployment and inflation, recorded the highest GDP per capita of all Asian cities in the study.

Complementing these economic factors, high enrolment rates in schools and universities provide a solid future workforce for potential investors. US-based biotechnology company Amgen, which in 2013 broke ground on its $200m manufacturing facility in Singapore, credited its investment decision to the city’s “rich talent pool and friendly business environment”. Doing business is relatively easy in Singapore, which enjoys a low level of corruption and a good credit rating. Starting a business only takes two-and-a-half days and, once established, businesses pay a relatively low corporate tax rate of 17%.

London: educated and connected

London ranked second in fDi’s Global Cities ranking, topping the tables for both Human Capital and Lifestyle and Connectivity categories. The UK capital boasts the highest percentage of university graduates among those of working age in all the locations studied; more than half the population, aged between 25 and 64, are educated to tertiary level. Seven of its universities are ranked among the top 500 universities in the world, providing a well-educated workforce.

London is well served by nearby airports, six within an 80-kilometre range, providing direct access to and from 304 international destinations. Of those companies citing motives for their investment between 2008 and 2013, 46% attributed their decision to London’s proximity to markets and customers. France-based hedge fund company Capital Fund Management opened an office in London in 2013, stating: “London is going to stay the capital of financial trading in Europe. We want to be close to the markets we trade and the clients we serve.”

Hong Kong for infrastructure

Hong Kong ranked third overall, performing well in both the Business Friendliness and Connectivity categories. With a relatively low corporate tax rate of 16.5%, low levels of corruption and a high degree of economic freedom, it is not surprising that 101 expansion projects were recorded in Hong Kong between 2008 and 2013. 

For fDi’s Global Cities of the Future 2014/15 ranking, winning locations were heavily focused in Asia and western Europe. However, with an unstable eurozone, a turbulent Middle East and growth slowing in Asia, the world will be watching to see which cities will drive FDI growth in the longer term. International Monetary Fund forecasts suggest that all eyes should be on Africa, with a potential for 7% growth in Nigeria alone in 2015. Could this lead to some new locations rising through the ranks next time? 

Methodology

To create a shortlist for fDi’s Global Cities of the Future 2014/15, the fDi Intelligence division of the Financial Times collected data using the specialist online tools fDi Markets and fDi Benchmark.

The list of 130 locations was drawn up to include the top 100 locations in terms of inward FDI projects on fDi Markets, plus any additional locations in the top 15, as classed for each region, not in the original list of 100 locations. Data was then collected for these 130 locations under five categories: Economic Potential, Business Friendliness, Human Capital and Lifestyle, Cost Effectiveness and Connectivity. Locations scored up to a maximum of 10 points for each datapoint, which were weighted by importance to the FDI decision making process to compile both the subcategory rankings as well as the overall Global Cities of the Future 2014/15 ranking.

In addition, surveys were collected under a sixth category, FDI Strategy. This category is the only qualitative category, and does not feed into the overall result. For this category there were 44 submissions – locations submitted details about their strategy for promoting FDI, which was then scored by fDi’s judging panel. In previous rankings, FDI Strategy had been included in the overall ranking, however, in order to separate totally qualitative and quantitative data, we chose to list FDI Strategy as a standalone ranking.

Cities in the study were categorised according to population. In total, 24 cities were classed in the Megacities category. This included locations with an urban zone population greater than 10 million. In addition, 62 cities were classed as Major, with an immediate city population greater than 750,000 and an urban zone population greater than two million, or an urban zone population of four million. Large locations (34 locations) had an immediate city population of more than 500,000 and an urban zone population over 1 million, or an urban zone population over 2 million. Small and medium locations made up the remaining 10 locations.

Finally, an Emerging Cities category was determined. The 58 locations in this category had a GDP per Capita figure below $35,000.

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