Network Effect Increasing Resilience of Individual Economies

The leading cities in Asia Pacific, Middle East and Africa are closely connected as a dense network and this bodes well for a stronger and faster economic recovery. With China and India estimated to see real GDP growth exceed over 10% and around 7% respectively for the fiscal year 2010/2011, growth in the other markets is expected to be facilitated by the strong catalyst effects from these regional powerhouses.

Based on the latest MasterCard Worldwide Insights report Networked Cities in Asia Pacific, Middle East and Africa, the “increasing returns” phenomenon will kick in when growth begins to resume in the region. As cities leading the recovery exert strong catalyst effects to facilitate growth in the slower moving cities, the slower moving cities will pick up speed and in turn provide stronger support to the fast moving cities to grow further. This positive network effect will benefit the region, making it more resilient.

“A dominant feature of today’s global economy is its dynamic and ever- expanding network of cities that are increasingly connected to one another economically, socially, culturally and technologically. Economic growth and business development in one city in the network can serve as a trigger for new activities in other cities, just as we are seeing how the robust recovery in China is helping fuel other economies in the region. This is a demonstration of the strong network effect, and this network effect will continue to be important in lifting these economies” said Dr. Yuwa Hedrick-Wong, economic advisor, Asia Pacific, MasterCard Worldwide.

Two aspects of connectivity - air passenger traffic and air cargo tonnage - were examined in the report to shed light on the density of the region’s network. Data from the International Civil Aviation Organization was analyzed, with key findings as follows:

- Hong Kong, Dubai and Singapore rank tops in terms of air passenger traffic, followed by Tokyo, Seoul and Bangkok.

- Hong Kong, Seoul, Tokyo are the top cities in terms of air cargo. Shanghai and Singapore come in fourth in the category and Dubai ranks fifth.

- In terms of the top air traffic connections of leading cities in the region:

- China: Shanghai and Beijing are most closely connected to Hong Kong, Tokyo and Seoul; Chongqing is most closely connected with Singapore, Hong Kong and Seoul while Tianjin is most closely connected with Seoul, Nagoya and Hong Kong.

- India: Delhi and Mumbai are closely connected with London and Dubai; Delhi is also closely connected to Kathmandu in Nepal and Mumbai to Singapore. Bangalore is closely connected to Dubai, London and Singapore.

- Northeast Asia: Tokyo, Osaka and Seoul are closely connected to each other and to Shanghai; Taipei is closely connected to Tokyo, Hong Kong and Bangkok.

- Southeast Asia: Singapore is most connected to the other cities in Southeast Asia; Hong Kong is one city outside Southeast Asia that is closely connected to Bangkok, Manila and Singapore, while Manila is also closely connected to Seoul.

- Australia: Sydney and Melbourne are both closely connected to Singapore, Hong Kong and Auckland.

-  Middle East: Dubai is most closely connected with London, Kuwait and Doha; Cairo is closely connected with Jeddah, Dubai and Kuwait while Beirut is closely connected to Dubai, Kuwait and Paris.

- South Africa: Johannesburg is closely connected to London, Dubai and Windhoek.

Summarizing the impact of this, Dr. Hedrick Wong said, “The more densely cities are connected in the network, the more powerful they are as catalysts to each other’s growth and development. These network effects are important because it is a positive-sum game. As the region continues to grow in its connectivity, individual economies will become more resilient and stronger.”

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