These are Asia-Pacific's cities of the future

In January 2016, Google established an engineering hub in Singapore to develop software for its Android operating system. In doing so, the company created 1000 jobs and spent an estimated $1.1bn.

Google’s Singapore operation is an example of the billions in foreign direct investment (FDI) that flow into the Asia-Pacific region every year. Indeed, the region accounted for more than 30% of global FDI between 2012 and 2016 – more than any other region.

“With its central location in Asia, diverse demographic and a strong pool of technical talent, Singapore is well suited to be a key engineering hub,” said Google.

Singapore’s ability to attract this type of investment is one of the reasons it has held onto the top spot on the fDi Intelligence Asia-Pacific Cities of the Future 2017/18 ranking.

For the ranking, fDi Intelligence, a division of the Financial Times, looked at 163 locations and assessed them according to five categories: economic potential; business friendliness; human capital and lifestyle; cost effectiveness; and connectivity.

Singapore attracted the highest number of FDI projects in the Asia-Pacific region in the five years to 2016.

It boasts an advanced economy and is renowned for its well-developed service industries. It has a high GDP per capita of more than $87,000 at purchasing power parity and a relatively low unemployment rate of 2.1%, says the report.

Singapore also ranked first for ‘business friendliness’. It only takes two and a half days for companies to establish an operation in the city, and it has the best credit rating and lowest country risk score of all Asia-Pacific cities, the report says.

Singapore performed well on a range of economic indices, including the Economic Freedom, Strength of Investor Protection Index and Corruption Perception Index.

Second place went to Tokyo. Japan has the highest proportion of people using the internet of all Asian countries. This high level of connectivity helped give its capital city a boost in the ‘connectivity’ and ‘business friendliness’ categories.

Major investors in Tokyo include the Indian conglomerate Tata Group, which created an estimated 400 jobs in its shared services centre to provide IT infrastructure services, and US-based software company Symantec, which created more than 300 jobs in an expansion of its Tokyo security operations centre.

US-based Cisco, which opened an innovation centre in the city, creating over 200 jobs, credited its investment decision to Tokyo’s position as a global technology leader, according to the report.

Hong Kong’s accessibility helped it climb to third place in the ranking. More than 150 international destinations can be reached from Hong Kong International Airport. The city also scored highly because of its well-developed transport and ICT infrastructure.

Chinese cities ride high

China has 14 cities of over 5 million people, and two are in the top 10 in the fDi ranking: Shanghai in 5th place and Beijing in 7th.

Shanghai is China’s most populous city, and is Asia-Pacific’s second biggest FDI destination after Singapore. The more than 1100 FDI projects announced between 2012 and 2016 spanned services, heavy industry and hi-tech industries.

“As President Xi Jinping seeks to establish China as a more open economy and a defender of globalization, rules designed to curb FDI have been lifted with the aim of making China more open to the world.

“Chinese cities could be the ones to watch in our next ranking in 2019,” concludes the report.

FDi Markets, a service from the Financial Times, analyses investment flows and trends around the world.