The economic power of mega cities

LAHORE: Major global industrial cities like London, Tokyo, New York, Frankfurt, Copenhagen and Shanghai generate substantial revenue contributions to their respective national GDPs. However, mega cities in South Asia including Pakistan underperform due to absence of several factors that influence revenue generation.

If we look at performance of mega cities in developed cities it would be found that these cities generally contribute a significant portion of the GDP due to their concentration of economic activities.

The revenue generation of mega cities is influenced by several critical factors, which include cities like New York and London benefit from diversified economies, housing industries such as finance, technology, manufacturing and trade. Efficient infrastructure and global connectivity (ports, airports, and IT infrastructure) help in trade and attract international businesses. A skilled and educated labour force contributes to innovation, entrepreneurship and higher productivity in cities like Tokyo and Frankfurt. Cities with established financial centres (London, New York Shanghai) attract investments and corporate headquarters. Business-friendly regulations and tax policies, as seen in Copenhagen, create a conducive environment for growth.

London generates about 23 per cent of the UK’s GDP. London’s financial services, technology sectors and international trade play crucial roles. Tokyo contributes approximately 19 per cent of Japan’s GDP.

Tokyo’s economy benefits from advanced manufacturing, finance and technology. New York City accounts for 10 per cent of the US GDP. The city is the leading financial hub, with strong sectors in finance, real estate and media. Frankfurt accounts for roughly 8.0 per cent of Germany’s GDP, being the financial hub with major banking headquarters. Copenhagen generates around 25 per cent of Denmark’s GDP, supported by services, finance and pharmaceuticals. Shanghai contributes around 3.5 percent to China’s GDP.

It’s a critical hub for manufacturing, trade, and finance.Comparatively, mega cities in South Asia do not yet reach the same level of revenue generation as a percentage of GDP due to various structural and economic differences.

South Asian cities like Karachi, Mumbai, and Dhaka have significant contributions to national GDPs, but their revenue generation as a percentage of GDP remains lower than global megacities due to structural limitations. Factors such as economic diversification, modern infrastructure, ease of doing business, and skilled workforce development can help bridge this gap.

Estimates suggest that Karachi contributes around 20 per cent of Pakistan’s GDP. Karachi serves as the economic backbone with its port facilities and manufacturing sectors. The contribution is very low compared with its potential and 80 per cent of the country’s port activities originate from this city. It is Pakistan’s financial capital and the auto and pharmaceutical industry is commissioned in the city. Lahore contributes approximately 11-12 per cent of Pakistan’s GDP, being a hub for trade and industry. Faisalabad generates roughly 5.0 per cent of Pakistan’s GDP, heavily supported by its textile industry. Indian cities are not better either. Mumbai contributes around 7.0 per cent of India’s GDP, with major contributions from finance, entertainment and commerce. Kolkata’s contribution stands at around 4.0 per cent of India’s GDP, focusing on trade, logistics and manufacturing. Chennai (Madras) generates 3.5 per cent of India’s GDP, due to its strong automotive and IT sectors.