The business of creating Asia's smart cities

20 Oct 2016

Smart cities have become a hot topic in recent years due to increased urbanisation and rising global pressures to remain economically viable in the face of scarce resources.

With urbanisation comes a host of problems for cities and its residents. Major cities worldwide are filled with ageing and overused infrastructure, rampant traffic congestion, and air and noise pollution. Countries are turning to smart innovations to make cities more liveable, and to accommodate further growth while also tackling environmental and societal constraints.

And nowhere is this imperative felt more than in Asia.

The United Nations (UN) reported that two-thirds of the world’s population will live in urban areas by 2050, and Africa and Asia will be the fastest-growing continents. Already home to 53 percent of the world’s urban population, Asia will see this proportion expanding to 64 percent by 2050.

Building a smart city

Pressures aside, the need to adopt smart city innovations presents countless business opportunities for companies looking to tap into emerging market segments – especially in the areas of digital government services, efficient energy use and renewables, water and waste management, transportation, education and healthcare.

Smart cities are cities that leverage data and technology to deliver services and improve the well-being of citizens while staying sustainable. They address challenges and make improvements to important functional segments of a city through a network of connectivity across systems, devices and objects (known as the Internet of Things).

Take the Songdo International Business District for instance: it is a revolutionary smart city built from scratch on 600ha of reclaimed land just southwest of Seoul. In striking contrast to Seoul’s densely populated cityscape, 40 percent of the land in the business district is allocated to green space, complete with bicycle lanes, passenger pavements and waterways. The city runs on solar and wind power, along with energy generated from human waste processed in a co-generation plant. A central IT network also manages energy usage of every building, complemented by windows that reduce incoming sunlight, LED lights and water-cooled air conditioning systems – reducing energy consumption in buildings by 30 percent.

Songdo is the first district in South Korea to receive Leadership in Energy and Environmental Design (LEED) accreditation, and speaks volumes about the country’s commitment to promote sustainable growth through technological innovations.

While many established and emerging cities may not have the luxury of building from scratch, governments in Asia have been looking at ways to implement technologies and innovations to steer cities towards a more energy-efficient and connected future.

IHS predicts there will be at least 88 smart cities worldwide by 2025, and Asia-Pacific will account for 32 of them. IHS defines smart cities as cities that “have deployed – or are currently piloting – the integration of information, communications and technology solutions across three or more different functional areas of a city”.

Companies in Europe and the US have been actively identifying key business opportunities to support Asia’s next wave of smart city technologies. 

“The potential of Asian cities will continue to rise,” says Arun Kumar, Assistant Secretary for Global Markets at the U.S. Department of Commerce and Director General of the U.S. and Foreign Commercial Service.

“With economic growth rates higher than global averages, many Asian and ASEAN cities present economic opportunities for companies in the US.”

Asia’s burgeoning smart city technologies

Singapore was chosen to launch International Trade Administration’s global guide “Smart Cities, Regions & Communities: Export Opportunities” because it is deemed a smart city “to which others can aspire”, according to Kumar.

“Singapore is in heart of ASEAN and close to India, which are both key smart city regional opportunities for US companies,” he adds.

He thinks Singapore’s NEWater technologies deployed by national water agency PUB is an exemplary smart city initiative. As a country with scarce water resources, Singapore has been actively finding ways to develop innovative water management and treatment systems to meet current and future demands.

NEWater is high-grade, reclaimed water treated and purified using advanced membrane technologies and ultra-violet disinfection to provide citizens clean and safe water for consumption. The NEWater plants can meet up to 30 percent of the country’s water needs, and is expected to meet up to 55 percent of water demand by 2060.

Beyond water management, Singapore has also announced a partnership with Microsoft to explore next-generation digital government services through the use of intelligent software programmes known as ‘chatbots’. These chatbots will simulate human behaviour, and function as digital representatives for select services, conversing and assisting users with online applications.

This project titled “Conversations as a Platform” will be implemented in three phases, and explore potential future scenarios that cater to Singapore’s multi-lingual and multi-generational population.

Beyond Singapore, other cities in Asia are also embracing smart city innovation.

In Bandung, Indonesia, city operations have been enhanced thanks to an IBM command centre launched in 2015. Video analytics automatically notify security personnel if irregular activities are detected on the city’s CCTV systems. The city uses a GPS tracking system to monitor traffic or track assets such as public buses, ambulances or fire trucks. Public safety has also been improved by way of a security app called Panic Button that alerts the command centre when citizens tap on it.

Further north, Japan’s Fukushima disaster in 2011 prompted the Tokyo Metropolitan Government to enforce the Tokyo Emergency Power Saving Program, which included lowering brightness standards of lights, changing to LED lighting and keeping appliances on energy-saving mode. Tokyo has also been active in the use of renewable energy sources such as solar power and hydrogen.

Meanwhile, Vietnam’s Ho Chi Minh City is interested in developing smart city capabilities, Kumar points out. The government has been in talks with the U.S Commercial Service for US businesses in the design, energy, ICT, transportation, water and waste sectors to help build infrastructural and technological capabilities for the city.

“This is an example of the important collaboration and convening of national and city governments with industry – in this case, US industry – on starting smart city development with proper planning and strategy,” he says.

Opportunities for MNCs in Asia’s smart city space

Singapore’s partnership with Microsoft and Bandung’s collaboration with IBM are clear examples of how MNCs leveraged business opportunities in Asia’s smart city innovations.

Consulting firm Frost & Sullivan identified four roles that businesses can take on in a smart city: as integrators, network service providers, pure-play product vendors and managed service providers.

Integrators are end-to-end service providers that ease integration of multiple sectors; network service providers offer connectivity; pure-play product vendors provide the hardware and asset products that enable such connectivity; and managed service providers can be used for 24/7 monitoring and management services.

Global smart city revenue is expected to increase from US$36.8 billion in 2016 to US$88.7 billion by 2025, according to Navigant Research. The smart city market size is also estimated to grow to US$758 billion by 2020, presenting a burgeoning market opportunity for both local and global businesses looking to contribute to the growth.

Smart city initiatives, however, are not without challenges. The transformation into a smart city requires more than investment and access to capital; it needs appropriate design and technology standardisation, along with planning and collaboration across departments and industries.

Kumar believes MNCs are well-equipped to solve challenges pertaining to smart city development, but only through collaboration with other MNCs and many SMEs.

“Development of smart infrastructure projects depends on innovative solutions that MNCs don’t always possess. They are successful when and if they leverage an ecosystem of private partners, large or small, to deploy the best technology solutions to increase government efficiency and, more importantly, to improve the quality of life for a city’s residents,” he explains.

Private-public partnerships are also critical in this space, says Kumar. Both private and public sector investments are needed to jump start smart city initiatives, with the need for public funds to seed initial projects to mitigate early risks.

“There is a large pool of capital that is not being fully deployed to fund smart city and smart infrastructural projects across the world, including in Southeast Asia. Focused funding of these projects requires strong financial mechanisms and assurance for private sector capital to be unleashed,” he adds.

As Asian cities look towards technology and innovative ways to address urbanisation challenges and reduce environmental impact, the public and private sectors will both have important parts to play in ensuring smart city projects are powerful and executable ideas for transformation.

“Although challenges remain, the region is rife with opportunities for deeper government and industry collaboration in the smart infrastructure and technology space,” notes Kumar.