Rapid urbanisation is fuelling growth in Southeast Asia. The region’s urban areas are currently home to one third of its population and contributes to more than two thirds of its collective gross domestic product (GDP). As this trend continues, governments in the region would have to cater to future demands and challenges that accompany this unprecedented pace of urbanisation.
The implementation of smart technologies in cities within the region could provide us with the answers to present day as well as future urban woes. According to a recent report by the McKinsey Global Institute (MGI), digital solutions could improve quality of life within Southeast Asian cities by some 30 percent.
“Urbanisation can propel Southeast Asia to a higher level of economic and human development, but only if growth is managed well,” said Jonathan Woetzel, Senior Partner and Leader of McKinsey’s Special Cities Initiative. “Cities need to act now to address growing environmental stresses, particularly to combat climate change and improve their resilience.”
However, when push comes to shove, smart city development doesn’t fall entirely under the purview of governments. Private sector contribution is a critical component that is required for the building of future sustainable cities. The MGI estimates that market segments that could benefit from private sector involvement like smart mobility applications and built environment industries could hold opportunities worth more than US$96 billion.
The report highlighted three key areas that could shape the strategies of public and private initiatives towards building future smart cities in the region.
A robust strategy
Every smart city ambition begins with an idea. The articulation of that idea into a strategic vision and long-term goal is central to the success of the smart city in question. Herein, governments must engage with the general public to secure a community buy-in of its smart city goals. Local governments should then outline a comprehensive execution plan and take a data-driven approach towards measuring progress.
At this stage, companies with aspirations to become urban solution providers can pair their technology with the existing smart policies at hand. They would have to tailor their solutions to the design of the smart city. This includes engaging with local leaders and the community at large. Most importantly, they must be forthright in their engagements with the local government so as to fully understand their constraints and reach a middle ground when implementing smart solutions.
Companies would also need to be able to anchor their offerings and their value propositions to the needs of residents. In doing so, they must ensure that their smart solutions are actualised and not merely headline gimmicks. Simple and scalable solutions tend to gain more traction and ultimately enhance value for end users and solution providers alike.
Source: McKinsey Global Institute
Prioritising developments
The main ingredient necessary for a functioning smart city is data. No longer can cities consider data as costly capital expenditures. Instead, they must be viewed as necessary operational investments even when fiscal resources are scarce. In such a case, sustainable models can be devised to fund the data collection process including monetising the data and offering development rights to private sector providers.
Cities with lower income can jump-start their progress by creating open data portals, which make raw data available for private sector innovation. This requires minimal public investment but could serve to improve the quality of life for citizens in the long run. On top of that, cities facing budgetary constraints must prioritise practical technologies over trendy or flashy ones.
“Cities facing tough budgetary choices will have to prioritise the practical over the flashiest new technologies,” said Mukund Sridhar, Partner and Leader of McKinsey’s Infrastructure Practice in Southeast Asia. “Installing digital systems behind the scenes to manage traffic, coordinate networks of hospitals, or cut down on bureaucratic paperwork may yield more impact than highly visible touchscreens on the street.”
Sustainable partnership
Although most critical public delivery services lie in the government’s domain, governments don’t have to act as the sole bastion of smart city solutions. As technological strides are made in terms of service offerings, the traditional roles between government agencies and service providers are slowly being reconfigured.
Hence, the government should provide sufficient space for private companies, foundations and even non-profits to shape the smart city ecosystem. This can be achieved by creating a consortia and inking partnership deals among private firms or between private entities and the government.
Most technology-based startups today have plenty to offer in terms of providing digital platforms, helping integrate existing systems in place as well as facilitating cross-industrial services – all of which can be harnessed to create smarter cities. Besides that, such activities also help develop the smart technology industry in the long run thus improving technical capabilities which can then be co-opted in the future.
Smart city development is no longer a pipedream but is fast setting the benchmark of how urban life should look like in the next few decades. This revolution in urban living is showing no signs of slowing down, and Southeast Asian governments must be quick to adopt to this trend or risk losing out on a brilliant opportunity.
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