Today, over half of the global population lives in urban areas. And that proportion is expected to rise to 68 percent by 2050. In Asia, home to thirteen megacities
Amid decreasing resources and finite space, cities in Asia are trying to tackle how best to make cities more efficient while limiting that impact on the environment. These challenges require effort from both the public and private sectors as they leverage technology to create solutions and make cities more intelligent.
What is a Smart City?
There are varying definitions of what a 'Smart City' is. According to the OECD
The idea of a Smart City has been constantly evolving. Dr. Ayesha Khanna
They are built on the backs of public-private partnerships, with private enterprises providing the expertise and funding that governments require to carry out innovative solutions.
“It's really going back to the basics and thinking, 'What is the specific problem that a citizen faces...from the moment that a citizen is born to the moment that they cease to exist?'" Khanna says.
“How can we make [their life] higher quality, more efficient and more sustainable? That is really the Smart City people talk about now."
Pillars that make a Smart City in Asia
Jasmine Duan, investment strategist at RBC Wealth Management Asia based in Hong Kong, highlights one reason why the topic on Smart Cities is very broad. She offers up the idea that perhaps the definition and scope for a Smart City differ from country to country.
“The Smart City development process is customized because each city has a different culture and a unique set of needs," she says, adding that technology will then have to be aligned with the goals of the governments and citizens.
When it comes to Asia, Duan says “cities [in the region] are characterized by their large population and high population density," and the rapid rate of urbanization has also led to some infrastructure challenges.
She breaks down the concept of a Smart City in Asia into four key pillars:
- Smart governance: Adoption of smart technologies by city leaders to deliver public services that meet the daily needs of citizens and businesses.
- Smart services: Connecting different government agencies with businesses and the public through technology, to improve transparency and service efficiency.
- Smart economy: An environment based on innovation that fosters growth and industry development and creates local and global trade linkages.
- Smart environment: Efficient management of resources through innovative solutions that aim to balance environmental sustainability, energy use and resource allocation.
The global market for Smart Cities is expected to create business opportunities worth over US$2 trillion
Duan notes that the growth rate for Smart City development, in general, is exceptional. Asia's smart city market, in particular, is projected to generate many opportunities “due to their rapid urbanization and rising demand for energy, infrastructure and mobility solutions,"
Smart Cities in a post-pandemic world
The COVID-19 pandemic has also highlighted the benefits of a digitalized city.
“Although COVID-19 is largely a health crisis, it has disrupted the ecosystems and infrastructure of cities," Duan says.
She adds that smart technologies can offer solutions for a post-pandemic world. “For example, a digital contact-tracing system plays a critical role in a pandemic, empowering citizens with the knowledge of impacted areas and also promoting safer urban movement."
Duan says China's QR health code app, for example, demonstrates how the Chinese government was able to accelerate the collection and sharing of data from both public and private sources.
For those tired of the hustle and bustle of city life, the pandemic prompted them to wonder whether living in a city is even necessary - in turn, raising the question of what this means for the cities of tomorrow.
But Khanna is not worried about a mass exodus.
“Cities will continue to attract talent and capital," she says, adding that the appeal of research and development access, test beds to work on and investment money will never diminish.
People's desire for short commutes was also exacerbated by the pandemic, Khanna says. Having what we need readily accessible within 15 minutes - whether it is our child's school, our doctor or even the grocery store - has become more important, according to Khanna. We could eventually see people living in multifunctional spaces, buildings with terraces that can receive drone deliveries, and smaller hospital clinics nearby that use AI for triaging.
Addressing sustainability through the built environment
Asia's urbanization boom is happening at a time when natural resources are increasingly limited and consumption outpaces production.
The current unsustainable use of resources also comes at a price — with resource extraction and processing leading to over 90 percent
Duan notes that many cities in Asia are factoring in environmental protection and conservation in their smart-state development plans.
“They are definitely using the help of technology to improve energy efficiency, reduce carbon emissions and promote the use of renewable energy," she says.
Listing Hong Kong as an example, Duan points to a variety of initiatives undertaken by the city's government to turn the densely populated area into an intelligent city.
“We are seeing the conservation of buildings, such as [the] construction of more green buildings or retrofitting existing ones with smart technologies." Other initiatives include increasing the use of remote sensors to monitor pollution and introducing a waste-charging scheme that encourages people living in Hong Kong to recycle and reuse, instead of relying on landfills.
But Khanna cautions that as “we live amongst machines, we have to take the best that they offer, but we also have to mitigate all the risks."
With the enormous amount of personal information required to facilitate millions of lives, issues around data become inevitable points of contention, Khanna says.
She notes that the approach to Smart Cities has evolved from a tech-centric view to a more human-centric one. She believes data governance has matured alongside the explosion in information. However, Khanna goes on to describe how many of the ethical concerns are being addressed through education, regulatory frameworks and data localization.
Navigating the Smart City opportunity
When it comes to investing in Smart Cities, Duan sees technology as having the potential to address sustainability challenges rather than creating them.
“Companies at the forefront of developing technological solutions may offer attractive, long-term investment opportunities," she adds. And investment can be done both at the stock and fund level.
Duan points out that investing through funds may be a good way to start for those who may not have the time to analyze a specific company.
However, she says technologies that are disruptive usually come with higher risk – in terms of both the technical and financial challenges for these companies.
Incorporating Smart Cities as an investment theme may also carry higher-than-average risks, and therefore should be part of a well-diversified portfolio.
Duan explains that it will take time for people to adapt to these cutting-edge or disruptive technologies. Therefore, the growth of companies who develop these technologies may not be linear and earnings growth could fluctuate.
“For those with [a] higher risk appetite and a longer-term investment horizon, investing in tech companies that develop Smart City solutions may be a good source of return for their portfolio," Duan adds.
Khanna describes a trend she is seeing where a government entity supports, contracts and funds these technology companies and allows their solutions to function with the city as a testbed. She says this is the essence of a Smart City program done well.
“There is a great opportunity for the public to not only take advantage of the Smart City infrastructure available but also invest in and partake in these entrepreneurial ventures," she points out.
For Khanna, the quintessential Smart City is one where public and private sectors come together to solve sustainability challenges through innovation.
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