Davos Agenda

5 ways to speed up the creation of smart cities

Building models are seen at the offices of Alphabet's Sidewalk Labs "smart city" after the company announced it has pulled out of its project due to economic uncertainty in Toronto, Ontario, Canada May 7, 2020.  REUTERS/Chris Helgren - RC2VJG91RKAK

Technology-enabled infrastructure will lead to smarter, greener cities. Image: REUTERS/Chris Helgren

Richard Threlfall
Global Head of KPMG Impact, GCM Sectors IGH Infrastructure, KPMG
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Davos Agenda

This article is part of: Sustainable Development Impact Summit
  • Ushering in an era of technology-enabled infrastructure is proving harder than imagined.
  • Governments need to create a climate in which InfraTech can flourish.
  • Forward-looking legislation and regulation, spanning sectors and countries, can open up opportunities for innovation.

The promise of technology-enabled infrastructure – or InfraTech – is mouth-watering. Smarter, greener cities. Connected transport systems. Efficient, carbon-neutral construction. Higher-performing, longer-lasting assets. Faster responses to pandemics. All powered by ubiquitous 5G wi-fi.

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But getting there is proving harder than imagined. Poor connectivity, cumbersome regulations, insufficient funding and a skills gap are all holding back progress.

Only through a sustained effort on the part of governments, augmented by public-private collaboration and investment, can we accelerate the pace of InfraTech adoption and usher in a new era of digital infrastructure.

Here are five steps that can speed up the process:

1. Governments should take the lead

It’s vital that governments create a climate in which InfraTech can flourish. By taking a coordinated, national and regional approach, they can encourage innovation and take-up of smart transport and construction, green energy and digital government, powered by AI, automation, Internet of Things (IoT), drones and other technologies.

This should require significant investment in high-speed connectivity, cloud computing, sensors and fintech. Given scarce resources, governments will have to focus on those technologies with the highest potential and that can be delivered at scale.

InfraTech readiness and use case
Image: KPMG

Regulation, legislation and procurement guidelines should be flexible and focused on outcomes rather than specific technologies. Furthermore, governments should place less emphasis on specific technologies, and instead encourage technology integration through cross-sectoral solutions.

Digital connectivity is a big priority. This means easing regulatory restrictions to spur investment into “last-mile” connectivity – possibly using tax incentives.

Such an approach, enabled by government, builds resilience and hastens economic recovery from pandemics or other shocks.

2. Adapt to evolving technologies and risks

Technology changes so quickly that the next big thing can soon become obsolete. Governments, therefore, must take a forward-looking approach to technologies and associated risks.

Laws and regulations can struggle to keep up with the pace of change, which could hold back the implementation of exciting new innovations. The answer may be to make any regulatory and procurement guidelines as flexible as possible, focused on future outcomes rather than specific technologies.

It’s a similar story when addressing risks. Those responsible for policy must anticipate how new technology impacts the environment, jobs, social inclusion, and data security. They need to anticipate and manage any fall-out, through strict data protection, environmental standards, and planned re-education.

3. Put data at the centre of policy

Data is the driving force of InfraTech. It has become our most prized asset, driving infrastructure like telecoms, power, water, transportation and digital public services.

In the past months, countries have shown how advanced data analytics can successfully track the spread of COVID-19 – as well as monitoring food and production supply chains.

As government goes increasingly digital, a citizen-centric mindset can ensure people get equal access to the services they need – such as health and social care, education and utilities.

The more that governments foster data sharing and interoperability, the more they’ll help spread ideas and stimulate innovation. They should prioritize the collection, processing and accessibility of public and private data – and focus on data quality and accuracy.

They should also be aware that data privacy and protection are the cornerstones of citizen trust – all of which is critical to the successful adoption of InfraTech. Canada’s Digital Charter is a good example of a national vision based upon trust.

4. Use a broad range of policy levers

Governments have a number of tools at their disposal to accelerate InfraTech. As I’ve mentioned, forward-looking legislation and regulation – preferably spanning sectors and even countries – can open up opportunities for innovation.

Large, expensive infrastructure assets can become stranded if superseded. By taking a whole-life view of project procurement and contracts, governments gain the flexibility to enhance these assets with newer InfraTech as it emerges. “As-a-service” procurement is also gaining popularity, to reduce risk.

Investing in newer technology inevitably brings greater uncertainty. Governments may have to create risk-return profiles that match investors’ expectations. Adopting best practice public–private partnerships (PPP) and governance helps transfer risk appropriately among stakeholders.

Government institutions are often ill-equipped to support InfraTech, with fragmented structures inhibiting innovation and data sharing. Creating new public organizations, focused on transformation, can help disseminate new ideas and improve national capacity and capability.

Finally, governments must build the skills to embrace InfraTech, by incentivizing companies to train workers, setting up public training programmes, and encouraging collaboration with academia and industry.


What is the World Economic Forum doing to ensure smart cities?

5. Attract private capital

How do you get investors excited about potentially risky InfraTech ventures with unpredictable revenue streams?

One well-tried approach is to offer sector subsidies, particularly at the earlier and later stages of a project. These can take the form of tax incentives, concessional finance, or R&D grants. Renewable energy subsidies in US, Europe and China have accelerated national adoption and reduced costs.

Another option is to bundle a number of smaller projects into a larger aggregate, thus spreading risk more widely. Novel, dynamic pricing, including pay-as-you-go and user pay, are also designed to give investors greater confidence in a reliable revenue stream.

The Global Sustainable Energy Innovation Fund is a recent initiative from the World Economic Forum and KPMG. It’s the first global fund designed to bring together private and public investors and overcome national boundaries.

This fund will invest only in products and/or solutions with the potential to significantly reduce greenhouse gas emissions, with a focus on low- and middle-income countries, offering competitive returns to investors. It’s hoped that other such funds will emerge, with similar sustainability goals, inspiring investment in innovative, green InfraTech.

Building an InfraTech ecosystem

InfraTech promises a bright new tomorrow, bringing cost-efficient, smart, green, longer-lasting infrastructure. It also has the potential to transform the way citizens interact with government and with the physical world.

The goal of every government should be an effective InfraTech ecosystem consisting of multiple players from the public and private sector, financiers and funders, and users. With such a system in place, they can lay the foundations for sustainable and inclusive growth.

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Related topics:
Davos AgendaFourth Industrial RevolutionCities and UrbanizationEmerging Technologies
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