Making Southeast Asia’s urban infrastructure smarter-
Around the world and across Southeast Asia, urban growth has often outpaced planning and investment, causing significant gaps in infrastructure and services. Cities need to do more with less – and increasingly, they are turning to technology to raise their performance. This includes expanding services to reach segments of the population who lack access today and planning ahead to absorb future growth.
A recent report from the McKinsey Global Institute (MGI) finds that smart city technologies have the potential to improve the quality of life of millions across Southeast Asia. It finds, for instance, that smart solutions could remove up to some 270,000 kilotons of greenhouse gas emissions annually. Some 5,000 lives lost each year to traffic accidents, fires and homicide could be saved through mobility solutions, crime prevention, and better emergency response. Intelligent traffic and transit solutions could save up to 8 million man-years in annual commuting time.
What exactly does it mean for a city to become “smart”? Cities are complex environments with millions of moving parts. Managing them is no small task, but now cities can use data and digital tools to tackle a wide range of public problems. Sensors, cameras and smartphones add a layer of digital intelligence to the urban environment, capturing a stream of real-time data on everything from traffic and transit to air pollution, weather, crime, energy use, and much more. Analytics systems and mobile apps translate this information into alerts, insights and tools that enable users to make better decisions. Millions of those decisions add up, creating a positive impact on the city’s overall performance. Less time is wasted in traffic and queues, and health and safety improve. Energy, resources, space and investment are utilised more efficiently.
Above all, smart city technologies change the nature and economics of infrastructure. Deciding to build a new power plant or metro line once locked cities into capital-intensive and extremely long-term plans based on a static snapshot of how they expected demand to evolve. Today, with an unprecedented volume of data points in hand, cities can get more capacity out of their existing systems – and when new construction is needed, embedding technology from the outset can make investment go further.
Nothing is more fundamental to the way a city functions than ensuring that people can travel from point A to point B quickly and conveniently – and technology can help to ease the gridlock that has become a daily source of stress in congested cities such as Jakarta, Manila and Bangkok. Intelligent syncing of traffic signals, for example, prevents backups at intersections. Real-time navigation alerts drivers to accidents, construction and congestion and helps them choose the fastest route. Smart parking apps point them directly to available spots, eliminating time spent fruitlessly circling city blocks and reducing congestion for everyone. Smart parcel lockers and load pooling (which dynamically matches available truck capacity with delivery needs) can cut down on the number of trucks clogging streets. Cities in which buses are the primary mode of public transit also stand to gain from these traffic measures.
Adding IoT sensors to existing metro cars, tracks and signals as well as city buses can help crews perform predictive maintenance on equipment, fixing problems before they turn into breakdowns and delays. Real-time information about routes and arrival times can be delivered on digital signage or via mobile apps so that riders can adjust their routes. Offering information about multiple modes of transit in one view gives people even greater ability to avoid delays. Collecting and analysing data on public transit usage and traffic can also help cities make better decisions about modifying existing routes and allocating investment.
In many places, start-ups are offering innovative services such as e-hailing, bike sharing, and scooter sharing, all of which give people a wider range of choices for getting around. A number of cities around the world are experimenting with on-demand minibus services, whether operated by transit agencies, auto manufacturers, or public-private partnerships (PPPs). This option could prove to be more viable and cost-effective than building out traditional infrastructure systems in underserved neighbuorhoods – particularly if services are coordinated citywide to maximise routing efficiency.
There is a great wave of innovation and experimentation in cities across the region: smart lighting and waste management systems, resilience and disaster management plans, intelligent buildings, public transit apps, and command centres that manage traffic using video feeds from across a city. Entirely new smart districts (including One Bangkok, New Clark City in the Philippines, and the Nhat Tan Noi Bai project near Hanoi) are being built from the ground up, with technology embedded in every aspect of the environment.
Although many of the region’s cities face real fiscal constraints, they can no longer think of data and smart city tools as costly capital expenditures. They are becoming increasingly necessary operational investments. Furthermore, there is much more to a smart city than government initiatives. Private sector innovation is a key ingredient, and cities worldwide are experimenting with new types of PPPs. MGI estimates that the market for smart mobility applications in Southeast Asia could be as large as $70 billion, while opportunities to make the built environment smarter could be worth more than $25 billion.
For companies and investors, smart cities represent major opportunities. But becoming an effective smart city provider involves much more than going after a growing market. It’s also about serving people and the public good. City governments will have to find the right combination of technologies, investment, policies, and partners to suit their own starting points and their own residents’ priorities – and private sector innovation can fill in some of the blanks.
Mukund Sridhar is a Partner at McKinsey & Company and the Leader of McKinsey’s Capital Project and Infrastructure practice in Southeast Asia. He is also the lead author of the newly launched McKinsey Global Institute’s report, Smart Cities in Southeast Asia.
