Smart solutions can help ASEAN cities improve quality of life

Southeast Asia’s future is tied to the fate of its cities. Today the region’s urban areas are home to one-third of its total population but generate more than two-thirds of the region’s GDP. Urbanisation is fuelling economic growth, but the breakneck pace has left many cities struggling to provide adequate housing, infrastructure, and services to meet the needs of a surging population.

While the urban challenges across Southeast Asia (SEA) have been growing in scope, new technologies that could tackle some of these issues have reached maturity. Smart cities in Southeast Asia, a new report from the McKinsey Global Institute (MGI), in collaboration with the Centre for Liveable Cities in Singapore, finds that cities across the region can incorporate data and digital technologies into infrastructure and services – all with an eye to solving specific public problems and making the urban environment more liveable, sustainable, and productive. The research, studying dozens of current applications, finds that cities in the region could use digital solutions to improve some quality-of-life indicators by 10 to 30 per cent. It expands on global research released last month by MGI on how the current generation of smart city technologies can perform in a variety of urban settings worldwide.


Smart Cities are poised to have significant and broad-based impact in SEA

Cities across SEA are primed to take advantage on smart solutions. Dozens of smart solutions are available today focusing on every domain of city life: Mobility, social infrastructure, the built environment, utilities, security, community, and the economy. As they begin their smart transformation, each city is setting its own priorities regarding which ones to deploy. MGI finds that smart cities could have a substantial impact across SEA to deliver a better quality-of-life. Among its findings:

  • Could remove up to some 270,000 kilotons of greenhouse gas emissions annually
  • Some 5,000 lives each year could be saved through mobility solutions, crime prevention, and better emergency response
  • Save up to 8 million man-years in annual commuting time
  • Smart healthcare solutions could reduce the region’s disease burden, extending overall life expectancy and adding years of good health
  • Creating more efficient and productive environments for business and hiring, and could add almost 1.5 million jobs
  • S$16 billion annually in savings with better housing options and lower energy bills.

The current generation of smart applications can help cities make significant or moderate progress toward meeting 70 per cent of the Sustainable Development Goals.

“Urbanisation can propel Southeast Asia to the 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 and particularly to combat climate change and improve their resilience.”


Rooting digital solutions in Southeast Asian realities

There is already a wave of innovation across the region. It includes digital citizen apps, home-grown ride-hailing apps, data-driven transit planning, intelligent traffic systems, data-driven disaster risk assessment, advanced construction techniques, smart energy meters, and much more. Low-income cities may be able to jumpstart progress by creating open data portals, which make raw information available for private-sector innovation that does not require any public investment.

The report notes that private-sector companies that find ways to contribute to the public good and expand choices for urban residents can find substantial market opportunities across SEA.

MGI estimates that smart mobility applications could create up to S$70 billion in value, while opportunities to make the built environment smarter could be worth more than S$25 billion. But the report cautions that companies with aspirations to become urban solution providers need to navigate a dynamic and complex ecosystem. Companies need an intimate understanding of a city’s context so they can anchor their offerings and value proposition to the real needs of residents, and they may need to add new government relations capabilities.


Bold action required by public and private sectors

A smart city starts with a smart strategic vision and goals. While it is important for city governments to outline a vision for the future, the rapid pace of technological change means that they have to retain some flexibility to experiment and recalibrate. Taking a data-driven approach that continually measures progress against clear quality-of-life goals can guide that process. Cities also need to consider how to pair smart technologies with complementary policies and investment in hard infrastructure.

“Cities facing tough budgetary choices will have to prioritise the practical over the flashiest new technologies,” Mukund Sridhar, Partner and Leader of McKinsey’s Infrastructure Practice in SEA, said. “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 touch screens on the street.”

Neither the public nor the private sector can build smart cities alone. City governments will have to continue providing many critical services, but they do not have to fund and operate every type of service and infrastructure system. Smart cities will change the parameters of how cities across Southeast Asia approach public-private partnerships.

Despite varied starting points, priorities, and capabilities, cities across Southeast Asia can cooperate to deploy smart solutions on a much bigger scale. The most advanced cities may be able to assist others in developing technological capabilities and specific apps, but it will also be valuable for the region’s lower-income cities to share with each other what they are learning about where digital innovation can yield the greatest impact. Green shoots are already visible, and the recently launched ASEAN Smart Cities Network can provide a vehicle for accelerating progress.