Asia in the lead on smart cities

Thought of the day

by Chief Investment Office 14 Mar 2019

Software giant Microsoft has announced it is teaming up with Mott MacDonald, the engineering consultancy, to develop cloud-based smart infrastructure systems to assist cities delivering services more efficiently. The tie-up is part of a broader drive to create "smart cities," deploying the latest technologies to ensure that urban centers keep pace with the influx of people into cities.

But while this is a global trend, we believe the move toward smart cities – and the opportunity for firms – will be most pronounced in Asia. The UN expects the percentage of people living in Asia’s urban areas to rise from 50% today to 75% by 2050. Asian cities now account for over half of the world's megacities, those with populations above 10 million inhabitants.

Asian cities have been grappling with the challenge of having to balance sustained population growth with strained infrastructure, depleting resources and finite space. As a result, Asian cities are now in the vanguard of innovation in areas such as smart connectivity, smart governance, smart services, smart automation, smart health and smart mobility – with cybersecurity forming the foundation of each smart city.

  • In Singapore, for instance, citizens have become accustomed to filing taxes online, monitoring subway schedules on mobile apps and connecting to personalized government sites through soft tokens.
  • China is rolling out a nationwide 5G network. Most telecom operators in Asia will launch 5G services over the next few years, with those in Australia, China, Japan and Korea set to do so in 2019. We believe the extensive use of Wi-Fi and the upcoming 5G technology, which significantly reduces latency, should further bolster smart services.
  • Bhopal, a city in central India, sought to retrofit its city through integrated area developments, integrated traffic management systems and smart road lanes with spaces for cycles and pedestrians.
  • By the time the 2020 Tokyo Olympic Games begin, there will be autonomous buses in the Tokyo Bay area, where most of the Olympic Games will be held, and we believe this technological innovation wave will spread across Tokyo in the near future.
  • So with the current momentum, we estimate Asia’s smart city market, led by China, could reach USD 800bn in 2025, creating sizeable growth opportunities for local economies along the way. In particular, we believe companies exposed to faster growth segments like fintech, 5G, smart mobility (e.g. electric vehicles and autonomous driving) and healthtech are in a sweet spot thanks to strong demand and regulatory support. Read more in our Shifting Asia: Smart Cities report.

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