McKinsey Report: Smart solutions can help Asean cities improve quality-of-life indicators to up to 30%

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 livable, 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 percent.

The report was launched at the World Cities Summit in Singapore last month, and expands on the recent global research released by MGI on how the current generation of smart city technologies can perform in a variety of urban settings worldwide.

Among its findings are:

  • 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 homicides could be saved through mobility solutions, crime prevention, and better emergency response.
  • Intelligent traffic and transit solutions could save up to eight million man-years in annual commuting time.
  • Deploying smart healthcare solutions for the urban population could reduce the region’s disease burden by 12 million disability-adjusted life years; in other words, not only extending overall life expectancy but adding years of good health.
  • By creating more efficient and productive environments for business and hiring, Southeast Asia could add almost 1.5 million jobs.
  • Residents could also save as much as $16 billion annually as smart solutions contribute to better housing options and lowering energy bills.
  • The current generation of smart applications can help cities make significant or moderate progress toward meeting 70 percent of the Sustainable Development Goals.

This report has identified Manila as a “Prime Mover” in the four archetypes of cities across the region. Prime Movers would be able to capture big wins in addressing quality of life inefficiencies by retrofitting existing infrastructure. For example, the use of smart mobility applications like intelligent traffic signals and real time public transit information among others, can help save on average 300,000 man-hours per year in these cities. Meanwhile, Cebu and Davao have also been identified as “Emerging Champions.” Emerging Champions would benefit most from integrating infrastructure, hardware, and software to deliver high-value and cost-effective impact. These solutions could help expand the cities’ access to services and reach the underprivileged residents.

For a closer look at the report, The Philippine STAR interviewed Jonathan Woetzel, senior partner, McKinsey & Company; director, McKinsey Global Institute; and leader of McKinsey’s Cities Special Initiative.

The rapid pace of urbanization in Southeast Asian cities have fueled the region’s economic growth but somehow brought with it problems in housing, infrastructure and services. More often than not, rapid growth means growing pains. Do you think there is a way to regulate or slow down this progression into a more manageable pace?

Developing urban and rural areas outside of major cities can spread the benefits of economic growth without sacrificing quality of life. Many urban problems, such as congestion and pollution, are exacerbated by overpopulation; if attractive employment opportunities and living options incentivize people to move to places other than the major cities, this could lessen the strain on infrastructure and resources.

In recent years, the Philippine government has recognized the need to invest outside of Manila — an example of this is the New Clark City in Pampanga, which is promoted as a “smart, green and disaster-resilient” community and is rapidly becoming a key investment hub for the country. The current administration has made this a priority, with ~4,000 out of ~5,000 projects in its 2017-2022 investment program allocated for regions apart from Metro Manila.

Who do you think is more influential in effecting change: the city governments, the private sector, or the people living in them?

If a smart city strategy is to be done right, the citizens should have the most influence over its development since the success of the public and private sectors’ initiatives will ultimately depend on how people incorporate them into their everyday lives.

Our reports find that both public and private sectors, and citizens alike play very significant roles in smart city development. While the public and private sectors play important role in planning and implementing solutions, the entire point of smart city planning is to respond more effectively and dynamically to the needs and desires of residents, so any strategy has to start with people. Many smart city initiatives have failed when they focused on the technology instead of on what people want and how they behave.

Also, neither the public nor the private sector can build smart cities alone. Creative and collaborative partnerships involving governments, private-sector companies, social-sector institutions, and the public alike will create better solutions and value. Various stakeholders can bring different things to the table, whether it is financing, urban planning experience, technical expertise, operational capabilities, or knowledge of the local landscape.

  • Many of the critical services are public goods for which the public sector is the natural owner. Government needs to take a leading role in putting enabling infrastructure and policies in place, but the city government does not have to be the sole funder and operator of every type of service and infrastructure system. It makes sense to identify those areas where city agencies can step back and make room for other players to contribute.
  • Companies need to start anchoring their offerings and value proposition to the real needs of residents. They may need to steer their potential government customers toward solutions that can make a visible difference in their constituents’ lives. Simple and scalable solutions tend to gain traction and users, enhancing value for citizens and solution providers alike.
  • Residents are also fundamental partners in the smart city. Being smart requires the public to adopt and use these technologies productively in the day-to-day life and business of the city, actively shaping how their city operates and uses its resources. Cities can use technology to take the pulse of public opinion on a wide range of issues, enabling residents to weigh in on many planning decisions. They can also use public feedback as the basis for making continuous improvements to the system.

The McKinsey Report has identified Manila as “Prime Mover” across the region, alongside Bangkok, Ho Chi Minh City, Jakarta, Kuala Lumpur. Compared to its counterparts, how would you rate Manila’s efforts in implementing smart solutions?

The report identifies Metro Manila as a prime mover. We find that in the Metro’s cities, major physical and social infrastructure systems are in place, but they are often strained beyond capacity. In such cities, even small changes that improve upon the existing infrastructure can make a difference. For instance, using the Beep payment system can reduce the time commuters spend queuing at the MRT and LRT via dedicated turnstiles while the installation of solar panels on public structures such as malls and government buildings reduces the city’s greenhouse gas emissions. Something as simple as an emergency SMS alert from the National Disaster Risk Reduction and Management Council (NDRRMC) can go a long way in saving lives in times of calamity.

What we find in this report is that the region’s cities similarly resist easy categorization. Comparing cities or drawing conclusions about how they can approach a major transformation is hard across Southeast Asia. To be frank, our report does not aim to serve as a ranking. Our report offers snapshots of where cities in Southeast Asia stand on these dimensions today – not to crown a winner but to help the region to draw on its commonalities to make progress and extracting lessons that apply across different cities.

What’s the action plan? Do you plan to partner with companies that also advocate smart cityhood such as IT companies?

We will continue to work with clients in both public and private sector to realize smart city opportunities in a practical and high-impact way. We pride ourselves on our independent and objective view, as well as an integrated set of capabilities to support the design, development and deployment of smart city solutions.

The report also cited seven domains of urban life — Economy, Mobility, Utilities, Community, Built Environment, Social Infrastructure and Security. Of these seven, which can be achieved more quickly, with noticeable results? What’s the hardest to solve? Can a Smart Safe City Solution underscore all these domains?

The speed of implementation and degree of impact of smart city solutions are highly dependent on each city’s specific context, ranging from the quality of current infrastructure to the level of cooperation needed among relevant players to affect substantial change. However, what we have seen in our research is that successful and sustainable solutions do have common elements, such as a strategic vision grounded in an understanding of citizens’ needs as well as a strong partnership between the public and private sectors.

In a city like Manila, congestion and crime are long-standing and immediate problems. These have also proven to be the most challenging issues to address — several attempts have been made over the years with varying levels of success. Hence, moving forward, Mobility and Security are two domains in which it will be critical for the government to collaborate with the private sector.

No one smart city solution can be deployed across all of these domains. However, some of these applications have the potential to impact multiple aspects of quality of life. For instance, Davao City’s Public Safety and Security Command Center aims to improve citizen’s lives in terms of crime prevention, emergency response, threat prevention and response, and traffic management. Given limited resources, cities may see the value in prioritizing such applications that have the potential to effectively address multiple pain points.