As we have frequently outlined on our blog, the Smart City project offers ample benefits to local authorities, ranging from significant financial cost savings to lifestyle improvements, safety and security benefits, and the potential to intelligently meet climate and sustainability goals. As word of the enormous potential of connected technologies spreads, an increasing number of municipalities across the globe, including pioneering world cities such as Edinburgh, are investing in their own implementations of the connected city vision.

Now, a report has been published that illuminates yet another benefit of adopting digital infrastructure in urban areas – that of economic development. Previously, this aspect was often misunderstood and, perhaps as a result, seldom mentioned. But the new report makes the eye-catching conclusion that the Smart City paradigm could increase cities’ economic development by more than 5% and drive more than $20tn in additional economic benefits worldwide by 2026. These figures are sure to perk up more than a few ears within local authorities, who are increasingly looking to transition smoothly into digitally-enabled, smart urban management.

The report, which was commissioned by Chordant, is entitled ‘Role of Smart Cities for Economic Development’. It emphasises the central importance of technology as a driver of economic development in future Smart Cities. It also underlines how a comprehensive and wide-spanning strategy is essential if the technology’s true economic potential is to be realised.

Urbanisation is progressing quickly. Today, 50% of the global population live in cities. We’re set to see that increase by a further 20% by 2050. With this siginificant growth in population, the role and importance of cities – and their concomitant responsibilities to their increasingly numerous citizens – will need to evolve correspondingly.

So, where exactly does the potential for economic development lie within the broader framework for Smart Cities?

The Smart City Path to Economic Development

The first major area is in the trialling and implementation of new connected infrastructures, which represent a huge growth market.

The next generation technologies set to define our future, from Internet of Things to 5G to V2I (vehicle-to-infrastructure), are all not merely applicable, but are in many cases exclusively targeted to urban environments. Around 29 billion connected devices are forecast by as early as 2022, while the global IoT market is expanding at a 23% CAGR, enabling smart solutions in major industries including – to name just a few – agriculture, automotive, and infrastructure. Venture capital is increasingly pouring into these areas, which are often collectively grouped as ‘UrbanTech’ or ‘GovTech’. Crucially, however, only cities can offer the scale and density through which infrastructure initiatives such as connected infrastructure or the sharing economy can be trialled and tested.

Artificial Intelligence and automation will also have a sizable impact on the economic performance and potential of a city – from driverless vehicles to surveillance cameras and cybersecurity protection, the convergence of automated processes with AI will be seen across virtually all sectors, and particularly within urban management. Intelligence-driven automation, according to the report, will be ‘the main engine for future economic growth, redefining, transforming, and revolutionising the economy into a cognitive, self-governing entity’.

The other major factor that the report claims could unlock unprecedented growth is the simple reason that more political power will be concentrated in cities, a natural development reflecting their increased populations. Historically limited to resolving local operations, we are increasingly seeing central governments devolve power and responsibilities to local authorities for the areas they oversee. Municipalities are already implementing their own measures for issues such as sustainability and tackling poverty, but as cities become increasingly populous, there is a clear democratic argument (by virtue of their dense populations) that they should be able to have wider access to tax revenues. The political winds are blowing towards city-level government in the not-too-distant future, with local authorities best placed to address issues affecting their own citizens, and to factor in the unique culture, geography and demographics of the municipality in doing so.

How will the economic development potential of the Smart City vision be utilised?

The great potential of the Smart City project, according to the report, is in addressing inequalities – both within the city itself and between different towns and cities. A crucial factor in implementing the project must be in ensuring that an entire city can benefit from technology-driven economic development, not just those areas we might expect to engage with modern infrastructure, such as business districts. Poor and unsafe areas, which are often excluded by this type of technological advancement, must be considered as part of a broader ‘levelling-out’ strategy of digital and economic inclusion of poorer and disadvantaged minorities and communities.

One example the report provides is the partnering of local authorities with private ridesharing providers such as Uber, which would help improve mobility in more remote suburbs in the vicinity of a city. Ultimately, the productivity and economic gains that could be realised through these new technologies could surpass the possibilities offered by more traditional infrastructure investment, such as building new railroads, and at a fraction of the cost and difficulty.

The other major growth opportunity offered to the most forward-thinking local authorities is in attracting businesses and investment to their nascent Smart Cities before their competition. This might involve offering favourable tax incentives to encourage businesses to make the move, or by considering the Smart City project as part of an overall cross-departmental effort to make a municipality the most business-friendly possible. This is a particularly enticing prospect for smaller cities and towns, where local authorities find themselves disadvantaged due to limited financial resources and a lack of the relevant technical expertise.

Coalitions are starting to form, particularly amongst smaller towns and cities, which allows the economic benefits of adopting Smart infrastructure to be shared by multiple participants and for best practices to be maintained. Nonetheless, competition between municipalities brings its own benefits, accelerating the interest in, advocacy for, and ultimately deployment of, the crucial technology.

Building a Smart City Strategy to Optimise Economic Growth

As we’ve discussed in some detail here, there is a huge amount of economic growth potential to be harnessed through the Smart City paradigm. But whether or not a municipality can be successful in ultimately doing so will depend the prior implementation of an effective strategy which takes into account economic growth potential and helps shape the direction of the project.

A myriad of factors must be considered. For example, a fine balance needs to be struck between the economic needs of a city – attracting businesses, spearheading job creation, etc. –the overall well-being of citizens and crucially, the environment. As towns and cities reach more advanced stages in their respective Smart City projects, there is also set to be increasingly intense competition to attract businesses and the funding they bring. This isn’t particularly notable at the moment, but an intelligent strategy should account for what will probably be a cut-throat contest in future. Finally, local authorities will also have to find a balance between short- and long-term thinking to achieve their potential; ‘quick wins’ should be partnered with longer-term structural investments for sustainable development.

IntechnologySmartCities’s integrated connectivity, data, communications and engagement platform for towns and cities provides a safe digital infrastructure upon which a bespoke strategy for economic growth can be based. Our Connected City Platform is fully compatible with modern technologies of ‘UrbanTech’ such as 5G and the Internet of Things. Our platform also hosts a robust information analytics engine which can guide further optimisations and improvements. To find out more about how citizens will benefit from the adoption of Smart City technology, or to learn more specifically about the unique benefits of our Connected City Platform, please get in touch.