This sector will be the biggest avenue for investors by 2020
The capital-intensive task of transforming cities into seamless ecosystems is prompting governments to explore revenue sources beyond internal bodies and join hands with financial intermediaries and private investors.
This is according to business and consulting firm Frost & Sullivan’s ‘Visionary Innovation Growth Partnership’ program, which helps companies develop actionable transformational growth strategies to win in an unpredictable future.
Cities are always looking to increase their capacity and efficiency of functioning in order to attract economic growth and activity. In order to build highly functional and intelligent cities, public authorities will need to integrate smart technology into existing infrastructure while building new infrastructure from ground up.
With the rising connectedness of things and people, the smart city market could according to Frost & Sullivan (F&S) expand from slightly more than $900 billion in 2016 to $1.57 trillion in 2020 – and prove to be one of the biggest investment avenues for private investors and institutions.
The public sector will also look to new mechanisms to distribute their funds into various smart city projects and, ultimately, earn revenue though those projects.
The creation of smart cities will have wide implications for all industries offering public and private services. For instance, smart cities will disrupt public utilities segments, such as energy, transportation, waste management and water distribution.
Private participants in industries such as ICT (Information Communication Technology) will fuel this disruption by integrating their services and providing hardware to change the way citizens live.
Smart cities are cities built on ‘Smart’ and ‘Intelligent’ solutions and technology, which F&S says will lead to the adoption of at least five of the eight following smart parameters: smart energy, smart buildings, smart mobility, smart healthcare, smart infrastructure, smart technology, smart governance and smart education and smart citizens.
Several financing mechanisms have been made available to stakeholders, depending on risk appetite, investment size, and duration of financing. It is imperative that stakeholders understand the nuances, advantages and shortfalls of each mechanism before choosing a tool to finance projects under their purview.