There are a variety of frameworks that city councils can pursue in order to realise their Smart Cities, all with differing extents of private sector involvement. The public sector can choose to deliver the project directly, but this is reliant on municipal expertise and acumen in relevant fields to pull off such a large-scale project. For instance, Singapore’s smart nation approach to serving an ageing population through projects like TeleHealth and HealthHub that centralise healthcare databases and boost access to digital healthcare was developed by the Ministry of Health.
Alternatively, project teams can consider joint ventures or vendor financing which is usually short-term contracts on specific phases of the product development in which the private sector has significant expertise. This would bring in vendors like CISCO which announced a city infrastructure financing acceleration programme with funding of $1 billion, aimed at helping the city governing authorities deploy innovative technology with minimal capital outlay.
The most common framework would be the setting up of public-private partnerships (PPP). In a PPP model, the government establishes a long-term contract with the private sector for the provision of services. The PPP aims to increase the efficiency of an infrastructure project where the relationship provides the government not just funding, but also private sector know-how in managing the project. While this may involve the construction of an asset which is temporarily leased to the company, payment is contingent on the private sector’s performance and the availability of the works or services acquired back by the city council, after a short period. A few examples of such partnerships are:
- IBM Command Centre in Bandung, Indonesia’s 3rd largest city, operates a digital monitoring facility that collects street-level data in a variety of sectors (traffic monitoring and accidents, safety issues and emergency response, floods and natural disasters, and crime), with the intent of improving the city’s management and governance.
- In partnership with the City of San Diego, General Electric (GE) upgraded the city’s lighting with LED and deployed an intelligent platform with a likely cost of $30 million, financed by GE. City leaders have estimated that it will save the city about $2.5 million worth of electricity per year, reduce maintenance costs, and provide other benefits.
In a few select cases, smart cities are conceptualised, developed and operated solely by the private sector. All risks are borne and proceeds gathered by private companies and individuals. These also tend to be the projects which promise the most innovation due to the extraordinary leeway and opportunities presented to the technological sector.
Belmont, Arizona is a planned 24,000-acre smart city which will feature high-speed public Wi-Fi, self-driving cars, and high-tech manufacturing facilities which are being built from scratch by a partnership involving Bill Gates’ investment firm; and local real estate investors promise a capacity of up to 80,000 residential units.