BusinessAugust 4, 2018

The business of smart city disruption


How can private enterprise help local governments innovate? Mark Thomas reports from the World Cities Summit in Singapore.

Imagine you’re a mayor. Your city is growing faster than you can build the things you need to support the growth, or you’re shrinking and trying to incentivise new industry. Either way, you can’t get the funding you need. Core infrastructure needs replacing, new climate changes rules will make business-as-usual more expensive, you’re being sued for limiting free speech and of course, there’s the traffic. You’re being forced by the government or your staff to consider petrol taxes, environment charges, tourist fees, maybe even a loo levy.

The biennial World Cities Summit (WCS), recently concluded in Singapore, promised answers to these issues and more. 24,000 participants, 130 mayors and city representatives and 100 industry leaders spent four days considering how to build more livable and sustainable cities. Wellington’s mayor Justin Lester was the sole New Zealand city or government representative.

City disruption is underway

How cities should use ‘disruptive innovation’ to deal with cities challenges was the first item on the agenda of day one’s Mayors’ Forum. Professor Greg Clark – a global city expert, chair of the London-based Business of Cities enterprise and a former key Auckland Council advisor – did his usual first class job for wrangling (and time-limiting) the 130 civic leaders sitting together in an enormous council chamber-style setting.

Mayors talked about embracing new technology tools (apps, shared platforms, sensors, internet of things systems) to change the way they work (and work with others). Cities were creating experimental zones including an Internet of Everything lab in Helsinki which aims to develop an open, standardised, data-driven and user-centric platform that makes working together (co-creation in the jargon) easier and more effective.

Blockchain (the public ledger system) is being used in cities in the country of Georgia to improve land registrations, and in Vietnam zoning rules are being better enforced with the use of mobile apps containing geospatial data. 

In cities in the Czech Republic, a new “multi-use” citizen smart card is streamlining access to both city and government services. The MasterCard initiative incorporates medical information, access to schools and other social benefit entitlements as well as being a national identity and conventional payment card. It’s helped reduce financial exclusion by giving those who are unbanked a way to more easily access services.

Most city leaders agreed that making data more freely available not just to industry but to citizens was essential to build better, jointly developed solutions, and to make it easier for citizens to play a role in their city on their terms. Smart mayors are also using the valuable data their cities own as a commercialisable asset.

There were case studies from Singapore on how to create sustainability markets with microgrid technologies incorporating energy renewables, and from Sydney on a new planning model which better integrates legacy development and new city growth.

In Hamburg, the largest car-sharing/electromobility district in Europe is being created and in Canada, a company has pioneered a new CO2-trapping concrete. A new office building similar in size to the original Newmarket mall and built from this new concrete will open in Atlanta next year; it will save the need to plant and grow an 800-acre forest.

In China, their latest smart city platform integrates data from agriculture, health, e-commerce, transport and manufacturing into a linked Internet of Things platform giving cities and citizens much greater real-time benefits.

South Korea’s capital Seoul, won the coveted World Cities prize. Twenty years ago, poorly managed growth had created urban sprawl, extensive congestion, high levels of air pollution and extremes of social inequity.

Mayor Park Won-Soon has since transformed the city by, among other things, developing the first digital mayor’s office and driving innovation by demanding and incentivising public/private cooperation.

In a city racked with citizen conflict, he implemented new technology and a formal rigorous engagement and negotiation system with conflicting parties. This is symbolised with a stylised 2-metre listening ear placed on the ground outside the Seoul City Hall building.

Seoul’s ‘we’re listening’ ear

Via Twitter, a citizen suggested a better night bus service. The city set up a process which analysed the data from 3 billion phone calls and established eight routes to run from midnight to 5 am.

Private sector developed internet-of-things technology is being used to improve the operation of both waste disposal and parking. And he transformed the city’s traditionally bureaucratic top-down decision by creating a participatory approach where citizens directly control 5% of city budget ($200 million of this year’s Auckland Council budget).

Mayor Park won re-election for a record 3rd term the day after the Trump/Kim Singapore summit in May.

New Zealand is falling behind

With plenty examples of city innovation on display it was timely that the annual Global Innovation Index was published towards the end of the summit. Although it measures countries, with more than 80% of global GDP generated in cities – cities are obvious drivers of a nation’s innovation (40% of New Zealand’s GDP comes from Auckland alone). New Zealand came in 22nd this year – a one-point drop on 2017, and now overtaken by Australia who finished 20th.

Australia had nine cities at the Summit including Adelaide, Melbourne and Sydney. However several countries more comparable to New Zealand and even higher up the Innovation Index were also there, including Austria, Finland, Switzerland and Sweden.

Similarly, several of the cities that finished higher up Deutsche Bank’s recent most liveable cities’ list than Auckland, ranked 12th, also attended: Helsinki, Melbourne, Sydney, Vienna and of course Wellington, which topped it. These are examples of places that are doing well but who know that maintaining an edge in the disruptive environment we are living in, means they have to continue to learn and also share what they know.

The pace of urbanisation is driving this. By 2050, 70% of the people on Earth will live in urban zones up from just over 50% today. This is causing both more urban problems and more opportunities to learn the best responses. This was the compelling message delivered to the mayors by the Executive Director of the UN-Habitat whose organisation ran the biennial World Urban Forum (WUF) in Kuala Lumpur in February – which no New Zealand city leader or government representative attended.

Urbanisation is an even more pressing issue for Kiwis. At the end of 2017, 86.4% lived in urban areas – the highest number ever – and despite high property prices this rate of urbanisation is increasing.

Urban development is more than houses and trains

Thus, it was a good idea for the new government to create an urban development ministry. But the trouble is the urban development minister is so busy trying to build houses and improve transport, that vital urban development, technology and innovation discussions, like those at the WCS and the WUF, are being missed.

Ironically, the WCS underlined the growing need for collaboration among cities. Peter Bakker, president of the World Business Council for Sustainable Development said the four big global urban trends of climate change, digitisation, growth and migration cannot be effectively addressed in silos.

To address this, Singapore has used its leadership of ASEAN this year to establish the ASEAN Smart Cities network involving 26 cities across the 10 nations to pilot technology enabled transport solutions, new data centres and other city service improvements. Meanwhile the much smaller New Zealand cities of Auckland, Wellington and Christchurch plough on with their own discrete activities.

I’m sure Justin Lester will share insights from the WCS back in New Zealand. He was an active participant helping co-hosting the Young Leaders Symposium but also busy connecting with others who can continue to keep Wellington absolutely positive (yes, that’s still going). But as a country, New Zealand needs to be much more engaged with what Greg Clark refers to as the “business of cities”.

The country’s highly centralised government structure remains a barrier to this as, by international comparison, its local governments deliver much fewer services. New Zealand spends just 11% of public revenue on local government, compared to an OECD average of 42%. 

As a result, ratepayers often want councils to focus on a narrow range of activities. Yet as countries urbanise, and the demands on cities grow, it’s foolish to think we can maintain the same limited local government funding options or expect growing New Zealand cities to cope effectively when they control so few levers.

We have the answers to funding city growth

So, how to fund the challenges of growth or of legacy under-investment was the second major theme explored at the Mayors’ Forum.

It’s an obvious issue for New Zealand too, but why Finance Minister Grant Robertson has asked the Productivity Commission to spend the next year or more enquiring into local government funding and financing is less obvious.

Because, of the ten reports produced by the Productivity Commission since 2011, almost half relate to the business of cities: housing, local regulation, land use and urban planning: Specifically, how to do it better and how to fund it.

Contained within these four large reports are all the answers needed to fix local government funding in New Zealand. These include:

  • change from a capital value to a land value for rates,
  • rate Crown land,
  • ease foreign investment for housing development,
  • properly reform the RMA,
  • increase user charges (particularly for water),
  • price existing roads to reduce congestion,
  • use targeted rates more, and specifically to capture development value uplift,
  • allow greater off-balance sheet financing and greater central government capital grants or debt guarantees,
  • use public-private partnerships for all significant local government infrastructure projects
  • give councils the power to sell development rights.

Importantly the reports also say that Auckland mayor Phil Goff’s preference of central government revenue sharing (e.g. via GST) or local incomes taxes are inefficient and should not be introduced.

If the finance or urban development ministers had been at the WCS, they would have heard many of these ideas talked about.

They would have learnt about the land value capture model the International Finance Corporation is implementing in cities. They would have heard about the new private/public risk sharing financing model which the Keppel investment business has used to develop the Tianjin Eco-City south-east of Beijing.

They would have seen that Rotterdam’s innovation strategy has had a former shipyard transform into a technical experimentation district by incentivizing private sector investment to catalyse public sector innovation.

They would have discovered that Amman in Jordan is using a novel investment strategy to develop a regional business hub, and Penang in western Malaysia has overcome challenges to finance projects with a land swap plan.

Perhaps the Ministers of these countries have read the earlier New Zealand Productivity Commission reports.

A new local government for New Zealand

Rather than just focusing on funding, the Finance Minister should ask the Productivity Commission to develop a new, more effective model for (urban) local government in New Zealand. Actually, it has already provided many of the answers to this question too in its reports.

If New Zealand wants to fix urban challenges more quickly, and improve the country’s Global Innovation Index rating, ministers, mayors and policymakers need to be much better connected to the innovations and technology transformation happening in other cities. This doesn’t mean ballooning council travel budgets. But it does mean a much higher priority on the business of cities and having this flow through the extensive offshore trade, foreign affairs, NGO and private networks New Zealand already has in place overseas.

Not so many people imagine themselves as a mayor, because it just seems too much hard work for too little reward.

As the age of cities dawns, New Zealand’s ministers and its mayors should seize the opportunity to redefine both the role of Kiwi cities and how they are funded, so the hard work pays off and the rewards are obvious.

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Mad Chapman, Editor
Aotearoa continues to adapt to a new reality and The Spinoff is right there, sorting fact from fiction to bring you the latest updates and biggest stories. Help us continue this coverage, and so much more, by supporting The Spinoff Members.Madeleine Chapman, EditorJoin Members

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