Dubai and Abu Dhabi lead the Middle East and North Africa region in a new global ranking of smart cities, outshining advanced urban centres like Seoul, Shanghai and Tokyo in implementing technologies to enhance quality of life, the environment and inclusiveness.
The IMD Smart City 2019 Index placed Dubai in 45th spot out of the 102 cities ranked while Abu Dhabi took 56th position, according to the IMD World Competitiveness Centre’s Smart City Observatory, which produced the study in partnership with Singapore University of Technology and Design.
The “citizen centric” ranking of major urban hubs across the globe is based on survey that gauged inhabitants’ perception of their urban setting and services provided. Saudi Arabia’s capital Riyadh took the 71st spot, Cairo came in at 99th position and the Moroccan capital Rabat was placed 101 in the ranking.
“Smart cities are becoming magnets for investment, talent and trade. Yet, a significant part of the efforts and energy spent seem to be disconnected from the long-term aspirations of citizens. Without citizen’s support and engagement, smart cities may not be sustainable,” Bruno Lanvin, President of the IMD’s Smart City Observatory said.
The ranking is significant as Dubai the commercial and trading hub of the Middle East scored better than global peers such as Chicago in the US and the French Capital of Paris, while Abu Dhabi topped Tokyo and Osaka in Japan and the Italian capital of Rome, the survey found.
Building cities integrated with next-generation technologies such as the Internet of Things and artificial intelligence begins with investments that leverage on advanced IT infrastructure. Smart city initiatives, central to the United Nations’ Sustainable Development Goals, have been top of the UAE’s agenda for some time.
Abu Dhabi has taken significant stride in automating government services and improving quality of life for residents in the capital through the use of technology, while Dubai's Vision 2021 also has a laser-focus on transforming the emirate into a smart city. The emirate is pursuing its goals to create a more efficient and seamless environment, through the introduction of public Wi-Fi and electric car charging stations, as well as smart parking, live traffic monitoring and smart power grids and the roll out of blockchain in business ledgers, billing and consumption services.
The Middle East and Africa’s Smart Cities market will double from $1.3 billion (Dh4.8bn) in 2018 to $2.7bn by 2022, according to global consultancy KPMG. International Data Corporation (IDC) expects the IT spending related to Smart Cities by both Abu Dhabi and Dubai to grow to $292.65 million in 2020, compared to $174.25m in 2018. Intelligent transportation and smart public safety are expected to be biggest areas of investment by the two cities, the Massachusetts-based IDC, said in a note earlier this year.
Globally, Singapore emerged as the smartest city in the world in 2019, according to the IMD Smart City 2019 Index, which ranked it on top in aligning policy with the lives and needs of its citizens. Zurich was ranked second followed by Oslo, Geneva, Copenhagen, Auckland, Taipei, Helsinki, Bilbao and Dusseldorf in Germany.
There is no ‘one size fits all’ strategy for becoming a smart city, although all three leading cities score highly for "structures" — how services are made available to citizens — while their scores vary for "technologies", which assesses real impact on citizens’ daily lives.
Singapore, for example, performs well in safety, monitoring of air quality and traffic congestion, while Zurich is strong for public transportation and access to medical and cultural services. Oslo’s citizens hail the quality of ‘circular economy’ solutions, online voting and bicycle-centric mobility, the study noted.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
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