AIIB meet: Indian cities need $45 billion to meet development goals

Indian cities will need around $45 billion every year to finance their infrastructure needs required to meet the sustainable development goals (SDGs) and to scale-up to become ‘smart cities’ over the coming decades.


In 2015, the Government of India announced its plan to build 100 smart cities and rejuvenate another 500 cities. Subsequently, the Union Cabinet approved a package of Rs 980 billion for the development of the 100 cities, and Rs 480 billion for the upgrading of 500 others. By January 2018, 99 cities under the Smart City Mission were selected for the next evolution in urban infrastructure and planning.


Ramamohan Mahidhara, Chief Investment Officer (CIO) at the International Finance Corporation (IFC), told Business Standard that cities in India have spent over $ 400 billion, on both capital-expenditure and operating-expenditure aspects of their infrastructure projects, over the past decade and a half.


There are around 1,700 cities in Asia with a population ranging from 150,000 to over a million, and based on existing projections 76 per cent of the world’s population will live in cities by the next decade, and five of the top mega-cities will be in Asia.


According to a report by the McKinsey Global Institute, a smart city is one which puts “data and digital technology to work with the goal of improving the quality of life. In particular, smart technologies change the nature and economics of infrastructure. They reduce the cost of gathering information about usage patterns—and with an unprecedented volume of data points in hand, city governments, employers, and residents can find new ways to optimize existing systems.”


Dholera, located along the Delhi-Mumbai Industrial Corridor,  is the country’s first and largest smart, sustainable greenfield city.


Speaking on a panel on Building Infrastructure for Asian Cities at the third annual Asian Infrastructure Investment Bank (AIIB), Jonathan Woetzel, Director at the McKinsey Global Institute, said, “In Asia today there is this once in a lifetime moment where there is a vast awakening of the population, where hundreds of thousands of people are emerging from isolated areas to cities where they can explore opportunities. The challenge is for cities is to support that change, enable that change and to allow the change to happen in a peaceful, sustainable and harmonious way.”


Mahidhara said that while there exists a massive gap in funding, “if we take a step back, the main thing in a smart city is if (the government) can deliver essential services to citizens in a timely fashion. There is a fair amount of challenge and opportunities, as the infrastructure needs of cities today are far greater than the financing capabilities.”


Further he said, “Cities need to raise revenues themselves, they are not doing so now, maybe Mumbai is an exception. There are a tremendous amount of stuff we need to do, perhaps getting credit ratings for cities. But we need to make institutional changes as well as capacity building capabilities in cities.”


“In many countries today there are several challenges, the reason why sometimes these projects don’t work is because either on one hand the government is not ready or on the other the private sector is not willing to invest. For successful implementation both have to work in tandem, that’s the only way the hands will clap,” said Loh Ah Tuan-Former Deputy Chief Executive Officer at the National Environment Agency of the Government of Singapore.


Apinetr Unakul-Strategic Director, CAT Telecom Company told members of the audience, the smart city concept has made telecom companies around the world restructure their business, as many of them are now looking towards providing technological solutions for smart cities. Nokia for example is working with the Indian Government’ Digital India initiative to develop 500 digitally integrated and sustainable smart villages across India.


“The telecom industry today is dying and they are now looking at technology integration and application to cities. But they are still figuring it out, how to create value and understand how to monetize these solutions.”


Mahidhara further stated that, ”Today state governments in India are competing with each other, we need to see city-to-city competition. As much as smart city development is about technology it is about having clear policies and solutions and robust institutional frameworks that stand the test of time.”


While there are institutions of finance willing to fund sound sustainable infrastructure projects and that solutions are readily available, it is necessary that city administrations improve their laws, and provide transparency and accountability to every citizen in a city, noted Woetzel.


The panel also included Ajoy Mehta-Municipal Commissioner of Mumbai and Renu Sud Karnad-Managing Director, HDFC Limited

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