It is time for a shift in thinking when it comes to planning smart cities, with a key factor being their ability to adapt to future needs, a Dubai summit heard on Monday.
With 1.3 million people moving into cities around the world each week, future needs and demands on resources are becoming harder to identify.
“It’s stretching resources beyond what cities are built for,” Michael Lake, president and chief executive of Leading Cities, told the Arab Future Cities Summit. “Our infrastructure is being stretched so far beyond our limits that our systems shut down, like in Boston.
“We can no longer think of cities in long-term planning. We can’t rely on today’s information to predict the future of today’s city.”
Leading Cities is a network of 10 cities, including Boston and Rio De Janeiro, that promotes innovation and technology.
Mr Lake said developing plans that could adjust to make a city more sustainable and resilient was crucial.
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“With 70 per cent of the entire world population living in cities in a few decades, the world is looking at people like us to make the right decision and build the cities of the future,” he said.
Cities including Dubai have a roadmap of how to tackle various challenges and its 2021 plan was outlined at the summit, addressing its urban, built and natural asset environments.
“It’s built on the economy, which we see as the engine of the city,” said Samira Al Rais, director of sustainable development at the General Secretariat of the Executive Council of Dubai.
“Some of the themes of the plan are for a smart and sustainable city, an inclusive and cohesive society and a creative and happy city. We developed around 600 programmes in the plan.”
As such, Dubai’s Government aims to ensure 20 per cent of trips by road are on public transport, compared with 16 per cent today. It also aims to have emergency services reach the scenes of accidents in an average of four minutes.
The city aims to have 90 per cent of the days in a year clear of all air pollutants.
The largest contributor to air pollution in Dubai is road transport, at 51.7 per cent, followed by industry at 18.6 per cent, air traffic at 10 per cent, energy at 9.6 per cent and sea traffic at 8.8 per cent.
As for greenhouse emissions, water and electricity top the list at 39 per cent, followed by industry at 30 per cent, road transport at 19 per cent and waste at 12 per cent.
And with an expected 564 million transport passengers estimated by 2021, compared to 362 million today, projects are in the pipeline to help meet those targets.
“Fifteen per cent of Dubai’s taxis will be hybrid by 2021 and we want to increase the walkability and bikeability of the city as well as electric and hybrid vehicles,” Ms Al Rais said.
“By 2030, we have a target of 25 per cent of solar installed capacity. We want to increase the penetration of district cooling by 40 per cent and save 18 per cent of energy.
“We want to build and operate Maktoum International Airport as a carbon-neutral airport and operate it using zero conventional energy.”
The United Nations Department of Economic and Social Affairs says managing urban areas has become one of the most important development challenges of the 21st century.
“Cities today don’t stand alone, they’re connected,” said Dr Abdullah AlNuaimi, Minister of Infrastructure and Development. “Today we look at smart cities as a part of our social ecological system, not only as a shelter.
“What we see today in the UAE is people getting together in a sporty lifestyle and we have eight cities under construction that encompass schools, clinics, sports centres, markets, roads, lighting and tracks for families, with another two in the pipeline for next year.”
Another 3,500 resident units will be added annually by 2030 when Dubai’s population is expected to reach 5.2 million, with 25 per cent more energy needs.
“We spend 90 per cent of our time in buildings,” said Fida AlHammadi, head of research and building at the Dubai Municipality. “So when we build them, we should take care of the criteria that we put in them.
“We launched last year Al Sa’fat, a green building evaluation system, to improve the performance of buildings.”
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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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