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Intelligent funding for Smart Cities

Dimitar HRISTOV, Cluster Sofia Knowledge City

According to the European Parliament, the idea of a smart city consists of the development and integration of information and communication technologies, human and social capital to improve citizens' quality of life and achieve sustainable economic development. 

A Smart City is the one that is able to successfully solve many public problems through solutions based on the latest technologies and through partnerships between citizens, academic organizations, businesses, municipalities, and the state administration, and between all interested parties. When we talk about such a city, we usually bring out at least six of its smart dimensions, namely: economy, mobility, the environment, lifestyle, people, and urban governance.

This sharing economy is already the basis of the business models set in modern cities, and the knowledge is gradually becoming the most valuable capital and growth factor in every modern city. This is the reason why Cluster Sofia Knowledge City participates in all the most important forums and European initiatives taking place in Bulgaria and where possible in Europe. We realize that it is precisely the current business generation that will decide how cities will develop in the future, and it is right now to offer city administrations and governments the relevant business models for that.

On June 27-28, Cluster Sofia Knowledge City took part in a General Assembly forum of the European Innovation Partnership on Smart Cities and Communities (EIP-SCC) i Sofia. The EIP-SCC is one of the five important tools for creating a common European smart market focused on energy, mobility, and integrated infrastructures and engaged in all sectors and all sizes in order to create and ensure a growing, open and inclusive market. The aim of this initiative is to attract representatives of key market players in Europe to work together and offer integrated solutions that can lead this market to grow.

The conclusions and the measures discussed during this forum are the subjects of this brief article. These conclusions are welcome for cities such as Sofia, which do not have their own potential to develop and implement strategies and programs to achieve significant revival in the smart cities market. We designate a market in Sofia as "sleeping" i.e. still in its infancy before it becomes an "emerging market" with clearly defined components, trends, and market players.
One of the main conclusions of the forum is that opportunities always arise when an appropriate environment is created to increase market demand, accelerate the process and actions that are good examples for both society and investors.

The Forum has accepted that five are the key areas that are an integral part of creating a basis for stepping up investment in smart cities projects:

1. Accelerating the development and use of new business models

At present, business models for smart cities are heavily influenced by (i) scarcity of public funds to cover the full amount of investment; (ii) the manner of outsourcing; (iii) the value system of society; and (iv) the increasing participation of society in funding (for example, group funding, social media, etc.). These factors create needs and opportunities for innovation and application of new approaches to management and return on investments made in infrastructure and services. These changes affect all stakeholders who need convincing evidence to achieve value and viability in using new business models.

2. Change in the attitude of investors and the way they work with them

Most investors characterize investments in smart cities such as "too small, too slow and too risky" and there is a truth in this assessment. Cities are complex organisms that provide a huge range of services to a very wide range of stakeholders. Urban authorities have legal obligations and must strike a balance between their political and professional goals. Unlike individual businesses that are relatively easy to assess for the economic suitability of investments, they need to account for and manage the complexity of "public value" accordingly, which is a serious challenge and requires more than financial knowledge and skills. The centre of gravity moves on the impact of changing attitudes, expectations, and how to work with private investors, which most often means using appropriate business models and strengthening public-private partnerships. The city market is one of the largest markets in the world and it is clear that private investors can not miss it because it is more complex. This is the reality and it must be understood. Public procurement covers only a small part of this market. In order to make it attractive for direct investments, it is necessary to work towards reducing the investment risk, which is done by increasing investors' confidence in the return on the funds invested in urban projects.

The conclusion is that this is possible through earlier involvement of the investment community in the preparation and structuring of transactions, providing knowledge transfer, building innovative trading capabilities, and innovative business processes in cities. This requires a systematic market approach, which is a serious challenge in managing a city.

3. Diversity control - application of standards

We are witnessing attempts to balance the desire or necessity of introducing customized solutions (custom-made) and introducing "universal solutions". This is a topic related to the role of the standards on the basis of which interoperability and impact on shaping the intelligent city market could be achieved. In small towns, the use of standards is much more advantageous in terms of the amount of investment and timing to achieve the desired effect, such as cheaper, faster, and better services.
The availability of standards is also good for investors as they will increase confidence in investment decisions. They themselves could play an important role in the preparation and adoption of common and interoperable solutions (standards) for intelligent cities. Through them, they will achieve economies of scale and, ultimately, expansion of the investment market.

4. Ensure an inclusive market

Since the creation of smart cities globally is already in the "maturity" phase, it is also understandable that some cities benefit more and others less than the introduction of smart city technology. Of the thousands of world cities, there are relatively few to which the term "smart city" fits, and unfortunately, Sofia is not in this group. It is necessary to create an inclusive European market in which industry, investors, research and research organizations can benefit from the EU grant. Achieving the scale will be with the more active involvement of cities in joint projects.
Less developed (followers) will have the opportunity to learn and apply good practices in creating smart cities and even contribute to testing or collaborating in offering innovation. In addition, smaller cities are often more flexible and quicker to implement individual solutions.
Thus, through common action and inclusion, and expanded investment market is created.

5. Winning and engaging urban/civil societies

This is definitely one of the most important means of ensuring greater investor confidence even though it is a process and a collection of multiple city-level activities and initiatives that are often not directly linked to them. Cities should implement strategies and try to plan the process of transformation by putting their so-called smart targets. In most cases, to achieve these goals and to consider expected financial, social, and environmental performance, cities have to make significant changes that are difficult to implement without public support.

Consequently, cities must very well know public attitudes, understand them, and use them to ensure the active engagement of society. These are urban actions and initiatives that may not be seen directly by the investment community but vital to the development of an intelligent city. There is a toolkit to help the cities in this venture, and one of these tools is the Cluster Sofia city of knowledge.

That is why the cities (regions) that rely on access to the EU Structural Funds must use these means to attract and stimulate private investment by applying appropriate and innovative business models to the so-called hybrid financing.

 

 


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