Financing Solutions and PublicPrivate Partnership (PPP) for building smart cities Glenn Andrew Hughes - PwC

1. Da Nang Smart City Summit 2019
Financing Solutions and Public
Private Partnership (PPP) for
building smart cities
Glenn Andrew Hughes

2. PwC
Key Global and Local Urbanization Trends
Vietnam will need to consider the opportunities and overcome challenges created by urbanization and other trends when carrying out its
smart city plans and initiatives
2
MegatrendsLocaltrends
60% population to be in
urban cities by 2030
More megacities to come:
By 2030, globally 43 cities
will have 10 mn or more
inhabitants
50% of global GDP is
generated by the 300 largest
metropolitan areas
Global population: 8.6
bn by 2030
450 mn more people in
the global population will
be aged 60 and over by
2030
Urban population to
increase from 36% (2018)
to 45% (2020)
> 813 towns and cities
throughout the country
contributing more than 70%
of economic output
Large population: > 100
mn. (2029)
Young population: mean
age ~ 36 yrs (2029)
~ 90% of the population
connected via smartphone
by 2023
21 technological shifts
expected to take place by
2027
35%, 40% & 50%
expected increase in
global food, water and
energy demand
respectively by 2030
Temperature: Avg,
increase > 2 degree C in
21th century
High mobile penetration
rate: >42.6 million
smartphone users by
2022
7th worldwide for no. of
Facebook users
Annual average
temperature increased by
about 0.5°C in the past 50
years
Climate change may
cause a 1–3 percent loss
in real GDP by 2050.
Rapid Urbanization Rapid Urbanization Rapid Urbanization Rapid Urbanization Rapid Urbanization
Rapid Urbanization
Cities – Drivers of
Economic Growth
Ageing Population
Technological
Breakthroughs
Climate & Resource
Scarcity
Source: Public Press, PwC research & analysis

3. PwC
Vietnam Smart Cities Story
3
In Vietnam, urbanization growth has been increased rapidly from 19.6% (2009) to 36% (2018)
and expected 45% (2020). To foster social and economic development, the Government has
officially encouraged all 63 cities and provinces to build smart cities, and until now, 30 of them
have started working with ICT companies to design and develop the Smart City implementation
roadmap.
In Jan 2018, MIC published the guidance on ICT direction in developing smart cities in
Vietnam. In line with international guidance on Smart Cities, Vietnam Smart Cities approach
also includes 6 stages:
• Define vision
• Develop an overall implementation roadmap
• Formalize stakeholders agreements
• Implement Smart Cities
• Evaluate the metropolitan improvement (quantitative)
• Closing & lessons learnt
Nominated as a
part of ASEAN
Smart Cities
network.
Ha Noi
Da Nang
Ho Chi Minh
Rapid Urbanization
National Guidelines
Source: Public Press, PwC research & analysis

4. PwC
Key emerging priorities for Smart City implementation in Vietnam
4
E-Government
Smart
Urban planning
Smart
medical &
health care
Safe city Smart environment
& resource
management
Smart
education
Smart
transportation
Standard ICT
framework
Centralized
monitoring
center
Open data
architecture
Source: Public Press, PwC research & analysis

5. PwC
Key challenges for smart city implementation
5
• Lack of funding capital
• ROI
• Business models
01
Funding
• Lack of IoT standards
• Legislation and policies
• Slow government procedures
and reaction times
02
Policy
• Lack of confidence in using
and benefits from smart city
services
• Citizen participation and
privacy concerns
03
Citizens
• City-wide network coverage
• Network capacity
• Retrofitting existing
infrastructure
04
Tech
Institutional
• Lack of upfront
public capital
• Institutional
inertia
• Institutional
capacity
Market
• Return profiles
• Risk profiles
• Imperfect
information
Raising finance
Steering finance
Blending finance
Key Barriers Area of Actions Finance Mechanisms
• Fiscal Decentralization
• Debt financing
• National investment vehicles
• Public-private partnerships √
• Land value capture
• Pricing, regulation, standards
• International Finance
Source: PwC analysis, Technavio, Cisco, ITU, IEEE, Smart Cities Dive, GreenBiz; Financing the Urban Transition: Policymakers’ Summary. Coalition for Urban Transitions.
Focus here is on Financing and Funding
challenges
Top 7 mechanisms out of 72
instruments

6. PwC
PPPs in Smart Cities: A three-tier development model
The relationship between government and the private sector is evolving along a three-tier continuum –a journey that’s reshaping how
smart city digital infrastructure will be developed, financed and delivered worldwide in the years and decades to come.
6
The evolutionary path of
smart city development

7. PwC
Varying PPP models across Smart City transformation journey
A 3 Tier Development Model of PPPs in Smart Cities
7
Tier 1
• Initial move to Smart City
Development. Generally with the
goal of delivering a “point
implementation” of a specific
smart city service, capability or
infrastructure.
• Fairly traditional contracting
structures between public and
the private sector
• Examples might include the
creation of a traffic or parking
management system, public Wi-
Fi, LED street-lighting, a mobile
app for citizens to report
potholes, or a system for
managing and monitoring water
usage.
• Economic arrangements:
Largely borne by public sector
Tier 2
• Facilitates the development and
deployment of additional services on
the base digital city infrastructure.
These services are then offered to –
and used by – citizens in other areas of
their lives, multiplying the benefits
• PPP frameworks adopted with high
degree of sophistication making a
PPP pipeline available for disruptive
business models in medium term
• Examples: Transit payment card
system enhanced into a smartphone
and/or facial recognition-enabled
payments mechanism, and expanded
beyond its core remit to act as a
broader/city-wide payment platform.
• Economic Arrangements: larger
customer base for private sector; city
receives a share of the revenues
generated from customers’ use of these
services (as co-investor/co-participant)
Tier 3
• Development of a digital ecosystem in
and around the city’s digital infrastructure,
with the result that new products,
services, businesses and government
revenue opportunities are created on the
smart city platform
• Private to Private Deal Structures
emerge in this Tier
• Examples: Street-lighting: where private
sector have been contracted to provide
lower-cost street-lighting is has also
implemented “smart” street-lighting that
includes sensors, Wi-Fi, digital displays.
The deployment of these technologies has
created a digital platform upon which
innovative new services and solutions can
then be developed and deployed.
• Economic Arrangements: Private to
private deals; monetizes the digital platform
and generate new revenue opportunities
for Government
Stages of Smart City transformation and evolving PPP regimes
Definition
PPPDynamicsand
Examples
Source: World Economic Forum, Shaping the Future of Urban Development & Services Initiative & PwC Research

8. PwC
Managing key risks in PPPs for smart cities
8
Source: World Economic Forum, Shaping the Future of Urban Development & Services Initiative, Global Survey on Urban Services, PwC Research
Risks in PPPs
Corruption risk/ Market
distortion
Cancellation & change of scope
Breach of contract
Environment & other permit risk
Judical
What Investor needs
What Investor wants
• Political and regulatory stability
• Property rights (identifiable, transferable and
enforceable)
• Adherence to contractual framework
• Exit mechanism from investment
• Transparent procedures
• Predictable licensing regime
• City vision with key projects identified and a
project pipeline
• Objective and robust city governance procedures
• Support from community and community
approval
• Clearly defined project, its scope, delivery
programme and likely budget
• Consideration of a project’s feasibility and
commercial viability, and possible funding options
• Identified consents and permits required for
project delivery
Government actions
Investor actions
• Stability of the regulatory environment
• Efficient administration
• Reliable dispute resolution mechanism
• Engagement with the public sector
• Engagement with local communities
• Ethical conduct

9. PwC
The way forward for government and private sector
9
• As you envision and build your digital smart city platform, what
foreseeable additional solutions or services could be built on it?
• Is your current contracting structure limiting the potential for
innovation on the digital platform, or creating a protected market for
the private sector contractor?
• What are the development and monetization rights of the
government, the current contractor or third parties with respect to
these “add-on” services/solutions?
• How can you build a permitting and regulatory framework that
facilitates smart infrastructure deployment?
• What formulas for sharing revenues and risks should you be
considering for tier-two and tier-three services and solutions, and do
you have the contracting know-how to secure these?
• How can you ensure the ability to exit from arrangements without
incurring undue penalties or disrupting the ecosystem?
Some key questions for government to consider:
• How can you develop and present technology solutions to government
that meet current needs while also offering downstream potential for
new solutions and services?
• How can you enter into contracts that enable you (or third parties) to
innovate, develop and deliver new services and solutions based on
already-installed technology –and how will you monetize that capability
while giving government the latitude it needs to create open markets?
• How can you educate government on the financing, risk and reward
scenarios inherent in new technology solutions and services, and share
both risks and rewards equitably with government?
• How can you engage early with potential third party participants in this
digital ecosystem and secure their participation in the framework of
government-invested service/technology solutions?
• How can you foster engagement with citizens to secure their buy-in for
smart city development and its benefits for a new “citizen experience”?
Some key questions for private sector solution providers:
• As innovation will continue to generate new services and solutions, it follows that government and businesses will need to be agile and adaptable in their
relationship
• It is important that these solutions deliver the fullest possible value to citizens, government and business alike – and deliver this value not just in the present,
but for the foreseeable future as well

10. pwc.com
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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Glenn Andrew Hughes
Head of Capital Projects & Infrastructure
Advisory
Real Estate Industry Leader
T: +84 28 3823 0796, Ext. 1633
Mobile: +84 765320895
Email: glenn.andrew.hughes@pwc.com