Supporting Southeast Asian Smart Cities is Critical for the Region & the United States

By Kim Mai Tran & Andreyka Natalegawa — 

Siem Reap, Cambodia is one of several cities in Southeast Asia that will benefit from Smart City initiatives in the region. Source: Stig Berge’s flickr photostream, used under a creative commons license.

In his remarks at the United States-ASEAN Summit in November 2018, Vice President Mike Pence announced the U.S.-ASEAN Smart Cities Partnership in an effort to spur U.S. investment in the region’s digital infrastructure and enhance cooperation on cybersecurity issues. This partnership will be strategically significant for two reasons. First, the partnership offers opportunities for U.S. tech companies to develop key urban digital infrastructure in one of the world’s fastest growing markets. Second, the partnership is central to Trump administration’s efforts to show its continued commitment to the Indo-Pacific region in the face of growing concerns over Chinese aims and activities in the region.

This partnership follows the launch of the ASEAN Smart Cities Network (ASCN) in April 2018. While the complementarity of the U.S.-ASEAN Smart Cities and the ASCN remains unclear, this is a first step to fulfilling the unmet need for smart, sustainable urban infrastructure in Southeast Asia.

Demographic pressure on urban centers in Southeast Asia is breathtaking: By 2030, its urban population will grow by 100 million people from 280 million people today, precisely in areas often least serviced by today’s urban technologies. While economists expect growth in Southeast Asian economies to slow down, urbanization will continue and accelerate. Countries in Southeast Asia must build up readiness and capacity to adequately respond to the challenges brought by rapid urbanization.

Unsupportive infrastructure and an unreadiness to face environmental and demographic challenges have given rise to flooding, traffic congestion, poverty, and growing inequality. Estimates indicate Jakarta, regularly rated as having some of the world’s worst traffic congestion, is projected to lose $3 billion every year because of traffic congestion. Informal and oftentimes precarious housing settlements accentuate challenges faced by the leadership of megacities, especially water and waste management. Flooding during monsoon season and water scarcity during dry season are still commonplace in megacities like Jakarta or Manila.

Recognizing these challenges, ASEAN members launched the ASEAN Smart Cities Network (ASCN)  at the 32nd ASEAN Summit in April 2018 under Singapore’s chairmanship. The ASCN listed 26 pilot cities spread across ASEAN. The ASCN aims to facilitate cooperation on developing smart cities and best practices, catalyze bankable projects in an effort to promote public-private partnerships, and facilitate “mutually beneficial” partnerships with external and private funders and partners.

Ultimately, the ASCN strives to leverage technology to bring smart and sustainable urban development, provide reliable and high-quality public services, and address issues stemming from rapid urbanization to eventually improve citizens’ overall quality of life.

Based on the ASCN member cities’ different needs and priorities, city representatives choose key sectors to develop. DKI Jakarta has prioritized industry and innovation, infrastructure, and health and well-being in its Smart City action plan, with a specific focus on incorporating cashless payments. The leadership of Cambodia’s Siem Reap is focusing on creating a clean environment and an effective resource management system as well as promoting a safe and secure city.

Harmonizing efforts between the ASCN and the U.S. initiative in order to address the challenges of urbanization would provide a welcome boost to U.S.-ASEAN relations, a partnership that is of great strategic interest to the United States. ASEAN is a critical market for U.S. businesses that are looking to increase their presence in Asia. Companies like Boeing, General Electric, Nike, and Pepsico are all forecasting Southeast Asia to account for a larger share of global demand and consumption. American tech giants have, too, been seizing the immense market opportunity ASEAN offers. In 2017, Facebook connected some 360 million people and the Silicon Valley giant recognized Southeast Asia as “a dynamic mobile first region, and the fastest growing for Facebook.” Similarly, Amazon has announced that it will partner with the Vietnam E-commerce Association to penetrate Vietnam’s e-commerce marketplace, which is projected to reach a value of $20 billion in 2020.

Spearheading the development of digital urban infrastructure in the region would allow the United States to anew be a leader in establishing norms and setting standards consistent with the rules-based international order. This would be particularly significant at the time when the Chinese Communist Party is striving to dominate the digital market in Southeast Asia with its Digital Silk Road strategy.

Despite being at an early stage, China’s Digital Silk Road is set to have significant geopolitical and economic impacts on Southeast Asia. China’s approach to developing and promoting digital and technology standards within its own borders has been criticized internationally, notably by the United States. The Chinese government has repeatedly breached WTO rules by unfairly interfering in standards development to the benefit of its state-owned enterprises. The Digital Silk Road, although still in its genesis, encourages Southeast Asian countries to adopt similar low standards and norms and fosters unfair competition.

U.S. tech companies are well suited to playing a role in building ASEAN’s smart cities, as they have been shaping innovation and digital infrastructure in the region for over a decade. Google established its first data center in Singapore in 2011, having since built another Singapore-based center in 2015 and in 2018 announced both a third Singapore facility and a new Google Cloud Platform region in Jakarta. Similarly, Amazon plans to invest $924 million in Indonesia and to launch its e-commerce service in Vietnam, in collaboration with local e-businesses.

Market opportunities for digital urban infrastructure and growing demand for digital tools make Southeast Asian cities a promising market for U.S. technology firms. Successful absorption of new U.S.-designed technology in Southeast Asian cities will also benefit the development of supply chains that respect standards and norms set by the United States. Ultimately, the absorption of new technologies could spur innovation in these urban centers. Smart cities initiatives in India, for example, could serve as a model for their Southeast Asian counterparts. India’s Smart Cities rely primarily on Modi’s “People-Private-Public Partnership” model, wherein the private sector is a main source of capital, technology, know-how, and other resources which, in turn offset pressure on the government to bring in the incremental revenue necessary to help finance these cities. In 2014, U.S. Trade and Development Agency (USTDA) and IL & FS Energy Development Company partnered and invested in waste management projects in three cities.

Strategically, the U.S.-ASEAN Smart City Partnership reaffirms U.S. commitment to the region at a time of uncertainty. Since the U.S. withdrawal from the Trans-Pacific Partnership (TPP), ASEAN leaders have held doubt regarding U.S. engagement in and with the region. The Smart City Partnership assuages this doubt, and complements the recently announced $113 million investment pledge in technology, energy and infrastructure initiatives in emerging Asia that Secretary of State Mike Pompeo called “a down payment on a new era of U.S. economic commitment to the region”.

The U.S.-ASEAN Smart City Partnership, whether implemented through the facilitation of public-private partnerships or direct government-to-government engagement by Washington, would serve U.S. strategic interests by strengthening ties between U.S. entities and municipal leaders in Southeast Asia. Already in possession of considerable decision-making powers in their own right, municipal leaders in Southeast Asia have come under spotlight in recent years as local governance has become a viable pathway to nationwide office, as in Indonesia and the Philippines. The United States would stand to benefit greatly from working directly with these leaders, incubating relationships and providing a generation of leaders with first-hand exposure to the benefits and advantages of working with U.S. and like-minded partners in development and infrastructure projects. Recent cases, including conflict between the Australian federal government and the government of Victoria over the latter’s engagement with the Chinese Belt and Road Initiative, demonstrate the need for a whole-of-government approach to infrastructure initiatives; an approach that should consider engagement with local actors equally as critical as engagement with national leaders.

In sum, the announcement of the U.S.-ASEAN Smart Cities Partnership signals a recognition of the importance of Southeast Asia, especially at a time of increasing great power competition in the region at both strategic and economic levels. In absence of U.S. participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Smart Cities Partnership represents a significant opportunity for the United States to bolster its presence and engagement in the region and will allow to the United States to participate in setting information and communications technology norms and standards in Southeast Asia.

Ms. Kim Mai Tran is a Research Associate with the Southeast Asia Program at CSISMr. Andreyka Natalegawa is Program Coordinator and Research Assistant the CSIS Southeast Asia Program.

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