SANTA CLARA, Calif.,
July 25, 2017 /PRNewswire/
-- The capital-intensive task of transforming cities into
seamless ecosystems is prompting governments to explore revenue
sources beyond internal bodies and join hands with financial
intermediaries and private investors. With the rising connectedness
of things and people, the global smart city market could expand to
$1.5 trillion by 2020 and prove to be
one of the biggest investment avenues for private investors
and institutions. The public sector will also look to
new mechanisms to distribute their funds into various smart city
projects and, ultimately, earn revenue through those projects.
"Stakeholders will be able to choose from a multitude of
financing mechanisms, and each financial mechanism has a unique
selling point in terms of infrastructure funding," said Frost &
Sullivan Visionary Innovation Research Analyst Yash Mukherjee. "Project initiators will
need to analyze the best-fit mechanism based on risk appetite, size
of investment, duration of financing and tax implications. They
will also benefit greatly from collaborating with financial
intermediaries, as they securitise the cost of capital and
distribute risks among investors."
Smart Cities Funding Models is part of Frost &
Sullivan's Visionary Innovation (Mega Trends) Growth
Partnership Subscription. The study analyzes and profiles each
financing mechanism to understand the key aspects of smart city
projects. This will give stakeholders a holistic view of the
infrastructure and financing involved in developing smart
cities.
To access more information on this analysis, please click
here.
The creation of smart cities will have wide implications for all
industries offering public and private services. For instance,
smart cities will disrupt public utilities segments such as
energy, transportation, waste management and water
distribution. Private participants in industries such as ICT will
fuel this disruption by integrating their services and providing
hardware to change the way citizens live.
"In developing countries, stakeholders in smart city development
often resort to direct financing through government allocation or
international grants. However, international grants and financing
are dependent on political and economic stability," noted
Mukherjee. "To attract foreign funding, which often is complemented
by transfer of technology and expertise, local governments must
focus on their ease-of-doing-business indicators."
Meanwhile, participants in developed economies rely more on
revenue-based financing models to build infrastructure.
Stakeholders from both types of economies have found great value in
adopting the public and private partnership model, even though the
terms of agreement may vary according to the region.
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Smart Cities Funding Models
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SOURCE Frost & Sullivan