Global Cities and Future Opportunities · 3 GLOBAL CITIES AND FUTURE OPPORTUNITIES OVERSEAS MARKETS FOR UK SME s 1.4 UNITED STATES Overview 53 Public Sector Initiatives Supporting

Global Cities and Future OpportunitiesInsights into five overseas markets and cities for new opportunities for UK SMEs

2 GLOBAL CITIES AND FUTURE OPPORTUNITIES OVERSEAS MARKETS FOR UK SMEs

2


1.4 UNITED STATES Overview 53Public Sector Initiatives Supporting R&I 55Potential Partnership Areas – Where do the Opportunities Lie? 57‘Fund’ Opportunities: R&D to facilitate knowledge transfer and learning 59Supporting Factors for UK SMEs Entry 60Challenges to Market Entry for UK SMEs 61Routes to Market – How can UK SMEs Access these Opportunities? 62Recommendations for SMEs –Better Access to Opportunities 63

1.5 JAPAN Overview 66Public Sector Initiatives Supporting R&I 67Potential Partnership Areas – Where do the Opportunities Lie? 70 Supporting Factors for UK SMEs Entry 73Challenges to Market Entry for UK SMEs 76 Routes to Market – How can UK SMEs Access these Opportunities? 77 Recommendations for SMEs – Better Access to Opportunities 80 Addressing Challenges 80

Chapter 2: City Typologies 83

2.1 OVERVIEW 2.2 Methodology 84 2.3 Process Map 852.4 Outcomes 88 2.5 City Profile Case Studies 88 CASE STUDY – Target High Growth ‘Goldilocks’ Cities for B2G opportunities: Varanasi (India) 90 CASE STUDY – Target Lower Growth B2B markets: Tokyo (Japan) 92CASE STUDY – Target Middleweights with Strong R&I Potential: San Diego (US) 101

EXECUTIVE SUMMARY 4 INTRODUCTION 6

Chapter 1: Priority Countries: Opportunity Overview and Recommendations 7

1.1 AUSTRALIA

Overview 9Public Sector Initiatives Supporting R&I 9 Other Supporting Factors for UK SMEs Entry 11 Barriers to Market Entry for UK SMEs 13 Where do the Opportunities Lie? 13 Routes to Market – How can UK SMEs Access these Opportunities? 15 Recommendations for SMEs – Better Access to Opportunities 20

1.2 CHINA Overview 22 Public Sector Initiatives Supporting R&I 24 Other Supporting Factors for UK SMEs Entry 25 Barriers to Market Entry for UK SMEs 26 Potential Partnership Areas – Where do the Opportunities Lie? 29 Routes to Market – How can UK SMEs Access these Opportunities? 32 Recommendations for SMEs – Better Access to Opportunities 33

1.3 INDIA Overview 34 Public Sector Initiatives Supporting R&I 35 Supporting Factors for Market Entry for UK SMEs 38 Barriers to Market Entry for UK SMEs 41 Potential Partnership Areas – Where do the Opportunities Lie? 45Routes to Market – How can UK SMEs Access these Opportunities? 49 Recommendations for SMEs – Better Access to Opportunities 51


EXECUTIVE SUMMARY

UK small and medium businesses that are

seeking to work in overseas markets need

to have a clear understanding of country

and city markets and the opportunities

available in each of them. This report provides

multiple levels of insights across countries

and cities as well as both specific in-country

ecosystem mapping and broader approaches

to five Innovate UK priority countries.

The report also provides a framework for

city typologies that can help businesses

determine the best approach to working

in various cities around the world.

Chapter 1 delves into five priority countries:

Australia, China, India, the United

States and Japan. For each country the

report provides a general overview, public

sector support for R&I, support factors for

UK SME entry, barriers to entry, sectoral

opportunities, routes to market and specific

country recommendations.

Australia provides some natural synergies

for UK urban innovation, given advanced

infrastructure in its cities and a good citizen

quality of life. The Australian government

provides strong support and funding for R&I

activities and has backed it with their Smart

Cities Innovation Plan, The National innovation

and Science Agenda as well as the Australian

Public Service Innovation Act.

China’s smart city market is growing rapidly

to meet increasing urbanisation demand,

which provides both large-scale opportunities

and large-scale challenges. China has a

top down approach to urban development

and has recently launched several national

initiatives, including the National New-Type

Urbanisation Plan; China’s 13th Five Year

Plan; the Made in China 2025 strategy; and

the Greater Bay Area Scheme.

India’s urbanisation rate has led to an

increased focus on smart cities with Prime

Minister Narendra Modi’s 2015 launch of

the national Smart Cities Mission programme.

The UK is well placed to support India in

its urban development journey having

already built a strong bilateral relationship.

India’s public-sector support for R&I from

the Ministry of Housing and Urban Affairs

includes the Smart Cities Mission, Smartnet

and the Atal Mission for Rejuvenation and

Urban Transformation (AMRUT). Programmes

from the Department for Electronics

and Information Technology include:

Digital India, Centre for Excellence

for IoT, the National Innovation Foundation,

and Startup India.

The United States remains an important

part of the global economy story, although

overall performance of US cities has varied.


Public sector initiatives include: The White

House Smart City Initiative, Metro Lab

Network, the National Science Foundation,

and the Smart Cities USA PPP.

Japan presents both opportunities and

challenges. Whilst Japan’s overall economy

has steadily declined, a renewed set of

economic programmes by Prime Minister

Shinzo Abe may present focused areas

of business growth opportunities. Public

sector opportunities supporting the science

and technology sectors include: National

Strategic Special Zones with business-

friendly conditions; a refreshed Science

and Technology Basic Plan; the Realizing

Society 5.0 programme with themes for

cyber security, IoT, big data, and A.I.;

expansion of the national Science,

Technology and Innovation programme;

and ‘New Tokyo. New Tomorrow – The

Action Plan for 2020’.

Chapter 2 of this report moves from

National to City focused markets with a

unique methodology for City Typologies.

This ‘hybrid’ approach begins to account

for the ever changing political, economic,

social and technological dynamics within

the landscapes of cities that are playing

a bigger role in determining the overall

market potential and attractiveness for

innovative, urban businesses.

Increasingly, essential services including

water, energy, clean air and waste are

being managed at the city level, rather

than by national authorities. This implies

varying models of urbanisation are adopted

across cities. These differences make it

imperative to understand how cities can

be understood both individually and as

clusters, based on their performance

across a set of parameters – in this case,

parameters that help determine the

attractiveness and market potential of

cities within the innovation and urban

services domain.

The core typologies framework

categorises cities on a simple two by

two matrix, looking at growth per capita

and by population, alongside city size. This

creates multiple lists of cities that could,

for example, be high growth and size,

high growth and medium size or low

growth and small size, among others. Users

can then select the ‘type’ of cities that

they want to examine further to determine

their capacity for cities with a high-public

sector demand (B2G), cities with promising

business-to-business (B2B) markets, and

cities with strong R&I opportunities, all

scored on a spectrum through rigorous

data and research.

This methodology produces a dynamic

mix of cities from the initial filters to

reveal emerging and established

market opportunities and highlights

cities beyond the ‘usual suspects’ for

cities primed for partnership, growth

and market development.

This report illustrates the uniqueness,

usefulness, and usability of the city

typology methodology by highlighting

several city case studies of cities that land

within different categories on the typology

including: Tokyo, New York, Varanasi,

Nanyang, San Diego and Ningbo.


The purpose of this study is twofold. Firstly, the

study undertakes a country-level gap analysis for

the five ‘priority countries’ 1 of Australia, China,

India, Japan and the United States (US) to provide

more granular insights into these markets.

Secondly, the study aims to define and create a

‘City Typologies’ framework to classify cities across

the globe based on their Research & Innovation

(R&I) attributes and market potential for businesses

in the urban services sector. This work stream is

intended to take the country-level gap analysis

to the next level and account for the growing

prominence of city dynamics in determining market

potential and attractiveness, as well as to account

for the high level of variation between dynamics

of cities within the same country.

This typology is further intended to guide the

overseas strategy of SMEs, based on different

market attributes of various cities across the globe.

1 The five priority markets were identified based on an

opportunity analysis of eight countries indicated by IUK.

INTRODUCTION


This chapter is intended to provide a more nuanced understanding and ‘gap analysis’ of the five countries identified as ‘priority markets’ in our previous work on ‘Country Overview and Innovation Ecosystems’. 2 In particular, it provides a snapshot of each country’s various government initiatives and other factors conducive to the entry of UK SMEs within the advanced urban services and related sectors, potential sub-sector opportunities, potential routes to market for UK SMEs.

2 The five priority markets were identified based on an

opportunity analysis of eight countries indicated by IUK.

CHAPTER 1

PRIORITY COUNTRIES: OPPORTUNITY OVERVIEW AND RECOMMENDATIONS


Sydney


1.1 AUSTRALIA

OverviewAustralia is a highly urbanised country with around

90% of its population (22 million people) living in

urban areas, as of 2017.i The country’s urbanisation

rate is forecast to reach 93% by 2050.ii This

urbanisation, however, is highly localised with most

of the population concentrated around the more

hospitable coastal areas in the South and South-East.

60% of the Australian population lives in its

five largest cities – Sydney, Melbourne, Brisbane,

Perth and Adelaide. Outside of these areas, the

country is sparsely populated. Due to its sheer

size and relatively small population, Australia’s

population density ranks among the lowest in

the world, with studies reporting just 3 people

per square kilometre.

While the US, India and China (three of the other

four priority markets) have huge urban systems with

many large, medium-sized and niche cities, Australia

only has five large cities (populations over 1 million)

and only 6 medium-sized cities (populations

between 200,000 and 1 million people).

However, Australia’s cities are the drivers of the

nation’s vast economy, with the five largest cities

accounting for 79.1% of the national GDP in 2015-

2016. In addition to driving the national economy,

Australia’s cities consistently perform well in

various Quality of Life and Liveability indices. For

example, Mercer’s 2017 Quality of Living Rankings

place five Australian cities within the top 30 cities

taking into account measures such as the political,

economic and environmental situation, personal

safety, health, education, transportation and other

public service factors.

The relatively advanced infrastructure of its cities

and better quality of life of its citizens provides

for natural synergies between Australian and UK

cities and by extension, between the two countries’

urban innovation landscape.

Public Sector Initiatives Supporting R&I

“The Australian Government recognises the vital role

new knowledge and innovation plays in the economic,

cultural and social advancement of a nation. In

2016-17 alone, the Australian Government invested

over $10bn in science, research and innovation.” —

Department of Industry, Innovation and Science,

Australia, 2017

The Australian government has recently launched

a number of initiatives to boost its innovation

agenda across sectors, and to channel new sources

of economic growth in the country. These initiatives

lay the groundwork for international Research and

Innovation (R&I) within the infrastructure, transport,

design and engineering and other such advanced

urban sectors in the country.

The recently published Smart Cities Planiii

sets out the Australian Government’s vision for

its cities—metropolitan and regional—and its

commitment to three pillars of Smart Investment,

Smart Policy and Smart Technology.

The Smart Investment pillar prioritises projects

that have clear economic and city-improvements

objectives such as creating more jobs, increasing

available housing and producing healthy

environments. It also lays the foundation for more

innovative funding packages and highlights the

need for more private-sector involvement.


The Smart Policy pillar emphasises the use of

‘City Deals’ to enable governments, industry

and communities to develop collective plans for

growth. These deals will allow cities to earmark

specific investments and make reforms required

to drive business and industry development

and ensure community wellbeing. As of January

2018, the government has signed four deals

for Launceston, Western Sydney, Townsville

and Hobart. Another deal is underway for

Geelong City.

The final Smart Technology pillar supports the

use of disruptive technologies, such as sharing

economy or the Internet of Things (IoT), to

improve how cities are planned and how

they function. There is also considerable

support for open data driven solutions and the

commercialisation of new innovations.

Secondly, The National Innovation and Science

Agenda (NISA)iv , launched in December 2015, is

the government’s flagship innovation and science

policy. It includes initiatives worth AUD 1.1 bn

over four years, and covers a range from sectors

including ICT, healthcare, education, agriculture,

defence and transport. Among other things,

it focuses on growing collaboration between

industry and researchers to find solutions to real

world problems and to create jobs and growth.

The Global Innovation Strategyv – the key

international measure of NISA – provides an

overarching framework to guide Australia’s

international industry, science and innovation

collaboration. The strategy promotes global

engagement on entrepreneurship and innovation,

building strong research and business connections

internationally. It is underpinned by funding

initiatives that support international collaboration,

particularly between researchers and industry.

These initiatives include:

l Global Innovation Linkages: Supports Australian

businesses and researchers to collaborate with

global partners on strategically focused, leading-

edge research and innovation projects. It supports

projects focused on developing high quality

products, services or processes that respond to

industry challenges, with funding of up to AUD 1m

per grant over a maximum period of four years.

l Global Connections Fund: Supports global SME-

to-researcher collaborations to enable viable

projects to grow and test commercialisation in

industries of strategic growth in Australia. There

are two types of grants under the Fund. Bridging

Grants are grants of up to AUD 50,000 as seed

funding to enable viable projects to grow in scope

and scale, test commercialisation and proof-of-

concept activities. Second, Priming Grants are

grants of around AUD 7,000 to enable Australian

SMEs and researchers to meet and collaborate

with international partners to further develop

their ideas.

Thirdly, the Australian Public Service Innovation

Action Plan aims to drive innovation in the public

sector through initiatives such as the Public-Sector

Innovation Network, an innovation blog and an

innovation tool kit. Efforts were considerably

stepped up with the arrival of the Turnbull

government, which in December 2015 accounted

for a new Australian national innovation and

science strategy that featured 20 policy reforms

and AUD 1bn in new investments.vi

Finally, the National Collaborative Research

Infrastructure Strategy (NCRIS) fosters research

excellence and collaboration between academia,

research institutes, government and industry to

deliver research excellence and practical outcomes.

It supports international collaboration through

facilities and projects covering capabilities such as

high-performance computing, data, environmental


and earth monitoring, advanced fabrication

and instrumentation, biology and therapeutic

development and astronomy.

Other Supporting Factors for UK SMEs Entry

Apart from various public-sector initiatives, at

a practical level there are a number of other

factors that strengthen the case for collaborative

R&I between Australia and UK.

l Common Economic, Cultural and Legal Practices:

In addition to the synergies arising from similar

levels of infrastructure and economic growth,

Australia and UK share a common language and

have similar cultures, business and legal practices

(such as IP protection) and technical standards.

These commonalities impart the UK businesses

certain advantages over other global players

when looking to enter the Australian market.

l Australia’s liberal stance to global businesses:

Australia’s reliance on overseas markets for

consumption and international trade has led to

the country developing a political and economic

environment which supports globalised business.

To this end, Australia is a strong proponent of

trade liberalisation having entered into ten free

trade agreements.

l Strong investment patterns between Australia

and UK: The UK is the second largest foreign

investor in Australia after the US, with stock

worth almost AUD 500bn. Over 1,000 British

businesses already operate in Australia, including

well-known companies like HSBC, BP and BT,

as well as hundreds of SMEs. These companies

provide a strong foundation for further R&I

collaboration between the two nations and

can act as potential ‘gateways’ for UK SMEs.

l UK SME Capabilities: UK SMEs have strengths

and sector expertise that particularly cater to

Australian needs and city challenges of urban

sprawl, congestion, an ageing population

and climate change.

l Strong IP Protection Practices: To increase

collaboration and commercialisation of

intellectual property, IP Australia, an agency

of the Australian Department of Industry,

Innovation and Science, has developed

Source IP – a digital marketplace specifically

created to help businesses and researchers

collaborate by facilitating quick and easy

contact. It helps businesses access public

sector inventions and technology available

for licensing, and to identify potential

collaboration opportunities.

l Government Support for R&I: The Australian

Government provides significant support

to Australian businesses, universities and

research for R&I, including international

collaboration, so many Australian partners may

be able to self-finance their participation. This

makes collaborating with Australian partners

financially less straining for UK counterparts.

l UK’s vast pool of talent and research

infrastructure means that the two countries

can join up resources for R&I into niche or

novel areas that would otherwise be difficult

to cater to owing to limited financial and

human resources.

l Finally, Australia’s relatively late entry to

the wave of smart cities gives UK SMEs

an opportunity to showcase and promote

solutions, technologies and models that

they have tried and tested within the UK,

giving Australian partners more confidence

on their capabilities.

GLOBAL CITIES AND FUTURE OPPORTUNITIES OVERSEAS MARKETS FOR UK SMEs


Barriers to Market Entry for UK SMEsDespite a number of encouraging factors,

there are few barriers that pose mild threats

to UK SMEs to form successful partnerships

and do business in Australia. However,

compared to other countries assessed,

these challenges are of less serious

nature and can be overcome with

appropriate offerings. The main

challenges identified are:

l Growing Focus on Home-Grown SMEs.

Recognising its own strengths in areas

such as advanced manufacturing, clean

technologies, road safety and infrastructure

finance, Australia has launched a number

of initiatives that focus on promoting its

home-grown businesses in its domestic

and global markets.

These initiatives include the CSIRO

Innovation Fund, Incubator Support

Initiative and its Global Innovation

Strategy that has led to the creation of

‘Landing Pads’ in global innovation

hotspots such as Berlin, San Francisco,

Singapore and Shanghai. These Landing

Pads provide Australian businesses and

research institutions with access to the

innovation ecosystems in these locations.

l Localisation Barriers. Australia has also

put in place several localisation barriers

to trade which may inhibit the ability of

international businesses from accessing

the Australian market. These include

Local Content Requirements (LCRs) which

require producers to use a minimum

percentage of locally produced output

(e.g.: components, IP, etc) and Local

Production Requirements (LPRs) which

mandate local production of a product

or service as a fundamental condition of

market access.

l Logistics and Resources for Long Travel.

Australia’s eastern cities are approximately

24 hours away from the UK by plane and

the country is between 7 and 11 hours

ahead of the UK in terms of time. This can

create communication difficulties and

requires significant financial commitment

to travel regularly.

l Inter-state Variations in Laws and Regulatory

Structure. Owing to its federal system, laws

and regulatory practice can change between

Australian states. This requires organisations

looking to operate across states to tailor their

inter-state operations accordingly.

Where do the Opportunities Lie?vii

In our previous work, we undertook an

in-depth sectoral analysis to identify

collaboration or ‘Connect’ Opportunities and

knowledge exchange or ‘Fund’ opportunities’,

as described below.

These opportunities showcase only some of

the potential collaboration areas and should

not be treated as an exhaustive list.

The ‘Connect’ opportunities imply R&I

activities intended to lead to commercial

business. These opportunities have been

identified by aligning UK commercial and

innovation strengths with challenges faced by

Australian cities that are currently not being

met by the domestic suppliers.


OPPORTUNITY DESCRIPTION AND REASONING

Urban design and planning

The UK has a well-established land-use and planning system. Recently, the UK’s focus has moved to planning at an urban scale to address a more fundamental agenda. Its specialities include: urban and regional development, master planning and urban design, urban regeneration, heritage and conservation, environmental assessment and sustainable development. Due to the rapid expansion of suburbs, Australian cities are suffering from urban sprawl and could benefit from the UK’s world-leading expertise in planning and regeneration.

Smart City Standards Development

Capabilities in regulatory and standards development has placed the UK at the forefront of developing new standards for green building, smart cities, open data, urban design, public service delivery and community governance. Australia has chosen to adopt UK-developed ‘smart city’ standards in the past (Hypercat), therefore there is an opportunity for the UK to export further smart city standards, which in turn will give UK companies a better opportunity to access the Australian market. In turn, Australia has launched the IoT Alliance Australia which aims to shape regulatory and collaboration frameworks to enable Australian industries to harness IoT opportunities. Learnings from this initiative may prove useful to the UK.

Innovation Ecosystem Development

Australia has a strong science base with strong universities and high public sector R&D expenditure. However, while Australia excels in terms of innovation inputs, it falls behind on turning research into commercial products and services. It performs particularly poorly in terms of innovation efficiency. The UK on the other hand has a strong innovation ecosystem, having founded more than a third of Europe’s ‘unicorn’ technology firms (worth over $1bn). The UK could share some of this expertise with Australia, particular in the area of venture capital funding which is struggling in Australia.

Digital Technologies

The UK’s diverse creative services combined with its fast-growing digital sector are producing innovative digital services for cities. The UK’s digital economy is estimated to comprise over 120,000 firms and represents around 8% of the UK’s GVA. Australia does not have a particularly developed digital technology industry. It has no companies on the Global Fortune 500 technology list and was assessed to have average capabilities in the areas of digital technology adoption and readiness by studies conducted by the OECD and WEF. Therefore, there is a good opportunity for the UK to export digital technology goods, services and expertise to Australia.

Service Design and Citizen Engagement

Due to a historic lack of government support, smart city development in Australia has been fragmented and characterised by strong private sector engagement. This has led to generic solutions being deployed which have not be customised to the needs and habits of citizens. While this is changing, there are still opportunities to better engage citizens in the design and implementation of smart city technologies in Australia. The UK has expertise in citizen engagement methods, with many design-led businesses creating innovations to promote public engagement with respect to urban development. The UK could offer knowledge and services around combining social and digital capabilities to deliver services to citizens in a more integrated way.

Table 1


The ‘Fund’ Opportunities imply R&I activities

to facilitate knowledge transfer and learning.

These opportunities (listed below) have

been selected by identifying mutual challenges

faced by the UK and Australian cities that

are currently not solved by either domestic

market, or they are areas where both countries

have complementary skills which could be

brought together to better solve a particular

market challenge.

Routes to Market – How can UK SMEs Access these Opportunities? The Australian government, as evidenced from

its strategy documents, is keen to promote

international R&I partnerships. Through a recent

publicationviii, the government itself recommends

that organisations looking for collaboration

opportunities with Australia first find a suitable

partner or partners. These partners could range

from businesses to public sector R&I bodies or

even academia.


Clean Tech

Australia has a strong clean tech sector, with a large number of companies in the water, waste and solar energy verticals. The sector is also supported by considerable public-sector investment (AUD 1m), therefore is likely to progress rapidly in coming years. The UK could benefit from learning from Australia’s expertise in order to achieve our Paris Agreement commitments.

Smart Ageing

Both countries have aging populations and this demographic shift will require significant changes to the way cities are planned and to the way services are delivered. Healthcare in particular will need to be delivered in new ways in order to meet increasing demand. To date, neither country has made major inroads in this area, creating opportunities for the two countries to work together in order to develop ‘smart aging’ solutions.

Infrastructure Finance

Both the UK and Australia have strong skills in innovative infrastructure financing. Australia’s pension funds have pioneered the way in investing in infrastructure and Australia’s Asset Recycling Initiative is a new approach to financing new infrastructure while simultaneously driving investment into existing infrastructure. The UK has world-class business and professional services capabilities, providing urban development financing, real estate and project management skills. The UK is also a pioneer of the Public-Private Partnership model, which Australia has used extremely successfully. Together the two countries could develop further innovative infrastructure financing approaches.

Sustainable funding sources and diversified business models

Like many other countries, the UK and Australia are struggling to implement and sustain innovative smart city solutions past initial demonstrator or pilot stages which typically involve public sector subsidies or grants. The two countries together could explore innovative ways to secure sustainable funding and diversified business models for smart cities projects.

Green design and building

Both the UK and Australia have capabilities in green design and building. The UK has pioneered the BREEAM sustainability rating system while Australia has created its own Green Star system. These systems are both used internationally and have different strengths and weaknesses. There may be an opportunity to collaborate to improve both systems and incorporate new approaches into them.

Table 2


Melbourne


l Partnerships with national science, research

and innovation agencies: One seemingly

‘easy’ way to access the Australian market

is to partner with some of the nation’s

leading R&I bodies active in various sectors.

These organisations often bring partners

together to respond to particular challenges

or areas of research. Some of the key

organisations include:

a) Innovative Manufacturing Cooperative

Research Centre (IMCRC): The AUD 40m

IMCRC aims to bring industry together

with world-leading research capability.

Through the development and application

of new materials, systems and technologies,

the IMCRC will create new products,

processes and business models. The

IMCRC is working closely with the Advanced

Manufacturing Growth Centre to ensure

an integrated approach to overcoming

challenges and developing market

opportunities for local businesses.ix

b) Commonwealth Scientific and Industrial

Research Organisation (CSIRO)xi:

Australia’s national science agency and one

of the largest and most diverse research

agencies in the world. It has more than

1,800 registered patents, making it the

country’s largest patent holder, and has

already resulted in more than 150 spin-off

companies. Using several dollar-matched

funding schemes, it helps Australian start-

ups and SMEs find the right research

expertise and capabilities to develop

new products, improve processes and

increase their competitive advantage.x

c) SMART Infrastructure Facility: The SMART

Infrastructure Facility at the University of

Wollongong is an international leader in

applied infrastructure research.

SMART, which stands for Simulation,

Modelling, Analysis, Research and

Teaching, brings together experts from

the areas of transport, water, energy,

economics and data analytics and

provides a state-of-the-art facility to

support collaborative research.

d) Australian Housing and Urban Research

Institute (AHURI): A national independent

research network which aims to deliver

high quality research on the Australian

housing and urban environment sectors,

as well as engaging and influencing policy

development in these areas. It is funded

in part by government and universities

and makes up the remainder of its funding

needs from professional services contracts.

e) Australian Urban Research Infrastructure

Network (AURIN): An online platform for

accessing, analysing and visualising urban

research data. Funded by the Australian

government, the AUD 28m AURIN initiative

is building the e-research infrastructure

to help understand and analyse Australia’s

urban areas. The network is led by the

University of Melbourne along with more

than 60 institutions and data providers

across the country.

f ) Industry Growth Centres: Australia has

established six Industry Growth Centres

to drive innovation, productivity and

competitiveness and help Australia

transition into smart, high value and export

focused industries. Each Growth Centre

engages with international markets and

accesses global supply chains, as well

as creating national and international

collaborative opportunities. They are a


key source of knowledge and network

opportunities in each industry sector.

The six Growth Centres include: Food

and Agribusiness, Mining Equipment,

Technology and Services, Advanced

Manufacturing, Medical Technologies

and Pharmaceuticals, Oil, Gas and

Energy Resources and Cyber Security

g) Cooperative Research Centres (CRCs):

The CRC Program is administered

by AusIndustry, a division within the

Department of Industry, Innovation

and Science. The Program aims to

promote high quality research to solve

industry-identified problems through

industry-led and outcome-focused

collaborative research partnerships

between industry entities and research

organisations. The CRC Program

contains two funding streams:

• Medium to long term industry-led

collaborative research

• Short term, industry-led collaborative

research CRC Projects (CRC-Ps)

h) The Australian Research Council

(ARC): As Australia’s primary funding

agency for research grants, the ARC

provides an array of opportunities

to support international research

collaboration across most disciplines.

All ARC funding schemes are open

to international researchers, but

applications are required to be made

through an eligible Australian institution.

The ARC’s funding schemes include

support for fundamental research,

fellowships and collaborative

research with industry, government

and the community.

l Partnerships with Universities: UK

already enjoys a robust university to

university collaboration ecosystem with

Australia. There are currently around 500

agreements between Australian and UK

universities and over 6,000 joint research

publications are produced annually.xii All

of Australia’s 42 universities engage in

research and several of them have

campuses in other countries. Strengthening

research connections is a specific objective

for most of these universities. UK SMEs

could either draw on existing UK-Australia

academia R&I relationships or partner,

where possible, directly with R&I programmes

of Australian universities.

Melbourne


Figure 1: Australia Business Expenditure on R&D (BERD), Top 10 Industriesxiii

Industry

Manufacturing

Professional, Scientific and Technical Services

Financial and Insurance Services

Mining

Wholesale trade

Information Media and Telecommunications

Construction

Administrative and Support Services

Electricity, Gas, Water, and Waste Services

Agriculture, Forestry and Fishing

0 1.000 2.000 3.000 4.000 5.000

2013-142015-16

Industry

NSW

Vic.

Qld

SA

WA

Tas.

NT

ACT

Overseas

0 1.000 2.000 3.000 4.000 5.000 6.000 7.000

2013-142015-16

Figure 2: Australia: Business Expenditure on R&D, by Locationxiv

(a) Ranked by 2015-16 BERD

Source: Australian Bureau of Statistics


l Partnerships with Local Businesses:

Businesses account for the highest

proportion of research expenditure in

Australia. Australia has world leading

innovative companies in areas such as

clean energy, finance, and agriculture.

Australia also has a strong home-grown

tech sector, with start-ups and entrepreneurs

being a large contributor to new jobs and

innovation in Australia. The Australian

Government supports business innovation

through the Research and Development Tax

Incentive, which provides a wide range of

market driven assistance for all industries.

UK SMEs have opportunities to collaborate

with Australian companies or enter into joint

ventures to complement and further enhance

their innovative offerings and capabilities.

The Australian government also recommends

Austrade, Australia’s trade and investment

commission, as a first point-of-contact for

international organisations seeking to

build partnerships and invest in Australia’s

innovative businesses.

Recommendations for SMEs – Better Access to Opportunities

l Link and Monitor Bodies in Australia

to Explore Opportunities for SMEs:

CSIRO, for instance, could be a good

potential partner and offer practical

insights, assist in finding Australian

partners as well as provide networking

opportunities to UK SMEs.

UK bodies in Australia, such as the Australian

British Chamber of Commerce, could enable

UK SMEs to obtain a foothold through major

industry conferences and publications either

by providing sponsorships or publicity through

its own physical and online platforms.

l Showcase Unique UK Capabilities and

Proven Expertise: Given Australia’s own

growing capabilities in the Advanced Urban

Services (AUS) domain, the Australian

government may be less accessible to

foreign entities competing with its home-

grown businesses. Hence, it may be beneficial

to offer R&I capabilities and expertise that

currently are not available within Australia’s

domestic markets. The Chamber, through its

membership-based model, supports bilateral

trade by providing networking opportunities

for businesses.

A recent report by KPMG xv particularly draws

out UK’s expertise in smart city standards as

an area that can be leveraged by Australian

cities. These include the British Standards

Institute’s PAS 181 Smart city framework,

TM Forum’s digital maturity model and

collaborative working groups, and Hypercat’s

standard for a secure and interoperable

IoT for cities.

The UK also enjoys the specific advantage

of having piloted a number of advanced

urban solutions in its own cities, while

Australia has only recently embarked on

its Smart Cities Plan.

l Missions and Programmes Tailored to

Australian Cities’ Needs: Australia has

already demonstrated its trust in UK capabilities

by adopting the concept of ‘City Deals’ based

on the UK’s own City Deals policy.xvi xvii


Sydney


Joining IUK missions and DIT trade missions

can accelerate the integration of SMEs with

the Australian ecosystem as well as creating

synergies with local businesses/entities.

l Identify Partnership Areas Based on

Sustainable Development Goals (SDG): In

the case of Australia, the key goals recommended

to be embedded into bilateral agreements

both at a government and at a private/industry

level include:

• Goal 6 – Clean Water and Sanitation:

Ensure availability and sustainable

management of water and sanitation

for all

• Goal 7 – Ensure access to affordable, reliable,

sustainable and modern energy for all

• Goal 11 – Sustainable Cities and Communities

Make cities and human settlements inclusive,

safe, resilient and sustainable

• Goal 13 – Climate Action Take urgent action

to combat climate change and its impacts*

UK COMPANY SECTOR EXAMPLES OF PROJECTS IN AUSTRALIA

Turner & TownsendProject management and consultancy in the real estate, infrastructure and natural resources sectors

High-profile projects include expansion programs at Brisbane International and Domestic Airports, Sydney Metro Northwest Rail, the 298-bed tertiary-level Perth Children’s Hospital and The Jewel, an iconic AUD1b three-tower mixed-use development on the Gold Coast.

John McAslan + Partners Architecture and DesignOne of the two architectural partners delivering the Sydney Metro upgrade to Central Station, a key component of Australia’s largest public transport project.

BT Australasia Telecommunication Infrastructure

BT in Australasia is part of BT Global Services, a global leader in managed networked IT services, serving the needs of more than 6,500 large corporate and public-sector customers worldwide. BT has been operating in Australia for 30 years, employing over 250 people across Sydney, Melbourne and Perth.

ARUP Engineering and ConsultingSydney CBD and South East Light Rail, Port of Melbourne Webb Dock Redevelopment; Cost-benefit assessment called Smart Grid, Smart City

Table 3

Source: Brody Hannan, FCO Blogs, August 2017

1.2 CHINA

OverviewOver the past two decades, China’s urbanisation

rate has increased dramatically, rising from 31%

in 1995 to 55.6% in 2015, resulting in over

700 million people living in cities.xviii This trend

is set to continue with the National New-type

Urbanisation Plan (2014-2020), the country’s first

official plan for urbanisation, stating that the number

of permanent urban residents will reach 60% of the

population by 2020. This will require the urbanisation

of a further 100 million individuals in 5 years.xix

This rapid urbanisation represents a huge

challenge for national, provincial and local

government and is driving China to speed up

the process of transforming its cities so they

can cater to the growing needs stemming from

the rapid urbanisation.xx


Shanghai

Shanghai


In response to this rural-urban shift, China’s

smart cities market has grown rapidly and is

predicted to be worth USD 4.6bn by 2025.xxi

The emphasis of smart city transformation in China

is largely focused on reforming, renewing and

targeting investment at existing cities, rather than

building new cities from scratch. However, there

are some notable exceptions to this such as the

establishment of Xiongan New Area in April

2017. In general, greater progress has been

made in first and second tier cities in eastern

and central China due to their higher level of

economic development and more advanced

use of information technology. Transforming the

less economically developed cities of western

China has proven more challenging but ongoing

developments and investment programmes

promise the region’s development expansion

into sophisticated urban clusters.

China’s strong government investment programme,

the largest ICT market globally with over 160 cities

of over 1 million inhabitants offers huge potential

for bilateral and multilateral R&I partnerships. The

country’s R&D spending has grown 20% per year

since 1999 and now accounts for roughly 2% of

GDP. This investment is propelling China up the

Global Innovation Index rankings, transforming

the traditionally low-cost, quantity-driven

manufacturing economy into a quality-

focused technology innovation powerhouse.


China takes a top-down approach to initiating

and promoting urban development with a

number of national government departments,

as well as city and local governments cooperating

to accelerate the sector. The government has

recently introduced a number of guidance

notes which aim to steer the country’s

urbanisation onto a human-centred and

environment-friendly path. A number of

ongoing national-level plans and ambitious

initiatives entail substantial collaborative

R&I opportunities in the country.

The National New-Type Urbanisation Plan (2014-2020) describes the desired direction

of smart cities in China highlighting the need

for wideband networks, digitised management,

intelligent infrastructure, convenient public

services, modern industry and fine governance.

Notifications include the ‘Notice to speed up

the project implementation of smart cities’

and ‘Guidance on promoting the sustainable

development of smart cities.’

Furthermore, China’s 13th Five-Year Plan (2016-2020) aims to optimise urban spaces

in China through public transportation, high-

capacity infrastructure, mixed-use development

and green city planning. Under the plan, China

aims to invest heavily in science and technology

and boost science spending by 9.1% this year to

c. US$41bn.xxii The plan also provides a list of

priority research areas for its plans. These

include quantum communications and

computations and big data applications.

China’s ‘Made in China 2025’ strategyxiii , a roadmap released by the State Council in

2015 to guide the country’s advanced industrial

manufacturing, has seen steady progress

in industrial capability, smart manufacturing,

innovation, as well as product quality and

branding. The strategy encourages investment

into ten strategic industries. One of these is

“New Information Technology”, that relates

to innovative technologies and solutions. UK

SMEs have the opportunity to tailor their

offerings that speak to this strategy.


In addition to these, China’s ambitious Greater Bay Area scheme that aims to link the cities of – Hong

Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan,

Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing

– into an integrated economic and business hub,

promises a number of opportunities for UK businesses in

sectors such as infrastructure, advanced manufacturing,

transport and professional services.xxiv Two of the seven

key cooperation areas in the Framework Agreement for

the Greater Bay Area focus on developing the area into

a global technology and innovation hub and building a

modern system of industries, reflecting the plethora of

opportunities it presents for R&I in the region.xxv

Similarly, China’s Belt and Road Initiative, proposed by

the Chinese government to connect China to other Asian

nations, Europe and beyond has resulted in a number

of large infrastructure projects. While major transport

infrastructure projects tend to be awarded to Chinese

contractors xxvi, there is potential for UK SMEs to win,

smaller, more advanced technology projects, arising

from the initiative.

Other Supporting Factors for UK SMEs Entry

l The UK-China Joint Strategy for Science, Technology

and Innovation Cooperation, signed in December 2017

xxvii outlines a new commitment for both nations to

catalyse science and innovation collaboration. This

strategy is built on top of ongoing UK China Research

and Innovation Partnership Fund (channelled through

the Newton Fund in the UK). Some of the principles

outlined by the strategy include effective protection

of IP for all stakeholders, project-focused bilateral

cooperation3 and open access to non-proprietary data.

l Our interviews with experts based in China indicate

that China is keen to encourage

3 Priority areas of common interest to be identified for a focused approach

foreign investment into non-sensitive industrial

sectors. This includes most of the smart city

and urban services domain including ICT,

urban planning, architecture and construction

services. The Chinese Ministry of Commerce

publishes a handbook of different industries

in which FDI is encouraged. Overseas

companies working in these industries

wanting to set up in China stand to receive

favourable tax incentives, cheaper land costs

and simplified approval procedures.

l According to a study by European

Commissionxxviii, China has improved access to

its own

R&I funding programmes – for instance,

China’s National Key R&D Programme (NKP)

now encourages joint research by Chinese

and foreign applicants. In January 2017, the

Chinese Department of International

Cooperation introduced a new section of

projects on international scientific and

technological cooperation under the NKP.

l Ongoing efforts to tackle issues pertaining

to growing urbanisation, poor air quality and

climate change have led to a strong demand

for technology solutions adapted to Chinese

needs, mostly in energy, transport, water

and recycling.

l UK’s existing bilateral relationships,

complemented by ongoing efforts to create

long-standing relationships with Chinese

counterparts, provide a strong platform for

UK SMEs. The Future Cities Catapult, supported

by IUK, has cultivated a strong relationship

with the UK Embassy in Beijing, who see us as

a trusted partner and gateway to urban

innovation in the UK


Some of the existing relationships between

Chinese and British cities include:

• Guangzhou: Established partnership with

Bristol city and strong links with FCO Beijing

• Shanghai: Long-standing partnership with

Liverpool city

• Wuhan: Established partnership with

Manchester city, UK engineering firm Arup

and Chinese IT firm Digital China

• Other established UK and Chinese cities

partnerships include: Birmingham and Nanjing,

Leeds and Hangzhou, Sunderland and Harbin,

Newcastle-upon-Tyne and Taiyuan, Nottingham

and Ningbo, Belfast and Heifei, Sheffield and

Chengdu, and Milton Keynes and Jinjiang

Barriers to Market Entry for UK SMEs

l High Competition from Other Global SMEs:

There is strong competition in the Chinese

urban services, infrastructure and technology

sector, with the following countries presenting

compelling offers:

• USA: US companies have excellent

capabilities in the areas of urban transport,

networking technologies, cloud computing,

big data, cyber security and smart grids.

In 2016, the US Department of Commerce

identified the ‘urban sector’ as a critical area

for future export opportunities.

• Nordics: The Nordic nations have

significant capabilities in the smart city

sector and are spearheading the UN’s

New Urban Agenda. Sweden is home to

three of Europe’s ten largest architects,

while Danish consulting engineering firms

generate nearly £3bn in revenue from

global activities, especially in urban

buildings and infrastructure.

• Singapore: Singapore’s expertise in

smart cities, urban planning and water

management makes its firms highly sought

after across the Asia-Pacific

• France: France is aiming to export

its expertise in areas such as 3D

design, urban cleantech, engineering

consultancy, waste management and

traffic management.

• Korea: Korean firms are highly popular

in the areas of Intelligent Transportation

Systems, GIS and low-energy housing

• Others: Japan, Germany, Australia and

Spain have all allocated resources in

order to help their firms become leaders

in advanced urban services

Despite this competition, the UK’s world-leading

status in urban innovation, its specialisms in

niche, advanced areas and its efforts to create

long-standing relationships with China should

help stand out from the competition.

l Growing Domestic Competition: China’s

rapidly maturing domestic competition and

technological capabilities, arguably, present

the most significant challenge to overseas

entities. Chinese firms have become adept

at mastering technologies and offering

solutions at lower prices, thus making it

more difficult for international firms to

compete. Through its five-year plans, the

Chinese government has made major

financial commitment to grow its own

innovation capabilities within the next few


years. However, this potentially could

mean additional collaboration opportunities

for UK SMEs aimed at helping China build

its capabilities.

l Cultural and Linguistic Barriers: Our

survey found that SMEs often have to

bear high, recurrent translation costs

when looking to work in China. UK SMEs

also tend to find Chinese business culture

complex and are often required to be

patient to build up trust and networks

within Chinese R&I and business

ecosystem. The right local Chinese

partners can help to navigate

the complexity of the market and also

the cultural and language barriers.

l Intellectual Property Environment:

China has a reputation for having limited

IP protection. This is also reflected through

our survey of UK SMEs, which revealed

that ‘IP protection costs are too high in

China, and UK SMEs need funding to

address this’.

“Our potential German customers are

owned by Chinese companies and our

concern is about our equipment being

copied after installation in China.” –

Survey Respondent

“In China there is a strong possibility

that a local partner, even at the level

of a joint venture, might be necessary

so IP is certainly an important topic.

The IP situation in China is much

improved however local knowledge

and support would be very welcome.”

– Survey Respondent

However, IP regulation and enforcement

is improving in China. There is support

available from a number of sources e.g.

through China-Britain Business Council

(CBBC) or the British Embassy) to help

companies with their IP strategy in

China. China has also made some

encouraging recent policy moves such as

the loosening of JV ownership restrictions

for foreign automakers.

l Unfamiliar Regulatory Environment: UK

SMEs have limited access to relevant

regulatory information and face difficulty

in understanding the regulatory

environment in China. There are often

faced with lengthy administrative

procedures. Moreover, there are regional

differences regarding the implementation

of national policies due to the autonomy

of local government. Often, they do not

have the resources and expertise to

effectively deal with high volume of

administration work.

l Hard to Access Public Sector: UK SMEs

have also reported that they find it difficult

to navigate through China’s governance

structure, or to access government officials,

infrastructure and data.

“China does everything by the rules handed

down from the top. There is a rule for

everything. The width of roads, everything.

That is how they have developed so fast,

by being totally prescriptive. We wanted to

change the rules in Dongtan, to do everything

different. But when it comes to it, China

cannot deliver that,” – Peter Head, Arup’s

Project Manager, 2009


l Inadequate Understanding on UK offerings:

Identified by several reports, a key challenge

for UK is that Chinese counterparts find it hard

to fully comprehend the UK value proposition,

as our offering is often more ‘intangible’ than

a hard technology offering. The ‘softer skills’

offered by the UK, such as planning, financing,

architecture and evaluation, are more difficult to

sell without strong foundational relationships,

brand recognition and demonstrated value. In

recognition of this, effort should be made to

clarify the UK’s urban innovation and smart city

offering in order to ensure value is conveyed.

l Marketing and Sales Challenges:

UK SMEs often find undertaking marketing and

sales challenging in

China, particularly when they do not

have a physical presence in the country.

l Other major challenges to doing business

in China includexxix:

• Large parts of the economy are still

closed to full foreign participation

• Anti-monopoly legislation exists in

relation to foreign firms

• Competition from well-resourced

and positioned State-Owned Enterprises

(SOEs)

• Local subsidisation in the form of

non-tariff barriers and practises that favour

domestic firms under the cover of policies

promoting ‘indigenous innovation’

Shanghai


Potential Partnership Areas – Where do the Opportunities Lie?‘CONNECT’ OPPORTUNITIES: R&D WITH AN AIM TO PROVIDE A GATEWAY TO COMMERCIAL BUSINESS


Spatial Planning

The UK has a well-established land-use and planning system. Recently, the UK’s focus has moved to planning at an urban scale to address a more fundamental agenda. Specific specialisms including: urban and regional development, master planning and urban design, urban regeneration, heritage and conservation, environmental assessment and sustainable development. China’s cities are growing rapidly and could benefit from the UK’s world leading expertise in these areas.

Integrated ‘City Systems’ Approach

UK businesses and cities have a strong appreciation for the complexity of cities and the sheer number of elements that interact with each other. The UK is a leader in using an integrated ‘city systems’ approach to urban challenges which will be valuable to a rapidly urbanising country like China.


Smart city development in China is extremely top-down and is led by technology and infrastructure. Social and human dimensions have historically been ignored. The UK has expertise in citizen engagement methods, with many design-led businesses creating innovations to promote public engagement with respect to urban development. The UK could offer knowledge and services around combining social and digital capabilities to deliver services to citizens in a more integrated way.

Smart City Standards

Capabilities in regulatory and standards development has placed the UK at the forefront of developing new standards for green building, smart cities, open data, urban design, public service delivery and community governance. China is only just beginning to develop and adopt standards in these areas, therefore the UK could offer knowledge and services concerning smart city standards, particularly in areas related to urban planning, management and leadership rather than technical standards.

Open Data The UK could offer knowledge and good practices related to open data, such as what and how data could be made available and accessible to researchers and the public, appropriate levels of openness, existing legal and regulatory frameworks for ensuring data security and privacy, licensing, terms and conditions of access, etc.

Sustainability, Green Building and Retrofitting

UK is a leader in sustainability and green building, having pioneered the BREEAM assessment method. China has is the world’s largest consumer of energy and has a need to improve its energy to productivity ratio as well as cut emissions as part of the Paris Agreement.

Intelligent Transport and Mobility

The UK is a leader in innovation around intelligent transport systems, particularly in the areas of real-time monitoring, transferring and analysing, traffic management service, systems integration and the internet of cars. The Transport Systems Catapult is also helping to advance UK innovation in this space. China is home to 18 of the world’s 50 most congested cities therefore is in dire need of solutions in this area.

Pollution and Remediation

The UK has a diverse range of contamination problems and sites, and due to a scarcity of available development land, has needed to clean-up and regenerate contaminated land. This has led to the growth of niche specialist consultancies, technology provides, contractors and equipment suppliers. China has significant pollution and contamination problems that could be improved using UK expertise.

End to end project selection, management and evaluation

While China excels in building large infrastructure projects, studies have found that the costs of these projects often exceed the benefits they generate, meaning that projects destroy economic value instead of generating it. Focus is often placed on construction rather than the ability to manage and operate in an effective manner. The study also found that infrastructure construction costs in China are on average 30.6% higher than estimated. China is in need to expertise around how to select, plan and design projects that will deliver economic value, as well as how to monitor and measure a project from the initial top-level planning, through to execution and final operation. The UK is strong in these areas.

Table 4

The areas below have been identified by

aligning UK commercial and innovation

strengths with challenges faced by Chinese

cities that are currently unmet by the

domestic market.


Hong Kong




Like many other countries, the UK and China are both struggling to sustain innovative smart city solutions past initial demonstrator or pilot stages. The two countries together could explore innovative ways to secure sustainable funding and diversified business models for smart cities projects.

Ageing Population

Aging populations in both China and the UK are creating challenges in terms of design of cities and services, and also healthcare challenges. The UK’s smart healthcare sector is predicted to grow rapidly in coming years and the Chinese government’s National Health Service Plan 2015-2020 aims to integrate the internet into the healthcare sectors. Therefore, there are huge opportunities to collaborate on designing and testing solutions in this area.

Resilience of Cities (Flooding)

Over 600 cities in China are ‘prone to flooding’ and the country incurs the highest losses globally. This is leading China to invest heavily in this area. Some regions of the UK are also prone to flooding, therefore as Chinese progress their research and development and create innovative solutions, opportunities may arise for the UK to learn best practice and adapt solutions for the UK market.

Air Quality 7 of the 10 most air polluted cities in the world are in China. The UK is also has strict air quality targets to meet, therefore this is an area where the two countries could work together and share knowledge in order to meet their targets.

Technology and InstrumentationChina is a world leader in the development of information, communication and networking technologies and has plans to become a leader in robotics, railways and electric vehicles. These plans are backed by huge investments. Therefore, the UK could benefit from sharing knowledge in these areas.

Innovation Methodologies

China lags behind leading economies in terms of more complex science-based and engineering-based innovation methods and struggles to convert its R&D innovation investment into impact. Conversely the UK has a considerably smaller R&D expenditure but punches above its weight in terms of impact, excelling in these complex forms of innovation. The UK could share some innovation approaches and techniques with China.

Table 5

‘FUND’ OPPORTUNITIES: R&D TO FACILITATE KNOWLEDGE TRANSFER AND LEARNING

The areas below have been selected by

identifying mutual challenges faced by the UK

and China that are currently not solved

by either domestic market or they are areas

where both countries have complimentary skills

which could be brought together to better solve

a particular urban challenge.


Routes to Market – How can UK SMEs Access these Opportunities? l Partnerships with existing UK organisations

in China: A number of UK companies or multi-

national companies with a strong presence

in the UK are well-established in China.

These companies offer the potential to act as

‘gateways’ to UK SMEs within the realm of R&I.

Using BRE China as a Gateway: UK-based,

world leading building science centre and

the authority on various built environment

aspects, BRE provides research, advice,

training, testing, certification and standards

for both public and private sector organisations

around the world. In 2016, BRE established

its physical presence in China to provide the

base for collaborating on a number of areas

including standards, research and professional

training. BRE is a key example of UK-based,

well-established R&I bodies in China that

could act as gateways for further R&I

collaborations between UK and China.

“BRE China aims to certify over 1,000 buildings

across China to its standards which will generate

£10m income and could create up to £200m of

work for UK supply chain companies.” – UK’s

Department for Business Innovation and

Skills (BIS), May 2014xxxi

l Participating in key Chinese S&T programmes:

The Chinese government encourages Foreign

Invested Enterprises (FIEs)4 to offer their expertise

and establish R&D centres in China, as well

as partner with Chinese research institutions

participating in key S&T programmes, such as the

National High-Tech Research and Development

Programme and National Basic Research

Programme.xxxii European companies have been

participating in China’s R&I initiatives through

licensing agreements with Chinese partners

and R&I investments.

4 FIE is a common method of creating an operation in Asian

countries, especially in China. In China, any one of a number

of legal entities can be considered FIEs including equity joint

ventures (EJV), cooperative joint ventures (CJV), wholly-owned

foreign enterprises (WFOE) and foreign-invested companies

limited by shares (FCLS).

EXAMPLES OF UK COMPANIES IN CHINA

UK Company Sector Key Projects in China

Mott MacDonald Engineering and ConsultingRecently signed collaboration and framework agreements with China Gezhouba International Engineering Corporation.

Holmes Miller Architects Architecture

Recently awarded the Huafa West Headquarters project, having successfully secured the commission through an international competition.

ARUP Engineering and ConsultingArup has completed many projects in China, such as Nokia China Campus, Changxindian, Beijing's first sustainable community.

ATKINS Engineering and ConsultingRegeneration masterplan in Jiangxi, China, High-speed rail development in Shangrao xxx.

Table 6


FIEs which invest in a joint venture (JV) and share

their technology with a Chinese State-Owned

Enterprises (SOE) are granted privileged access

to the Chinese domestic market and such JV

companies enjoy priorities in receiving loans

from domestic financial institutions and obtain

tax incentives and favourable tariff schemes.

In addition, the government also offers a series

of incentives to foreign-invested R&D centres,

and such incentives include exemptions of

customs duties on imported equipment,

business and income tax deductions.

l Partnering in Private Sector, Global Scale R&I

Initiatives: With a growing number of global

companies establishing their R&D centres in China,

and launching initiatives open to external partners,

there is an opportunity for UK SMEs to use these

initiatives as gateways to the Chinese ecosystem.

For instance, Alibaba Group, the Chinese tech giant,

recently announced its plan to invest more than

$15bn over the next three years into a global R&D

initiative called Alibaba DAMO Academy. One of the

aims of the initiative includes strengthening global

technological collaborations. There is currently strong

collaboration between Alibaba’s researchers with

American university programs such as U.C. Berkeley’s

RISE Lab, which is developing technologies that

enable computers to make secure decisions based

on real-time data.xxxiii

l JVs with Local Chinese Businesses: Despite

China’s slowing economy and recent scrutiny of

foreign companies, forming business partnerships

through JVs remains an attractive way to get

access to Chinese markets as they are less risky,

less costly and sometimes the only alternative.

In a recent survey by PwC, 76% of foreign

respondents and 70% of Chinese respondents

responded that they are planning on entering

into a business partnership in China. xxxiv

Recommendations for SMEs – Better Access to OpportunitiesFACILITATING ROUTES TO MARKET FOR SMEs:

l Tap into existing large or well-established

UK companies: UK SMEs have the

opportunity to tap into existing large or

well-established UK companies in China

to identify potential for R&I collaboration.

Attendance at thematic workshops

or networking events organised either

by IUK or DIT may highlight these

synergies between these companies

and UK SMEs looking to partner in China

l UK bodies active in China: It is also

recommended that SMEs link with UK bodies

active in China such as DIT, British Chambers

of Commerce in China, BRE, and also UK

academia with a strong, collaborative R&I

foothold in China.xxxiv

l The China-Britain Business Council (CBBC),

for instance, works in a strategic partnership

with the British Chamber of Commerce

in China to deliver streamlined services

to its members.

The Council’s SME programme with its

annual SME Forum event aims to enable

SMEs to come together and share practical

advice and support. It also hosts smaller

roundtables addressing practical issues

like registering IP, managing a business

in China and cultural briefings on specific

areas of business. The council also provides

a dedicated SME resource with guides such

as the China Business Handbook 2017/18xxxv

and reports for SMEs on the practicalities

of doing business in China.xxxvi


l Make use of common research facilities and

infrastructure: The ‘Evolution of China’s Innovation

Performance’ study by European Commission

indicates that sharing of research facilities

and infrastructure helps to grow contacts with

the Chinese research community, increasing

opportunities for collaboration.

l Establish collaborative R&I partnerships in

China with other overseas ‘experts’: “Recognise

that some companies have far more expertise

in overseas countries than they do and take

advantage of their expertise.” – Survey Respondent, February 2018

For instance, the Germans do very well in China. Latest

figures show they export more than four times the

goods of the British ($86.1bn vs $18.8bn).5 The Germans

have a much larger on the ground presence than UK.

They also have an economy that is heavily aligned to

China’s due to manufacturing focus. UK SMEs could

expand their horizons by forming partnerships with

German enterprises that are already established or

looking to establish partnerships in China.

l Prioritise Sustainable Development Goals (SDGs):

In the case of China, the key goals recommended

to be embedded into bilateral agreements both at a

government and at a private / industry level include:

• Goal 3 – Ensure healthy lives and promote

well-being for all at all ages

• Goal 7 – Ensure access to affordable, reliable,

sustainable and modern energy for all

• Goal 9 – Build resilient infrastructure, promote

inclusive and sustainable industrialization and

foster innovation

5 Data from UN COMTRADE https://comtrade.un.org/

• Goal 11 – Sustainable Cities and Communities:

make cities and human settlements inclusive,

safe, resilient and sustainable

• Goal 13 – Climate Action: take urgent action

to combat climate change and its impacts

l Cities to Focus in China6: Over the last decade,

inland cities have sought to “catch up” with the

coastal cities, supported by government policies

and increased domestic consumption. Whilst the

coastal cities remain important places to invest,

inland cities such as Chongqing, Chengdu and

Wuhan have become increasingly important.

These cities have all seen very high levels

of growth and FDI in recent years and have

demonstrated good initial interest in the UK’s offer.

1.3 INDIA

OverviewDespite rapid urbanisation over the last 50 years,

India remains one of the less urbanised countries

globally with only about 33% of the population

living in urban agglomerations or towns (World

Bank, 2016). However, in terms of sheer size of

its urban population – 438.8 million as of 2016 –

the country stands next only to China. xxxvii

India is also home to five of the world’s 31 megacities

in Delhi, Mumbai, Kolkata, Bangalore and Chennai

which have populations of 26.5 million, 21.4 million,

15 million, 10.5 million and

10 million respectively. xxxviii

6 Not an exhaustive list of recommended cities. This list may vary

from the list derived from City Typologies analysis in Chapter 2


Furthermore, according to the 2011 census,

there were 27 cities in India with populations over

1 million, and the number of urban agglomerations

with populations of 1 million or more increased from

35 to 53 since the 2001 census. In this census, the

most urbanised states were Tamil Nadu (48.45%),

Kerala (47.72%) and Maharashtra (45.23%).

With the population of India expected to exceed

that of China by 2050 and rapid urbanisation

expected to continue, India faces one of the

biggest urbanisation challenges in the world. While

under 30% of the population currently live in cities,

some 300 million people – almost equivalent to

the population of the US – are expected to arrive

in cities by 2050. This equates to more than 60%

of India’s population. This forecasted exponential

increase in urban migration has resulted in the

Indian government calling for 100 new cities to

be built over the period.3

Undoubtedly urbanisation in India has been an

invaluable instrument of economic, social and

political progress, however, the magnitude of

the urban population coupled with the

unplanned growth of urban areas and a lack

of adequate infrastructure has led to serious

socio-economic problems. Public services and

utilities such as housing, sanitation, transport,

water, electricity, health and education are all

buckling under the strain of increasing population

and insufficient investment.

This investment situation is changing. In 2015,

the Prime Minister Modi launched the Smart Cities

Mission, an ambitious multi-year programme

aiming to create 100 smart cities across India,

backed by a central government budget of

INR 48,000 crore (US$ 7.2bn). xxxix Under this

programme, cities are actively encouraged to

seek support from both national and international

private sector organisations.

The UK is well placed to support India in its urban

development journey having already built a strong

bilateral relationship. In 2014, the UK exported

goods worth £6.35bn and services valued at

£2.24bn to India. The UK is also the third largest

investor in India. xl

The Indian smart city market is an attractive

proposition for the UK due to the large number

of cities, widespread appetite for innovation and

change and huge technical workforce. Furthermore,

the needs of India’s cities are well aligned to

areas of UK strengths, particularly in the areas of

planning, sustainability, standardisation, intelligent

transport and pollution remediation.


Suffering several acute urban challenges, India

has launched a number of high-profile initiatives

aiming to tackle urban challenges and catalyse

urban innovation. The most recent and most-widely

publicised of these is the 2015 Smart Cities Mission

launched by the Ministry of Urban Development.

MINISTRY OF HOUSING AND URBAN AFFAIRS (MOHUA)

Smart Cities Mission: Launched in 2015, the

Smart Cities Mission has gathered a vast

amount of national and international attention.

It is an urban renewal and retrofitting programme

targeting 100 cities across India, aiming to

accelerate core infrastructure improvements in

cities, provide a decent quality of life to citizens,

offer a clean and sustainable environment, and

readily apply ‘smart solutions’. The government

has highlighted a number of focus areas for this

programme including mobility, energy, public

safety, water, sanitation and citizen engagement.



While things have progressed slowly until now,

there are encouraging signs that India’s Smart City

Mission will generate opportunities for innovative

domestic and foreign SMEs. For further details on

the Mission, please refer to ‘India: Country

Overview and Innovation Ecosystems.’

l Smartnet: Smartnet is an initiative of the Ministry of

Housing and Urban Affairs to create a resource-rich

ecosystem of learning, sharing and disseminating for

city managers and primary stakeholders in the urban

transformation of India. It encourages Government to

Government, Government to Business and Business

to Government linkages for the urban sector in India

enabling transparent and structured interactions

between cities, businesses and institutions.xli

l Atal Mission for Rejuvenation and

Urban Transformation (AMRUT): In

2014, the newly elected government

discontinued the Jawaharlal Nehru

National Urban Renewal Mission

(JnNURM) and launched a new urban

investment programme with a total

investment outlay of INR 50,000 crore

(US$7.5bn). AMRUT has a similar purpose

to the JnNURM mission – to improve the

quality of life and local infrastructure of

its target cities – but is aimed towards a

wider geographic coverage (more than

500 cities) and gives urban local bodies

(ULBs) greater authority over the delivery

of individual projects.

Assam

Delhi

Gujarat

Punjab

Odisha

Maharashtra

Karnataka

Kerala

AndhraPradesh

TamilNadu

MadhyaPradesh

Smart City (rank)

Jaipur

Rajasthan3

Udaipur

16

New DelhiMunicipal Council12

Ludhiana

19

Ahmedabad

6

Indore

11

Pune

2

Surat

4

Solapur

9

Belagavi

15

Davangere

10

Chennai

18

Kochi

5

Bhopal

20

Jabalpur

7

Bhubaneshwar

1

Kalinada

14

Guwahati

17

Visakhapatnam8

Figure 3: India’s First 20 Smart Cities


INITIATIVES BY THE DEPARTMENT OF ELECTRONICS AND INFORMATION TECHNOLOGY

l Digital India: Digital India is a flagship programme

of the Department of Electronics and Information

Technology that aims to transform India into a

digitally empowered society and knowledge

economy. It has three main objectives:

l Centre of Excellence for IoT: As part of the

Digital India programme, the Government

has launched a Centre of Excellence for IoT

in Bangalore, which aims to enable the rapid

adoption of IoT technology, to foster a new

growth strategy and to empower India to become

a leader in the domain. The centre is a joint

venture by National Association of Software and

Services Companies (NASSCOM), Department

of Electronics & Information Technology and

the Education and Research Network (ERNET).

l National Innovation Foundation (NIF): Set up

in 2000, the National Innovation Foundation

is an autonomous body of the Department

of Science and Technology. The NIF aims to

help India become inventive, creative and a

global leader in sustainable technologies,

without social and economic handicaps

affecting the evolution and diffusion of green

grassroots innovations. To this end, NIF provides

institutional support in scouting, spawning,

sustaining and scaling up green innovations

while also building a network that links various

innovation ecosystem stakeholders and

enables knowledge sharing between them.

The Foundation provides a large number

of funds to enable and accelerate the

development of innovations such as the

Micro-Venture Innovation Fund (MVIF) and

the Grassroots Technological Innovations

Acquisition Fund (GTIAF).

l Startup India: is a flagship initiative of the

Government of India, intended to build a

strong eco-system for nurturing innovation and

start-ups in the country that will drive sustainable

economic growth and generate large scale

employment opportunities. Launched in 2016,

the programme aims to simplify the process for

establishing start-ups, promote bank financing

for start-up ventures, foster industry-academia

partnerships and provide incubation for early-

stage businesses. Key aspects of the programme

include INR 10,000 crore of funding, 80%

reduction in patent registration fees and

freedom from Capital Gain Tax for 3 years.

Supporting Factors for Market Entry for UK SMEs

l Improvement in Doing Business Rankings

and Government Reforms: The recent 30-place

jump made by India in the World Bank’s Ease

of Doing Business (EODB) rankings, from

130 to 100, is an encouraging piece of evidence

on improving conditions for businesses in

India. This, combined with Moody’s raising

of its global rating for India is compelling

evidence of positive changes taking place

within India’s business operating environment.xlii

The current government’s reforms including

greater co-operation between state and central

governments, introduction of Goods & Services

Tax (GST), fast-growing cities and programmes

such as ‘Digital India’ and ‘Make in India’ establish

India as a compelling market and investment

destination. In January 2016, French company

Airbus entered in a JV with Indian firm Mahindra

under Indo-French cooperation agreement to

manufacture helicopters within the Make in India

initiative – signifying the opportunities these

initiatives hold for international businesses. xliii


Co-operative federalism with the centre will be

key in achieving India’s sustainable development

and competition between states is likely to bring

about greater efficiencies.

In 2013-14, 24 of India’s 29 states grew at rates

of more than 5.5%, with the wealthiest one,

Maharashtra (capital Mumbai), recording a growth

rate of 7.3%. Some of India’s states such as Bihar,

Madhya Pradesh, Meghalaya and Tripura recorded

growth rates over 9%. The next round of economic

growth will thus take place in India’s emerging states

and cities, with rapid development in rural areas.

l The urban challenges facing India are well aligned

to areas of UK strength. Within the realm of

urban infrastructure, Indian cities need better

roadways, transport and traffic management,

waste management and capacity building –

areas in which UK businesses enjoy world-l

eading reputation in.

l India is fast becoming ‘data-rich’ while developing

a ‘digital first’ economy. Initiatives such as

MeghRaj, the official Government of India

cloud, the use of Artificial Intelligence (AI) in

national security, and big data for Aadhaar, the

unique identification programme, show India’s

rapid leaps into future. As technology is being

harnessed to develop best-in-class digital

infrastructure and services for businesses and

citizens in India, it is clear that there are major

opportunities for UK (and Indian) companies

to invest in the digital revolution in India.xliv

l The UK already has an established R&D

partnership with India, with activities being driven

through a number of avenues. The Research

Councils UK, together with the Government of

India and third parties have invested over £200m

in co-funded research programmes since 2011.

This impressive portfolio of over 100 high-quality,

high-impact UK-India research projects places the

0

100

200

300

400

500

600

700

Urban Transport

Traffic Support

Infrastructure

Street Lighting

Water S

upply

Sew

erage

Storm W

ater Drains

Solid W

asteM

anagement

Total Investment for

eight major sectors

Other sectors

Renew

al and Redevelop-

ment including S

lums

Total investment in

urban infrastructure

Urban R

oads

Capacity B

uilding

282.5

73.5 16.3 3.3

52.331.0

39.2 8.2 506.350.6

67 16.3

640.2

44%

11% 3% 1%

8%6%

5% 1%8%

10% 3%

$375.6 billion (59%) $130.7 billion (20%)

Source: The Future of Urban Development & Services: Urban Development Recommendations for the Government of India

Figure 4: Urban infrastruture requirement:


Mumbai


UK at the forefront of collaborative innovative

with India. xlv Further R&D funding has been

provided through the UK government’s

Prosperity and Newton Funds.

The Future Cities Catapult has also played

an integral role in developing relationships

with Indian cities by completing a number of

projects in the urban development domain:

• Prosperity Fund Project (Newtown

Kolkata): Supported New Town, Kolkata

to develop a smart city roadmap in

partnership with the Newtown Kolkata

Development Corporation.

• Prosperity Fund Project (Pune): Developed

an operational manual for a smart cities

hub for India, in partnership with the

MoUD and the National Institute for Urban

Affairs (NIUA).

• Prosperity Fund sponsored trade mission

to UK: Delivered a 1-week trade mission

for a delegation from Pune to London,

Bristol and Glasgow.

l Corporate Innovation Centres: India

ranks among the top 10 global locations for

corporate innovation centres thanks to a

highly skilled workforce coupled with relatively

low labour costs. Between March to October

2016, 9 new corporate innovation centres

were opened across India by large companies

including Apple, Airbus and Visa.xlvi Three

of these innovation centres were opened in

Bangalore, with Hyderabad, Jaipur and Pune

each seeing two centres open.

These corporate innovation centres signify

the growing technology and innovation

prowess of Indian cities.

l City-to-City Partnerships: In recent years,

several UK cities such as Manchester, Sheffield,

and Leicester have sought to build economic

partnerships with Indian cities that have a

sectoral and ecosystem alignment. This is

proving successful, with increased investments,

trade, joint ventures, and academic collaborations

being forged. More such city-to-city partnerships

will entail more opportunities for UK businesses

in Indian cities.

Barriers to Market Entry for UK SMEs

l Legal and Regulatory Challenges: In a series

of annual surveys by UKIBC xlvii, UK businesses

were asked to choose the issues that they

perceived as the major barriers to doing business

in India. ‘Legal and regulatory impediments’ was

identified as the top barrier in all the three years.

However, there was a decline in the %age of

respondents choosing this issue from 2016

(67%) to 2017 (63%).

l Corruption: Corruption continues to be

another major impediment for foreign

businesses looking to operate in India.

However, over the last three years, there has

been a considerable decline in the number of

companies that view ‘Corruption’ as a major

barrier – from 46% in 2016 to 34% in 2017. This

decline is a positive sign as it shows a major

improvement from both the previous years –

indicating that the current government’s efforts

to mitigate corruption appears to be delivering

some tangible and much-desired results.xlviii

Going through an established and transparent

government to government route, such as through

a bilateral agreement or joint fund e.g. Newton

Bhabha Fund, offers strong potential to overcome

challenges arising out of corruption in India.


l Local Competition and Preference to Local

Players: India hosts as many as an estimated

13 million Micro, Small and Medium Enterprises

(MSMEs) in India, with a vast number on MSMEs

specializing in advanced, innovative products

and services including healthcare IT and IT-enabled

services, education, logistics, and transport related

services.xlix Being local entities and often able to

offer their solutions at relatively lower costs, they

represent strong competition to SMEs from UK.

The threat from local competition is made further

acute by government’s preference to local players.

Often, decision-makers are unable to grant any

projects to foreign SMEs, if they do not have any

local partners or previous experience working in

India. This means finding local partners, which

ideally have substantial record of delivering

projects in India, is of utmost important to UK

SMEs looking to enter into Indian market.

l Competition from Other Global Leaders: India

and its Smart Cities Mission has garnered massive

attention from countries and businesses across the

globe, keen to enter and expand into Indian market.

In addition, UK faces strong competition from other

countries that can offer more attractive financing

terms for smart city projects. For example, Japan

is able to secure large-scale infrastructure projects

by offering below-market interest rates. This has

generated considerable positive press for high-

profile projects such as the high-speed rail project

between Delhi and Mumbai, proposed by the

Japanese government.

SpainIndia, Spain to sign MoU to develop Delhi into smart city. Spanish agencies will provide technical support

FranceFrance keen to invest in creation of smart cities in Nagpur and Himachal Pradesh in sectors like power and transport

JapanIndia and Japan signed MoU to develop Varanasi into a smart city

SingaporeSingapore building smart city in Andhra Pradesh India. 10 times bigger than itself along with providing training to officials of the state government

USIndia and the US agreed to develop Ajmer, Allahabad and Visakhapatnam as smart cities

GermanyGermany offering its assistance in developing three smart cities (names yet to be decided)

Source: Zinnov Management Consulting, April 2015

Figure 5


l Regional Differences in Political, Regulatory

and Economic Systems: In its current state,

the country consists of 29 different states and

7 union territories and business and economic

conditions vary significantly between them.

Power and decision-making are decentralised

in India, with differences at the state level in

political leadership, quality of governance,

regulations, taxation, labour relations and

education levels. For instance, Gujarat has

a relatively positive business climate that

has succeeded in attracting significant foreign

investment. West Bengal on the other hand,

has a much lower level of foreign-owned

business activity, but in response to competitive

pressure from other states, is implementing

state-level reforms to attract more investment.

“The application of “liberalisation” in India is not

uniform as certain measures are not percolating

down the system” – Richard Heald, CEO,

UKIBC, November 2017

l Regional Differences in Political, Regulatory

and Economic Systems: In its current state,

the country consists of 29 different states and

7 union territories and business and economic

conditions vary significantly between them.

Power and decision-making are decentralised

in India, with differences at the state level in

political leadership, quality of governance,

regulations, taxation, labour relations and

education levels. For instance, Gujarat has

a relatively positive business climate that has

succeeded in attracting significant foreign

investment. West Bengal on the other hand,

has a much lower level of foreign-owned

business activity, but in response to competitive

pressure from other states, is implementing

state-level reforms to attract more investment.l

“The application of “liberalisation” in India is

not uniform as certain measures are not

percolating down the system” – Richard

Heald, CEO, UKIBC, November 2017

New Delhi


Source: Zinnov Management Consulting, April 2015

Figure 6: India: Smart City Key Stakeholders

Partnering with government to execute

smart city projects

Integrators: Provides unified and integration of multiple components E.g. IBM, Oracle, Accenture

Network Service Providers: Offers collaborative networks and data analysis. E.g. Cleoo, Verton

Product Vendors: Provides products that operate as main nodes of connectivity. E.g. Honeywell, Schneider Eldorado, Siemens

Managed Service Providers: Provides monitoring, management and consulting. E. g. IBM, Infoeye

Building smart cities in a

defined premise

Government forms bodies such as Special Purpose Vehicle,

local municipal corporations etc. to manage the implementation

of smart city projects

Taking initiatives to build platforms for pilot testing and encouraging inviting

stakeholders to participate

External stakeholders are willing to invest in upcoming

smart cities projects

KEYENTITIES

TechVendors

Real EstateDevelopers

Governmentowned bodies

IndustryAssociations

Foreigncountries

Type of vendors

l Cultural and Language Barriers: Especially

when working in villages and small cities, lack

of proficiency in local languages can be a key

barrier, such as when undertaking citizen-

centred research or trials, or when dealing with

local government and other public bodies.

l Finding Partners and Building

Trust with Various Stakeholders: Finding the

right partner and the appropriate opportunity

can prove difficult in India due to a large

number of stakeholders involved from

public and private sectors alike. This is

made further complicated by less clarity on

the formal and informal methods to form

partnerships and win bids. Going through a

government to government route, such as

through a bilateral agreement or joint fund

e.g. Newton Bhabha Fund, can potentially

help to overcome this challenge.


Potential Partnership Areas – Where do the Opportunities Lie?lii ‘CONNECT’ OPPORTUNITIES: R&D WITH AN AIM TO PROVIDE A GATEWAY TO COMMERCIAL BUSINESS

The areas below have been identified by aligning

UK commercial and innovation strengths with

challenges faced by Indian cities that are

currently being unmet by the domestic market.

Table 7


Spatial Planning

The UK has a well-established land-use and planning system. Recently, the UK’s focus has moved to planning at an urban scale to address a more fundamental agenda. Specific specialisms including: urban and regional development, master planning and urban design, urban regeneration, heritage and conservation, environmental assessment and sustainable development. Due to rapid and continued rates of urbanisation, Indian cities suffer from urban sprawl, overcrowding, poor service availability and low quality of life. The Indian planning system has been inherited from the UK, however, while the UK has evolved and progressed their system, the Indian system has remained the same. There is an opportunity for the UK to support Indian cities improve and evolve their planning and regeneration systems.


A core pillar of the Smart Cities Mission is improving citizen engagement through the use of participatory approach when designing and implementing urban solutions. This is currently not being done to a sufficient level in Indian cities. The UK has expertise in citizen engagement methods, with many design-led businesses creating innovative solutions to promote public engagement with respect to urban development. The UK could offer knowledge and services around combining social and digital capabilities to deliver services to citizens in a more integrated way.

Pollution and Remediation

Poor waste management policy implementation and run-down infrastructure has led to severe pollution of India’s bodies of water and land. As many as 302 river stretches on 275 rivers across the country have got polluted due to discharge of both municipal and industrial waste water. The UK’s diversity of contamination problems and site, coupled with scarcity of available development land has led to the growth of niche specialist and multidisciplinary consultancies, technology providers, contractors and equipment suppliers.


UK is a leader in sustainability and green building, having pioneered the BREEAM assessment method. Energy use in India is expected increase rapidly in coming years as India progresses to a fully-industrialised economy. The Indian government has expressed a need to generate more energy from renewable sources while simultaneously improving the energy efficiency of existing assets.


The UK is a leader in innovation around intelligent transport systems, particularly in the areas of real-time monitoring, transferring and analysing, traffic management service, systems integration and the internet of cars. The Transport Systems Catapult is also helping to advance UK innovation in this space. India has the second largest road network in the world and cities suffer severe congestion, with delays and additional fuel costing in excess of US$ 21 billion.

Large-Scale Infrastructure Delivery

UK engineering firms are a preferred choice for major urban development projects worldwide, while the UK’s construction sector registers a relatively high number of patents and enjoys technological advantages over other G7 and BRIC countries. Furthermore, the UK has world-class business and professional services capability, providing urban development financing, real estate and project management. UK companies have developed some of the most significant infrastructure and sustainable urban development projects in the world. Eg. Crossrail. India is in dire need of infrastructure improvements, especially in the areas of waste, water and sanitation, and is keen to ‘build for the future’. Huge amounts of investment have been proposed and this presents a good opportunity for UK companies to conduct R&D on large infrastructure projects.



The areas below have been selected by

identifying mutual challenges faced by the UK

and Indian cities that are currently not solved by

either domestic market, or they are areas where

both countries have complimentary skills which

could be brought together to better solve a

particular market challenge.

Table 8


Air Quality

Outdoor pollution in cities is estimated to cause 1.1 million premature deaths per year in India and the country is home to 14 of the world’s 30 most polluted cities. The UK has issues with air quality in its large cities and also has strict air quality targets to meet, therefore this is an area where the two countries could work together and share knowledge in order to meet their targets.

SMAC technologies India has a booming start-up scene with many businesses using SMAC technologies to develop innovative propositions. There is an opportunity for the UK to collaborate with the vast numbers of skilled software developers in India to create new business propositions that solve urban challenges.

Frugal InnovationIndia has developed strengths in frugal innovation where products are designed such that non-essential features are removed, and product complexity is reduced. The UK could benefit from learning about this method of innovation to enable it to more effectively compete in certain international markets.


The Bureau of Indian Standards along with NASSCOM and the Ministry of Urban Development are working closely to create a sustainable model for smart cities, recently releasing a draft of their “Standards for Smart Cities.” While this is a good start, there is significant scope for improvement in the depth and breadth of guideline development. The UK is a world leader in the creation of smart city standards and could benefit from the sheer scale of smart city development taking place in India to test and validate its standards. There is also a strong appreciation of the benefits of BIM in India, however the country is yet to capitalise on this opportunity and skills remain low. The UK is a world-leader in BIM implementation, therefore could provide services to Indian counterparts.

Sharing Economy

India is especially ripe for a sharing economy boom because of its high urban population and population density, which helps hyper-local sharing services due to the proximity between suppliers and customers, and the huge numbers of millennials who are comfortable with technology and the concept of sharing. The sharing economy concept is also generating momentum in the UK and the two countries could work together to develop and test the concept further.


Smart GovernanceBhopal

Bhopal Municipal Corporation partnered with SAP to automate public service offerings

Smart EnergyGhazlabad

Wave City instated light detectors to trigger street lights automatically

Smart TransportationVisakhapatnam

Setting up surveillance sensor camera at 94 junctions to regulate traffic in the city

Smart HealthChennai

Sankara Nethralaya in collaboration with TCS has kept all electronic medical records

Smart Education Tamil Nadu

4 schools using Windows tablet that can use NCERT application with cloud storage abilities

Smart IT & CommunicationBangalore

Cisco has partnered with ELCIA to establish an IoT innovation hub

Smart EnvironmentMumbai

Palava Smart City to reuse -80% of household and city waste

Smart BuildingGujarat

GIFT smart city will monitor building functions such as lighting, heating, unit failure etc.

Figure 7: Examples of Smart City projects implemented across India

Source: Zinnov Cities

Routes to Market – How can UK SMEs Access these Opportunities? l Newton-Bhabha Fund: The Newton Fund’s

partnership with India is known as the Newton-

Bhabha Fund. The Fund managers develop and

run calls, allocate and manage the money they

receive as part of the Newton Fund. Various

opportunities for SMEs are listed on its funding

page. The Fund has identified a number of

priority areas for India:

• Sustainable cities and urbanisation

• Public health and wellbeing

• Energy-water-food nexus

• Understanding oceans

• High value manufacturing (underpinning

capabilities)

• Big data (underpinning capabilities)

KEY PROGRAMMES

The joint programmes within the Newton-Bhabha

Fund cover a wide range from capacity building

programmes to funding research projects through

to the translation of research into innovation.

Some of these include.liii

l Joint Research Calls and Joint Virtual Centres:

Provide opportunities for Indian and UK experts

to work together on research projects to address

key global challenges. Partnerships exist in areas


Nepal


including, air pollution and human health, sustainable

cities and urbanization, clean energy, anti-microbial

resistance, and women and child health.

l Research and Innovation Bridges: Facilitate

collaborations between UK and Indian

businesses and research bodies, proposing

innovative, commercial solutions to particular

socio-economic challenges.

l Joint Industrial R&D calls: Support collaborative

industrial R&D projects up to two years in duration,

that aim to address societal challenges with a

route to future commercial success.

l Leaders in Innovation Fellowships: Offers

commercialisation and entrepreneurship training

and coaching for innovative researchers.

l Industry Academia Partnerships Programme:

Aims to forge partnership between higher education

institutions and industry to build technology

links and enhances quality and relevance of

engineering education.

l Connect with UK India Business Council (UKIBC):

The UKIBC is a membership-based, non-profit

organisation founded in 2007 to foster business

relations between the UK and India. The organisation

works with businesses in both countries, as well as

the UK and Indian governments, to promote and

increase bilateral trade. It is currently working with

the UK’s Department for International Development

on the India Urban Gateway Programme, which

provides capacity building and a route to market

for SMEs in the urban development sector.liv

l Smart City Projects: The projects envisioned under

the governments’ infrastructure initiatives and the

Smart City Mission provide opportunities in a wide

range of advanced urban sectors including utilities,

sanitation, public transport, affordable housing,

IT connectivity, e-governance, safety and security,

health, education, and the environment.

In terms of implementation of projects, the state

government, Mayor of the Municipal council and the

district collector are important organizations. The

implementation of the projects at the City level has

been assigned to a Special Purpose Vehicle (SPV)

created for the purpose. The SPV will plan, appraise,

approve, release funds, implement, manage,

operate, monitor and evaluate projects.

Each smart city will have a SPV which will be

headed by a full time CEO and have nominees

of Central Government, State Government

and urban local body (ULB) on its Board.lv

The projects can be carried out through joint

ventures, subsidiaries, public-private partnerships

(PPP) or turnkey contracts, suitably dovetailed

with revenue streams. A number of cities are in

the process of appointing Project Management

Consultants (PMCs) under the Smart Cities Mission.

These PMCs will be responsible for identifying and

tendering for project execution. Often, the best

way for SMEs to approach these projects is to work

through PMCs and profile their technologies or

capabilities with these organisations.lvi

Our research also suggests that it is important to

maintain healthy relationships with local

government in cities as well as with key decision-

makers for smart city projects. In particular, any

smart city project bids by companies get scored

based on the level of internal sponsorship of bids

that the bidder company is able to attain. UK

SMEs should ensure internal sponsorships from

the following internal stakeholders (in order of

priority) in their bids to cities:

• City Mayor / Direct Commissioners

• Nodal Commissioners

• IT Officers


l Partnership with Local Champions: A large

number of local innovative firms are likely to

dominate the Indian smart city market, particularly,

where the state or local governments favour local

players. In such instance, strategic collaborations

with local players will allow UK SMEs to tap into

certain markets that would otherwise be a lot more

difficult to penetrate.

Some of the key partnership strategies to break

into the Indian market include lvii:

Strategy 1: l Partner with Indian company in a JV or consortium

to share the pre-qualification for tenders and take

up the project supervision role and the Indian

company undertakes the project execution.

On success, the Indian company pays a

consulting fee.l Investments on part of UK business in proportion

to the percentage of the project component.

Strategy 2:l Partner with Indian company in a JV or consortium

and bid for project jointly, share the financial cost

associated with the bidding process and get

involved in project execution.l Investment required by UK business in proportion

to the percentage of the project component.

l Tapping into Existing UK firms in India: Several UK-

based or multi-national firms with physical presence

in UK are already well-established in Indian cities and

may be well-placed to win bids; UK SMEs have the

opportunity to explore collaboration opportunities

with these players and where possible, make joint

proposals for projects and R&I initiatives. According

to UKIBC, there were around 600 UK businesses

present in India in 2015. Of these, around 60%

operate in two sectors: advanced engineering &

manufacturing; and financial & professional services.

Information technology and communications is also

a major area of UK activity in India. Given

appropriate incentives and motivation (such as

small fee or tax rebate), these well-established firms

can potentially connect SMEs to buyers, suppliers,

financial institutions and a whole gamut of other

important stakeholders.

l Pro bono work with Indian partners: Doing pro-bono

work with Indian partners before being able to win

projects is another route to Indian market that offers

a number of advantages. Firstly, it offers opportunity

to build networks and trust with decision-makers

and potential partners. Secondly, SMEs with little or

no previous experience of working in India are able

to have a softer landing in the country and better

comprehend the cultural, political and business

landscape in the country.

Figure 8: UK Business in India

32%

5%

3%3%

2% 1% 1%

30%

9%

14%

Delhi-NCR Maharashtra Karnataka Other

West BengalUttar Pradesh Gujarat

Telangana

Goa Kerela

Source: UKIBC (2015)

For instance, Red Ninja, a Liverpool-based SME

that specialises in using IoT and open data from

city systems to improve urban planning, transport

systems and security assisted Indian cities for a few

years before it secured a £1m deal in 2016.lviii


l Entry through India’s Strong Research

Ecosystem: India is home to numerous universities,

with a strong base of national institutes. The

Indian Institutes of Information Technology (IITs)

in various cities are seen as the hallmark of

esteemed education. The quality of Indian tertiary

education institutions has emerged as an area of

relative strength in the Global Innovation Index,

with India being ranked 20th on the measure.

44 Indian universities featured in the top 250

QS University Rankings of BRICS (Brazil, Russia,

India, China, South Africa) countries 2016.lix

Furthermore, the following Centres of Excellence

have been established under various schemes

of the Government of India lx These Centres of

Excellence and the strong academic research

ecosystem can provide a number of collaborative

R&I opportunities to UK SMEs, before they enter

the commercial Indian market.


l Ensure collaboration is closely aligned

with the aims and ambitions of the UK-India

Tech Partnership, announced in April 2018

by Prime Ministers Modi and May. This is a joint

commitment to identify and pair businesses,

venture capital and universities to provide

access routes to markets for British and Indian

entrepreneurs and small and medium enterprises.

The UK and India have also committed to expand

their research relationship to work together to

address a number of global challenges, such

as clean energy and urban transformations.

For instance, in city of Pune in Maharashtra,

where Future Cities Catapult has a strong

relationship, there will be a strong focus on

the future of mobility. Additional connections

will also be linked to Bangalore with a focus

on augmented and virtual reality, advanced

materials and AI.

This provides new opportunities for city-level

collaborations as part of a new £3.5m urban

transformations programme to address issues

around rapid urbanisation including issues that

are predicted to arise in developing areas like

urban planning, governance and management.

l Use of Bilateral Funding Mechanism: A

substantial share of successful international

partnerships in the Indian smart city domain

have been built on top of existing bilateral

trade relationships, and often, using funding

available from various international funds

and commitments.

For instance, France committed $1.5bn for

development projects in India in August 2017,

to support three Indian cities – Chandigarh,

Lucknow and Puducherry. Apart from financial

support, France is providing technical support,

including special training workshops under

the programme.lxi

This was followed with Egis, French

engineering group, winning the first

contract to make the city of Bhubaneswar

in India a smart, sustainable and inclusive

city model.

The Newton Bhabha Fund goes some way

in facilitating UK SME collaboration with

Indian partners.

l Prioritise Sustainable Development Goals

(SDG): For India, the key goals recommended

to be embedded into bilateral agreements

both at a government and at a private/

industry level include:


• Goal 3 – Ensure healthy lives and promote

well-being for all at all ages

• Goal 6 – Clean Water and Sanitation

(even in cities): Ensure availability and

sustainable management of water and

sanitation for all

• Goal 7 – Ensure access to affordable,

reliable, sustainable and modern energy

for all

• Goal 11 – Sustainable Cities and

Communities: make cities and human

settlements inclusive, safe, resilient and

sustainable

• Goal 13 – Climate Action: take urgent

action to combat climate change and

its impacts

l Use UKIBC to Find Local Partners: With

most cities having a preference for

businesses with previous local experience

in some form, it is imperative for UK SMEs

entering the Indian market to form local

partnerships to win projects.

Figure 9

Source: Zinnov Management Consultants

Initiative objective

Conducted the ‘Smart City India World Conference’ to provide a platform for discussion among key stakeholders to brainstorm on strategies and implementation plans of smart city projects.

Under the agreement, the industry led consortia will lead the conceptualization and implementation of pilot projects in smart cities.

Hosted a consultation workshop on smart cities attended by various industry members presenting their perspective on the role of technology in smart cities and MoUD1 sharing the vision of smart cities.

Key organisers Initiative details

Policy Advocacy

Facilitator

Thought leadership

+

+

+ PwCNasscom

Confederation of Indian Industry

CAMI Association of

India

Siemens Hitachi

Smart City India World Conference

UKIBC – UK government’s overseas business

network initiative provider for India supports

finding local partners for UK businesses

in India.

UKIBC also helps UK businesses with market

research, introductions, market visits, product

& service showcase, virtual office, business

setup and recruitment – all of which can be

highly useful to SMEs.

l Engagement with Indian Industry Associations:

Indian industry associations, such as the

National Association of Software and Services

Companies (NASSCOM), Confederation of

Indian Industry (CII), and the Federation of

Indian Chambers of Commerce and Industry

(FICCI) have a strong influence on public sector

policies and business engagement. With a vast

membership network of Indian businesses these

associations can help UK SMEs by offering

partnership platforms and access to knowledge

and network databases.


1.4 UNITED STATES

Overview America’s cities are the engines of the US economy.

If the 21st century is the century of cities, as some

observers characterize it, urban America begins the

millennium in a strong position. Large cities in the

US —and in particular, the nation’s broad swath of

dynamic middleweights—dominate the economy as

in no other region of the world. They also loom large

in the urban world. Large US cities are expected to

generate more than 10% of global GDP growth in the

next 15 years, a larger contribution than all of the large

cities of other developed countries combined.lxii So

although the burgeoning cities of Asia have seized

the public imagination, US cities will remain an

important part of the global growth story over the

coming decades. While the overall performance of

urban America has been a strong one, the fate of

individual cities has varied widely.

Large US cities, defined here as those with

150,000 or more inhabitants, generated almost

85% of the country’s GDP in 2010, compared with

78% for large cities in China and just under 65%

for those in western Europe during the same

period.lxiii ICT, the proliferation of sensors owing

to the Internet of Things, and converging data

standards are also combining to provide new

possibilities for the physical management and

the socioeconomic development of cities. Local

governments are looking to data and analytics

technologies for insight and are creating pilot

projects to test ways to improve their services.

Technologies influence patterns of behaviour.

Digital and mobile technologies are making the

connections between service providers and

users tighter, faster, more personal, and more

comprehensive. Sharing-economy business

models are emerging that enable more efficient

use of physical assets, such as cars or real

estate, and provide new sources of income to

city residents.

EXAMPLES OF UK COMPANIES IN INDIA

Company Sector Indian HQ

British Telecom Telecom New Delhi

Cairn Energy Energy Gurgaon

ARUP Planning, Technical Consulting Hyderabad, Mumbai

Benoy Architecture Mumbai

BSI (British Standards Institution) Standards Multiple Cities

CDC Investment Works UK’s Development Finance Institution (DFI) Bangalore

JCB Construction, agriculture, waste handling New Delhi

Knight Frank Real Estate Consultancy Multiple Cities

Table 9


Chicago


Large US cities are using technology and data

analytics to solve specific problems in areas such

as health, transportation, sanitation, public safety,

economic development, sustainability, street

maintenance, and resilience—problems that affect

city residents every day.

Because change in a city is costly (in many ways)

and can be especially challenging for early

adopters, it is important that the results of urban

experimentation be shared, helping to foster less

expensive and more easily replicable solutions. US

cities need a platform for collaborating with each

other and all relevant stakeholders, sharing results,

insights, and best practices. The platform should

foster the development of standard, customizable

models (for studying alternatives) and applications.

It must also facilitate innovation from the bottom up,

being neither built nor operated monolithically and,

like the World Wide Web itself, having no central

authority directing innovation


In 2015, several Federal agencies, notably the

Departments of Commerce, Transportation and

Energy, enhanced their efforts to implement

programs of technology-based innovation for cities.

White House Smart City Initiativelxiv: A key

milestone was the September 2015 announcement

of the White House Smart Cities Initiative, which

put a spotlight on the support for urban technology

innovation being provided by a number of

Federal Agencies.

As part of this initiative, the government has

committed approximately $160m over five years

to support smart city initiatives and federal

research. These activities will create more than

25 new technology collaborations to help local

communities tackle key challenges. The key

challenges include reducing traffic congestion,

fighting crime, fostering economic growth,

and managing the effects of changing climate

change and improving the delivery of city

services. These initiatives include:

l More than $35m in new grants and $10m in

proposed investments to build a research

infrastructure for smart city development by

the National Science Foundation and National

Institute of Standards and Technology

l Almost $70m in new spending and more

than $45m in proposed investment to

develop new smart city solutions by

the Department of Homeland Security,

Department of Transportation, Department

of Energy, Department of Commerce and the

Environmental Protection Agency.

While this investment is small compared to

India’s $7.4bn 100 Smart Cities Mission or

Singapore’s Smart Nation Programme’s nearly

$7.5bn in technology investments over the past

3 years, it is a welcome start to American public-

sector investment in the smart city market.

Smart City Challenge, US Department of

Transportation (USDOT): The US DOT recently

announced a $165m investment in smart-city

solutions. This total includes $65m in public

funding and $100m in matching funds geared

toward advanced transportation technologies.

The funds aim at easing traffic congestion

and improving driver and pedestrian safety.

For example, Pittsburgh will get $11m through

the initiative to install smart traffic lights, while

Denver will receive $6m to connect vehicles to

mitigate traffic during rush hour. Further, around


$8m is now available for local governments for

building out mobility through car- and bike-sharing

services and demand-based dynamic buses.

This initiative should allow more cities in the

US to adopt a key IoT application.

Metro Lab Network: Another part of the White

House’s Smart Cities Initiative was the creation of

the MetroLab Network. Launched in September

2015, the MetroLab Network is a group of more

than 35 city-university partnerships focused

on bringing data, analytics and innovation to

city government. Its members include 38 cities,

4 counties and 51 universities. The Network’s

mission is to pair university researchers with city

policymakers to undertake research, development

and deployment projects that improve our

infrastructure, public services and environmental

sustainability. The university acts at the city’s

R&D department and the city acts as the test-

bed. Faculty and student get access to real-life

laboratories to test advanced approaches aimed

at addressing city priorities and challenges. Cities,

and their residents, benefit from technologies

and policies that leverage digital and information

technology, data analytics, sensing and more.

Individually, the city-university R&D partnerships are

beneficial and help drive innovative approaches

in government. When networked together, the

partnerships present an opportunity to scale

effective solutions, accelerate best practices, and

advance the understanding of urban science.

National Science Foundation (NSF)7 is an

independent federal agency that supports

fundamental research and education in all non-

medical fields of science and engineering. With

an annual budget of $7.5bn (FY 2016), the NSF is

the funding source for approximately 27% of all

7 https://www.nsf.gov/about/glance.jsp

federally supported basic research conducted

by America’s colleges and universities. The NSF

organises its research and education support

through seven directorates, each encompassing

several disciplines. These include: biological

sciences, computer and information science

and engineering, engineering, geosciences,

mathematical and physical sciences, social,

behavioural and economic sciences and education

and human resources. The NSF also supports

research through several offices within the Office

of the Director, including the Office of Cyber

infrastructure and the Office of Integrative Activities.

Smart Cities USA Intel and the City of San Jose

are collaborating on a public-private partnership

(PPP) project, to implement Intel’s IoT Smart

City Demonstration Platform to further the City’s

Green Vision initiative. This will help San Jose

drive economic growth, foster 25,000 Clean

Tech jobs, create environmental sustainability

and enhance the quality of life for its citizens. By

installing a network of Air Quality, Sound & Micro

climate Sensors, Intel and San Jose are creating a

‘sustainability lens’ for the City. The ‘sustainability

lens’ will use IoT technology to measure

characteristics such as particulates in the air, noise

pollution, and traffic flow. City Management will use

this information to drive improvements in air quality,

noise, transportation efficiency, environmental

sustainability, health, and energy efficiency.

The Smart Cities USA PPP, as part of the Smart

America Challenge, will demonstrate how cities

can use IoT to measure and act on critical data

to improve life for its citizens. These initiatives

demonstrate the engagement of the government

in smart city level projects and are forward looking

in terms of the government’s strategy and vision in

this sector and could provide potential collaboration

opportunities to the UK companies.


UK-US Science and Technology Umbrella Agreement: In

September 2017, the UK and US governments signed the

first UK-US Science and Technology umbrella agreement,

aimed to strengthen research collaboration between

the two countries. The treaty outlines a commitment to

collaborate on world-class science and innovation, building

on existing successful research co-operation in recognition

of the value of open data to further scientific research and

strengthen the economies and foster business growth.

Potential Partnership Areas – Where do the Opportunities Lie?lxv The areas below have been identified by

aligning UK commercial and innovation strengths

with challenges faced by American cities that are


Table 10


Spatial Planning

The UK has a well-established land-use and planning system. Recently, the UK’s focus has moved to planning at an urban scale to address a more fundamental agenda. Specific specialisms including: urban and regional development, master planning and urban design, urban regeneration, heritage and conservation, environmental assessment and sustainable development. Due to the rapid expansion of suburbs, American cities suffer from urban sprawl and could benefit from the UK’s world-leading expertise in planning and regeneration.


Smart city development in the US has historically been highly private-sector led. While this is changing, there are still huge opportunities to better engage citizens in the design and implementation of smart city technologies. The UK has expertise in citizen engagement methods, with many design-led businesses creating innovations to promote public engagement with respect to urban development. The UK could offer knowledge and services around combining social and digital capabilities to deliver services to citizens in a more integrated way.


Capabilities in regulatory and standards development have placed the UK at the forefront of developing new standards for green building smart cities, open data, urban design, public service delivery and community governance. The USA has launched the American National Standards Institute (ANSI) Network on Smart and Sustainable Cities (ANSSC), which provides a forum for information sharing, and coordination on voluntary standards but is not as advanced as the UK in this domain. Markets and Markets have reported that a key inhibiter of American smart city market growth is a lack of standards to enable interoperability of innovative technologies.


The UK is a leader in innovation around intelligent transport systems, particularly in the areas of real-time monitoring, transferring and analysing, traffic management service, systems integration and the internet of cars. The Transport Systems Catapult is also helping to advance UK innovation in this space. Metropolitan areas in the US suffer from severe congestion caused by poor urban planning and inadequate public transportation. While the US is a leader in autonomous and electric vehicles, it is yet to tackle issues with public transportation.

Large-Scale Infrastructure Delivery

UK engineering firms are a preferred choice for major urban development projects worldwide, while the UK’s construction sector registers a relatively high number of patents and enjoys technological advantages over other G7 and BRIC countries. Furthermore, the UK has world-class business and professional services capability, providing urban development financing, real estate and project management. UK companies have developed some of the most significant infrastructure and sustainable urban development projects in the world. E.g. Crossrail. The USA is in dire need of infrastructure improvements and is keen to ‘build for the future’, rather than repairing infrastructure to 1950’s standards. Huge amounts of investment have been proposed and this presents a good opportunity for UK companies to conduct R&D on large infrastructure projects.


Boston



The areas below have been selected by identifying

mutual challenges faced by the UK and US cities

that are currently not solved by either domestic

Table 11


Autonomous Vehicles

The US is a market leader in the development of autonomous cars and is home to approximately half of the 19 major companies currently developing autonomous vehicle propositions. The UK is also investing heavily in autonomous vehicle technology and test beds, therefore could benefit from conducting R&D with the market leader.

Electric Vehicles The US is also a market leader in electric vehicle technology, with two American companies holding 32.5% of patents in the field. The UK could benefit from conducting collaborative R&D with the market leaders in order to bolster our capabilities.

Open DataBoth the UK and the USA are market leaders in open data, however, the World Wide Web Foundation is clear that there is more to be done in the area. The two countries could work together to progress the systematic opening of data, while also addressing legal, regulatory, security, privacy and licencing concerns.


Like many other countries, the UK and USA are both struggling to sustain innovative smart city solutions past initial demonstrator or pilot stages.

The two countries together could explore innovative ways to secure sustainable funding and diversified business models for smart cities projects.

Air Quality Half of all American live in counties where they are exposed to unhealthy levels of pollutants. The UK also has strict air quality targets to meet, therefore this is an area where the two countries could work together and share knowledge in order to meet their targets.

IoT Platforms

The USA has been an early adopter of IoT devices and platforms, leading to it becoming the largest single-country market. There is an opportunity for the UK to work with the USA to develop IoT platforms that are not only technologically sound, but also incorporate the needs and desires of citizens to make them useful and beneficial for all city stakeholders.


The USA and the UK can both be considered market leaders with their respective LEED and BREEAM building sustainability programmes. The LEED programme has recently been expanded to include cities and communities and there is likely to be valuable leanings from this expansion.

market, or they are areas where both countries

have complimentary skills, which could be

brought together to better solve a particular

urban challenge. Alternatively, areas may have

been selected as the US has particular strengths

that may be beneficial to the UK.


Supporting Factors for UK SMEs Entry

A number of factors appear conducive to UK SMEs’

expansion and growth in the US markets:

l The UK is one of the largest markets for US goods

exports and one of the largest suppliers of US

imports. In terms of trade relationships and exports

to countries, the US is the single-most country

from which the UK earns the most through trade.

Exports to the US from the UK were worth £100bn

in 2016, more than twice as much as exports to any

other country. Furthermore, US firms have invested

£479m ($600bn) in the UK – nearly a quarter of

total investments in Europe – signifying the strong

bilateral relationship the two countries share.lxvi

l According to the World Wide Web Foundation’s

‘Open Data Barometer’, the US is a leader in

open data, ranking 2nd in the index with only

the UK performing better. Countries at the top

of the ranking are characterised by strong open

data readiness, implementation and impact and

could provide a collaborative environment. Open

data can become an instrument for fostering an

environment of innovation and providing a vibrant

platform to UK SMEs to creates multiple business

opportunities, such as the potential to improve new

products and services and to raise productivity.

l The recently established US-UK SME Dialogue

– under the ambit of the US-UK Trade and

Investment Working Group – aims to promote

closer collaboration and sharing of best practices

on policies and programs to support SMEs in

each country’s market. At the inaugural meeting

in April 2018, the US and UK governments jointly

released the guide ‘Doing business in the US and

UK: resources for small business’ as a key tool for

SMEs seeking to benefit from US-UK trade.

The US also invited the UK government to

join the 10th Americas Competitiveness

Exchange (ACE) on Innovation and

Entrepreneurship in California, to exchange

best practices on innovative approaches

to economic development.lxvii

l Recognising the importance of intellectual

property to their respective economies

and to the bilateral trade relationship, the

UK and the US have identified short-term

cooperative initiatives to support each

country’s world-class intellectual property

framework. Efforts are underway to develop

joint educational tools and resources for

SMEs to support the export of creative

and innovative products and services

between the two countries. There is also

agreement to continue discussions on

enforcement approaches, policy tools, and

voluntary initiatives for addressing online

piracy including the emerging challenge of

illicit streaming devices and services.

l In September 2017, the US and the UK

also entered into a historic Science and

Technology Agreement, which establish

a foundation for enhanced research

partnerships to further world-class science

and technological innovation.

l To reduce the impacts of urban sprawl, US

cities are looking to adopt new planning

approaches, create more diversified and

mixed-use developments and regenerate

urban areas to increase population density.

UK’s SMEs have strengths and sector

expertise that could particularly cater to US

needs and city challenges of urban sprawl,

congestion and climate change.


l To facilitate the rapid improvement of

national infrastructure, the US government

plans to make use of ‘race-to-the-top’

competitions to elicit the most creative,

integrated and cost-effective solutions,

measuring success in terms of outcomes

and rewarding progress towards the

goals such as:

• Building truly affordable housing that

is energy-efficient and transportation-

accessible

• Expanding access to electric vehicle

chargers on Interstate Highways, at

workplaces, multi-family housing and

other key areas

• Creating smart, connected, zero-emission

public transportation systems to provide

convenient access to work and play for

commuters and urban dwellers who don’t

want to own a car or can’t afford to.

These competitions could serve as

a valuable platform for UK SMEs to

showcase their expertise and engage

with the public and private sector to

develop new and creative solutions.

l The US Department of Commerce holds

a yearly summit called SelectUSA which

provides a platform to domestic and global

companies to network with key government

bodies engaged with fostering R&I and also

big private companies that invest heavily in

R&D across the US. The 2017 Summit saw

more than 2,800 participants from over

60 international markets. This included

over 1,200 global business investors and

economic developers from 51 US states

and territories.

Challenges to Market Entry for UK SMEs

l The US is an extremely large market to

do business in, and in many ways, is

not a single national market. The federal

system means that those looking to do

business in America must treat each state

as a separate entity with its own

procedures. Solution providers must also

contend with vast regional differences.

This may cause problems when trying to

develop and replicate solutions across

cities in different states.

l One of the most severe challenges of the

US market comes from domestic

competition. The US boasts a mature and

vibrant private sector, which is capable of

producing market-leading technological

solutions. Furthermore, the US is home

to more of the world’s top 50 universities

than any other country, resulting in the

country possessing considerable research

capabilities. Therefore, problems in the US

market are not likely to arise from lack of

access to the market, but more from local

competition and a saturated consumer base.

l Finally, the arrival of President Trump’s

administration has caused uncertainty in

some smart city market verticals, particularly

those associated with climate change,

sustainability and energy production.

In March 2017, President Trump signed

an executive order targeting climate

change regulations put in place by

the Obama Administration, stating that

they hinder US energy production and

jobs without providing meaningful

environmental benefits. Trump’s order


directed the Environmental Protection

Agency (EPA) to review the regulation to

decide whether to “suspend, rescind or

revise it”. The outcome of this decision and

future policies are likely to have significant

ramifications for innovation and solution

providers in this space.

l This project feeds into the ambitious

new UK-India Tech Partnership which is

expected to generate significant

investment and support the creation of

thousands of new jobs across the UK.

Earlier this month Prime Minister Modi

and Theresa May announced a joint

commitment to identify and pair businesses,

venture capital and universities to provide

access routes to markets for British and

Indian entrepreneurs and small and

medium enterprises.

Routes to Market – How can UK SMEs Access these Opportunities? l Support from Pre-Established Companies:

Support from existing large UK businesses to

new SMEs could pave a great way for their

entry into local markets. Several UK organisations

are already well-established in US cities and may

be well-placed to win projects; UK SMEs have the

opportunity to explore collaboration opportunities

with these players and where possible, make joint

proposals for projects and R&I initiatives.

Furthermore, leaders from large companies would

be most suitable to provide the best mentorship to

budding SMEs. This mentorship can take the form

of assistance with writing business plans, sharing a

large company’s experience, and supporting more

tactical needs, such as how to get legal advice, as

well as accounting and administrative tasks.

EXAMPLES OF UK COMPANIES BASED IN THE US

Company Sector US HQ

HSBC Holdings Banking and financial services New York

Vodafone Communications technology services New York

ArupProfessional services firm (Design, planning

and engineering)Cambridge, Massachusetts

British Telecom (BT) Communications technology services Irving, Texas

Astra Zeneca Pharmaceuticals Wilmington, Delaware

Table 12


l Participate in SME Congress and Industry

Events: International bodies such as

International Council for Small Businesses

(ICSB) are the pioneering organizations

in the US supporting SMEs to develop

a vast knowledge network and facilitate

collaboration with local peers. Developing an

understanding of the local business ecosystem

and collaborating with local academia and

government agencies would be quintessential

for the growth of UK SMEs in the US.

• Events such as the ICSB’s Forum for

Entrepreneurs and MSMEs and the

annual George Washington University

School of Business Entrepreneurship

conference, which focuses on new frontiers

in entrepreneurship and brings together

practitioners, educators, policymakers and

industry CEOs and leaders could be a useful

forum to participate for UK SMEs.

SME SURVEY

“Setting up business missions or facilitating attendance at key conferences so can engage with potential clients and suppliers. Also help in disseminating international conferences and when they occur. Facilitating meetings with regulators/government agencies to start to understand their role (i.e. licensing/permitting) in projects of that country.”

l The continued collaboration with the UK-

US Science and Technology Umbrella

Agreement would benefit both nations and

this agreement will enable the UK to share its

resources and expertise. This collaboration could

be leveraged by UK SMEs (potentially through

IUK) to help build a platform with latest research

trend findings that could be useful for UK SMEs

to enhance their understanding of critical topics

related to tomorrow’s innovative agenda and align

their offerings based on learnings through such

collaboration platforms.

Recommendations for SMEs –Better Access to Opportunities

l Alignment with Mayor of London’s International

Business Programme:

• Mayor’s International Business Programme

help start-ups and small businesses to grow

by promoting access to affordable workspace,

finance and business support. The Programme is

a strong advocate for London’s businesses and

helps foster trade, pursue investment and build

links with other global countries/ cities. Through

its promotional agency, London & Partners,

it promotes London businesses and SMEs to

investors, business and overseas markets.

• The Mayor of London programme funds also

another program called Silicon Valley Comes

To The UK (SVC2UK), which is a not-for-profit,

volunteer-led series of events that brings

together early stage investors, successful serial

entrepreneurs, students and alumni with leading

serial entrepreneurs and investors. It is designed

to improve the ecosystem for entrepreneurship

in the UK and drive sustainable growth by

helping promising CEOs in their scaling journey,

inspire students, and foster relationships with

Silicon Valley and the UK. This program could

serve as a strategic platform for UK SMEs

looking to set up a base in Silicon Valley and

could be a useful Launchpad.

Box 1


California


l Prioritise Sustainable Development Goals

(SDG): In the case of US, the key goals

recommended to be embedded into bilateral

agreements both at a government and

at a private / industry level include:

• Goal 9 – Build resilient infrastructure,

promote inclusive and sustainable

industrialisation

and foster innovation

• Goal 11 – Make cities and human

settlements inclusive, safe, resilient

and sustainable

• Goal 12 – Ensure sustainable consumption

and production patterns

• Goal 13 – Take urgent action to combat

climate change and its impacts

l Enable early stage entry through R&I

partnerships: The US market tends to be

highly competitive and once mature leaves

little space for the entry of UK firms. Hence,

UK SMEs should look to enter the US market

earlier in the life cycle of product and services

development, and ideally, in the later

phases of the R&I process, at a point of

TRL 88 and above.

A way to gain entrance at an earlier stage of

the product and services development

innovation life cycle is potentially through

partnerships with US university spin-offs

and innovation hubs.

8 Technology readiness levels, as defined by the European

Commission. For more information, https://ec.europa.eu/

research/participants/data/ref/h2020/wp/2014_2015/

annexes/h2020-wp1415-annex-g-trl_en.pdf

l Set up a local base in Silicon Valley: Silicon

Valley has been and continues to be one

of the world’s most important centres of

innovation and technology disruption.

The Valley has a unique set of assets—the

presence of technology giants, world-class

universities, abundant venture capital and a

hypercompetitive yet collaborative culture

that celebrates both risk and failure.

The UK is the leading European destination

for Silicon Valley investors, with British

tech companies raising more venture

capital from Bay area VCs than any other

European country. Over the last five

years, London tech firms have also raised

considerably more capital ($2.5bn)lxviii than

their European counterparts

Some existing UK programmes, such as

the SVC2UK which brings together

annually the most relevant founders,

corporates, investors, and policy-makers

from the UK entrepreneurial ecosystem

and Silicon Valley in engaging meetings

and workshops, could serve as an effective

platform to build a presence in Silicon Valley

and help UK SMEs find their way into the

US innovation ecosystem.


1.5 JAPAN

Overview Around 94.3% of the Japanese population,

amounting to 119 million people, lives in

cities.lxix Japanese cities are dense in terms

of population, buildings and infrastructure

networks. At 335 persons per square kilometre,

Japan’s population density is six times more

than the world average of 51 per square

kilometre (2015).lxx

In the most densely populated cities such

as central Tokyo, the figures go up to 12,022

habitants per km square, while the 6,758 is

the average for the main cities. The model of

political decision-making is generally considered

to be centralised in Japan, as the State remains

a key player in city planning. Local Governments

(LGs) tend to act as executing bodies of the

central policy, despite the two decentralisation

reforms of 2000 and 2006.lxxi

Additionally, the private sector, especially

real estate and construction companies, is a

prominent actor of urban planning in Japan,

where municipalities tend to let them lead

and conduct large scale initiatives such as

smart cities. This results in a situation where

municipalities are not the leaders of projects, but

often mere advisory participants. In some cases,

LGs manage to lead actively the planning and

implementation of projects, instead of following

the roadmap decided by the private sector

Japan’s economy, overall, has steadily eroded

in almost every sector, including its signature

advanced manufacturing industries. Policy

changes can create the right conditions for

reigniting growth, but Japan needs a greater

focus on what individual companies can do

immediately and on their own. In fact, launching

a major private-sector initiative to transform

Japan’s productivity performance can constitute

a “fourth arrow” of economic reform to

complement Abenomics – the set of economic

policies advocated by Prime Minister Shinzō

Abe, since the December 2012 general

election. Abenomics is based upon “three

arrows” of monetary easing, fiscal stimulus

and structural reforms.lxxii

Japan’s economic fundamentals are solid,

as Abenomics has made steady progress.

For instance:

l Real GDP has been growing above its potential

for five consecutive quarters through Q1 2017.

The momentum toward achieving the price

stability target of 2% has been maintained.

l For the past three years, wage increase

has been at the highest level in this century.

This trend is continuing this year as well.

l The labor market remains tight. In April 2017,

the unemployment rate stayed at 2.8 %, and

the job-to-applicant ratios were 1.48, above

one in all prefectures.

Going forward, it is important to ensure

that growth in consumption and investment

continues to strengthen. To achieve such a

virtuous circle, sustained and stable wage

increases will be crucial. Structural reforms

aimed at raising potential growth will also

contribute to achieving such wage increases.

The government plans to continue to

accelerate Abenomics by using all policy

tools – monetary, fiscal and structural, in

cooperation with the Bank of Japan.lxxiii


Tokyo



The Japanese government aims to increase

spending on science and technology by

900bn yen over the next three years, with

a significant chunk going to a new initiative

to promote collaboration between industry

and academia. The boost forms part of Prime

Minister Shinzo Abe’s 2017 strategy for growth,

which was approved by the Cabinet in June

last year.

Japan’s investment in R&D has stalled since

2001, but the government’s growth strategy

underlined the economic importance of

innovation. By 2020, the government aims

to raise the country’s GDP to 600tn yen

(US$5.4tn), up from 537tn yen in 2016, and

increase its investment in R&D to 4.4tn yen

(US$36.1bn), up from 3.5tn yen in 2017.

Key to the strategy is the Public/Private R&D

Investment Strategic Expansion Program

(PRISM), which will support significant industry–

academic partnerships in established research

areas, where policy-makers expect high public

demand, including artificial intelligence,

robotics and quantum optics. PRISM is part

of the government’s recent push toward

establishing Society 5.0, a super-smart society

that seamlessly integrates cyberspace with

the real world.lxxiv

National Strategic Special Zones (NSSZs):

The National Strategic Special Zones (NSSZs)

are an initiative set up by the government to

establish brand-new economic zones with

business-friendly conditions by means of

promoting bold deregulations. This initiative

is one of the key policies of the ‘Japan

Revitalisation Strategy’ aiming at enhancing

the international competitiveness of Japan by

breaking traditional ‘bedrock regulations’.

This initiative led to the appointment of six

specific zones, which includes Tokyo area,

Kansai area, Niigata city, Yabu city, Fukuoka city

and Okinawa prefecture. While the conventional

special zones were mostly initiated by limited

deregulations on private sector’s requests, the

brand-new “NSSZs” are strategically led by the

Prime Minister and implemented through close

discussion with relevant local governments and

the private sectors. This new framework and

implementation process is the key to enable

unprecedented speed and producing bigger

effects than before.lxxv

l Tokyo Area: a plan of essential deregulations

for Tokyo to become a real global business

hub through attracting foreign enterprises and

relaxing existing floor-area-ratio regulations.

l Kansai Area: will promote deregulations

mainly in the medical field

l Niigata city: will promote deregulations mainly

in the Agricultural field

l Yabu City: will promote deregulations mainly

in the Agricultural field

l Fukoko City: Build Employment reforms to

support business foundations

l Okinawa Prefecture: Promoting tourism in

Okinawa to develop it as an international

tourist city.

Science and Technology Basic Plan

(FY2016/2020): Under the 5th Science and

Technology Basic Plan (FY2016/2020), a

comprehensive Strategy on Science, Technology


and Innovation (STI) has been laid out to make

Japan the most innovation-friendly country in the

world. The various initiatives under this strategy are:

Realizing Society 5.0: As a part of the ‘Growth

Strategy 2017’ and the ‘Basic Policy on Economic

and Fiscal Management and Reform 2017’, the

government announced that it would work for

realization of Society 5.0 –super smart society

where people can live comfortably and abundantly

in all situations – to address various social issues

by incorporating innovations that the 4th Industrial

Revolution has progressed rapidly into every scene

of industry and social life.lxxvi

l Bringing together government, industry and

academic sectors and promoting public engagement

and encouraging ambition in younger researchers

and start-up companies.

l Sharing the concept of Society 5.0 with the world

and building platforms for utilizing big data in

support of a knowledge-based society.

l Thoroughly implementing efforts by relevant ministries

and agencies, all the way from basic research

to practical application (e.g. by reinforcing basic

technologies and promoting initiatives in connected

industries) and promoting SIP (Strategic Innovation

Promotion Program) in step with the direction of

initiatives in the relevant ministries and agencies.

Connected Industries

• Creation of new added values by connecting various things.

• Things that used to be in an independent relationship or adversaries merged and changed

The birth of a new business model

Things x Things

Humans x Machines/Systems

Company x Company

Human x Human(inheritance of knowledge and skills)

Production x Consumption

Japanese workplace skills x DigitalDiversified collaboration

HuntingSociety

FarmingSociety

IndustrialSociety

InformationSociety

Society 5.0Super Smart

Society

1st Industrial RevolutionAcquisition of power(steam engine)

2nd Industrial RevolutionInnovation of power(electricity and motor)

3rd Industrial RevolutionProgress in automation(computer)

4th Industrial RevolutionEnabling of autonomous optimisation. AI thinks on its own based on a large amount of information to take optimal action

Changes in thenature of industry

Developing by eachindividual industry

Social changes

Changes intechnology

Figure 10: Connected Industries leading to Society 5.0


MAIN THEMES OF SOCIETY 5.0

• Cyber security: Innovation that backs up safe data and communication, considering the qualities of the IoT, for example, the long life cycles from configuration to transfer.

• IoT system architecture technology: technology that empowers the displaying of equipment and programming as segments, and the building and working of expansive scale systems.

• Big data analytics: Innovation associated with getting knowledge and value from a lot of a wide assortment of information, including unstructured information.

• Artificial Intelligence: technology that backs IoT, enormous information examination, and advanced communication.

• Device technology: Innovation that empowers fast, real-time preparation of extensive measures of information with low power utilization.

• Network innovation: technology that appropriates large measures of data at high limit and rapid speed.

• Edge computing: innovation that empowers expanding speed and enhancement of real-time processing at the real system area, which is fundamental for expanding the usefulness of IoT.”

Box 2

Science, Technology and Innovation (STI):

Steady Implementation of the Public & Private

Investment Expansion Initiatives for Science,

Technology and Innovation (STI)

l Budget-Making Process Reform Action:

Establishing a fund for PRISM (Public/Private

R&D Investment Strategic Expansion Program)

that will encourage private investment in R&D

by leveraging government investment in R&D

while stimulating the synergistic effects between

PRISM and Strategic Investment Planning (SIP)

l Systemic Reform Action: Complete

enforcement of reforms to universities and

national research institutes and moving from

stewardship to management

l Evidence-Based Investment Action: Achieving

the “visualization” of government R&D

investments and policy effects and implementing

appropriate resource allocation and evaluation

l New Tokyo. New Tomorrow – The Action plan

for 2020lxxvii: In December 2016, the Tokyo

Metropolitan Government formulated a new

comprehensive 4-year plan called ‘New Tokyo.

New Tomorrow’. The vision of the plan has three

dimensions to it:

l Smart City: Driving the economy as a global

megacity and Japan’s capital and engine and

aim to create a city that can solve the challenges

facing the megalopolis and continue growing to

lead in the international competition among cities.

l Safe City: To protect the lives and assets of the

city residents from all kinds of disasters, and build

a dynamic and bustling Tokyo.

l Diverse City: Creating a city that embraces

diversity and where everyone can lead vibrant

lives and participates in an active in society.

Next-Generation Energy and Social System

Demonstration Areas: Yokohama Smart City

Project / Virtual Power Plant Project: In 2010, the

Ministry of Economy, Trade and Industry (METI) as

one of four “Next-Generation Energy and Social

System Demonstration Areas” selected Yokohama

through its Yokohama Smart City Project (YSCP), the

city works to provide a system optimizing energy

supply and demand at individual homes, commercial

buildings and in urban areas, in cooperation with

34 companies. Those include Japan’s leading

energy company, an electrical manufacturer and

construction companies.

In 2015, a new public-private body, the

Yokohama Smart Business Association (YSBA),

was established to advance the project from

demonstration to implementation. Yokohama’s

aim is to be an energy-recycling city that is

environmentally robust, resistant to disasters,

and economically strong.


Potential Partnership Areas – Where do the Opportunities Lie?lxxviii

‘CONNECT’ OPPORTUNITIES: R&D WITH AN AIM TO PROVIDE A GATEWAY TO COMMERCIAL BUSINESS

The areas below have been identified by aligning

UK commercial and innovation strengths with

challenges faced by Japanese cities that are



Citizen Engagement and Service Design

The UK has expertise in citizen engagement methods, with many design-led businesses creating innovative solutions to promote public engagement with respect to urban development. Citizen participation is not a clear priority in Japanese Smart Community projects as it has historically not been encouraged by private sector companies or central government. However, some local governments are realising the need to engage citizens (Eg: Kitakyushu). The UK could offer knowledge and services around combining social and digital capabilities to deliver services to citizens in a more integrated way.

Power Grid Technology and Management

Japan is making extensive changes to its energy infrastructure including market restructuration, power grid upgrades and massive expansion of renewable energy. The UK is advanced in power grid technology and management, as well as long distance transmission networks, therefore the UK could establish partnerships to provide expertise as well as products and services. Japan is progressing with its smart meter rollout with TEPCO expecting to install 27 million smart meters by 2020. The UK has quickly developed into one of the most attractive markets in the world for advanced smart grid technology and applications, thanks to a highly competitive energy sector and recent reforms.

Energy Efficiency of Existing Building Stock (Retrofitting)

Despite good progress in improving the energy efficiency of the economy in general, major gains are yet to be made in building energy efficiency. With the country’s energy mix using a lot of fossil fuels, there is an urgent need to reduce energy consumptions across buildings and infrastructure if emissions targets are to be met. A system of voluntary standards is expected to be replaced by mandatory ones which will go some way in improving the situation, however there is more to be done. While Japan is making inroads in influencing the efficiency of new buildings, it is struggling to retrofit existing buildings. UK companies can bring expertise in insulation and energy efficient building design, backed by the Building Research Establishment’s assessment method for sustainable buildings, BREEAM.

Big Data and Sensing

Big data (centralising large amounts of data from multiple sources and processing it) can help identify patterns, define problems and inform decision-making. For example, traffic can be better regulated thanks to large data gathering about real time congestion level by street and preferred and alternative GPS routes. In case of an earthquake, it can also be useful to map the damage in terms of building and transportation networks, to access information about the evacuation routes and zones, the weather forecast, and the remaining available renewable energy sources. Such a capability could be valuable for a metropolis like Tokyo where structures and infrastructure need to be maintained and people need to be kept moving. Currently, while this technology is being used in specific smart city projects in defined areas of cities, it is not yet being applied at a city scale.

Innovation ‘Coaching’

Japan has only recently started to encourage an entrepreneurial culture and cultivate a national start-up ecosystem; therefore, these areas are fairly immature and underdeveloped. The UK and London are frequently ranked at the top of entrepreneurial and start-up indexes and have developed a huge amount of knowledge about how to create and grow a successful start-up ecosystem. This knowledge could be extremely valuable to Japan, therefore, could form the basis of collaboration between the two countries.

Table 13


‘FUND’ OPPORTUNITIES: R&D WITH AN AIM TO FACILITATE KNOWLEDGE TRANSFER AND LEARNINGThe areas below have been selected by

identifying mutual challenges faced by the

UK and Japanese cities that are currently not

solved by either domestic market, or they are

areas where both countries have complementary

skills, which could be brought together to better

solve a particular market challenge


Smart Ageing

Both countries have ageing populations, although Japan is further ahead in the process. This demographic shift will require significant changes to the way cities are planned and to the way services are delivered. Healthcare, in particular, will need to be delivered in new ways in order to meet increasing demand. To date, neither country has made major inroads in this area, creating opportunities for the two countries to work together in order to develop ‘smart ageing’ solutions.

Circular Economy Japan has been a diligent advocate of circular economy principles for decades and has an extensive set of policies and progressive targets to drive further progress. As the UK recognises the need to be more conservative in its consumption and recycle more, learnings from Japan could be extremely useful.

Public TransportBoth the UK and Japan have well developed, integrated and heavily-used public transportation systems. There is an opportunity for the two countries to work together to create market-leading next-generation public transportation solutions.


Like many other countries, the UK and Japan are both struggling to sustain innovative smart city solutions past initial demonstrator or pilot stages, which typically involve public sector subsidies or grants. The two countries together could explore innovative ways to secure sustainable funding and diversified business models for smart cities projects.

Robotics

Japan has long been known as a ‘robotics superpower’ and continues to build on its strengths in the diverse area of robotics production, utilisation, supply of key parts and research and development. While previously an expert in industrial robotics, Japan is now focusing attention on the development of nursing, construction, infrastructure maintenance and management robots and disaster response robots all of which could be of use to the UK. Therefore, collaboration in this area could be extremely beneficial to the UK.

Table 14


Supporting Factors for UK SMEs Entry

An Innovation Hub and changing business

environment: Japan is currently ranked 14th

in the Global Innovation Index (GII) ahead of

New Zealand, France and Australia and just

behind Canada. Japan is very active in R&D

and innovation and has filed a large number

of patents, many of which have high universal

validity. It’s pedigree as an innovator is

undoubted and is trying to rapidly adapt

to the digital age. As a push to revitalize

Japan’s stagnant economy, Prime Minister

Shinzo Abe has implemented a package of

reforms dubbed “Abenomics.” The so-called

third arrow of Abenomics is concerned with

deregulation, and through it, a number of

special economic zones (SEZs) have been

established across the country. Osaka and

the greater Kansai area – including the

nearby cities of Kyoto and Kobe – have

been selected as a SEZ as a part of the SEZ.

Culturally, Japan is experiencing a rapid change

in outlook too. It is opening up more and as a

country, is keen to understand the learnings

from international companies and research

organisations. The merits of an entrepreneurial

and innovative culture are gradually being

recognised, and this has led to a rapid increase

in support for start-up businesses. This cultural

shift is also being seen in Japan’s corporations.

Japan’s shrinking population: Japan is

currently dealing with the challenges of an

ageing urbanised population. In urban areas,

the birth rate has fallen far below replacement

rate. With a falling birth rate, one of the world’s

longest life expectancies, and close to zero net

immigration, Japan is headed for a uniquely

high ratio of seniors. New companies can thrive

in this hyper aging societies by identifying

new customer segments among seniors

and developing novel products (Companies

can profit from hyper ageing is to develop

products that help seniors cope with infirmity)

and services to help them. Hyper ageing

could be an area where companies from the

UK and Japan could potentially collaborate

to develop new products and services for the

Japanese market.

Large urban infrastructure market: Given

Japan’s urban infrastructure sector is very

much dominated by large domestic firms,

there could be clearly niche opportunities

for UK companies to collaborate with

Local companies in areas such as urban

data analytics, AI and citizen engagement.

Japanese green card for highly skilled

foreign professionals: In order to invite

more highly skilled foreign professionals

to Japan, the Japanese Green Card for

Highly-Skilled Foreign Professionals system

was established in April 2017 to greatly

shorten the residence period of five years

necessary for an application for permission

of permanent residence, to make it the

most quickly obtainable green card in the

world. This will allow foreign researchers,

corporate managers, and other workers with

specialized talents to apply for permanent

residence after as little as a single year living

in Japan. This strategy bearing the subtitle

“Toward a Fourth Industrial Revolution”—

calls for ‘strengthening creation of innovation’

and identifies attracting highly skilled

foreign professionals to work in Japan as

an integral component in that process.

Achieving this goal will require creating a

system that lets foreign talent stay in Japan

for an extended time.


SME SURVEY

“Our target businesses are both global enterprises and start-ups. We will ease the terms and conditions for hiring talent, both local and foreign. Osaka wants people who are internationally-minded using the city as a base.”

Masaaki Yoshikawa, Osaka Innovtion Hub Director

Box 3

Tokyo 2020: Japan remains the third-largest

economy in the world, bigger than the UK and

Germany combined. Japan’s new ‘sports economy’

is likely to boost economic growth further when

Tokyo hosts the Rugby World Cup in 2019, and

the Olympic and Paralympic games in 2020. As

a result of their preparations, urban development

has accelerated as the 2020 Olympics approach.

Environment and sustainability have been a key

focus of the International Olympic Committee and

the Tokyo 2020 Committee in charge of organising

the Games is cooperating with Tokyo Metropolitan

Government to ensure the planning for these

games are as sustainable as possible. This partially

builds on the existing smart city strategy, which

includes the upgrading of energy efficiency in

buildings via installations of Energy Management

Systems, fostering take-up of renewable energy

sources such as solar PV and hydrogen, and a

number of other measures to ensure a stable

energy supply and lower carbon dioxide emissions.

The 2020 Olympic and Paralympic Games will

provide an opportunity to increase awareness

of renewable energy, energy saving and waste

management. The mega-event will also be the

opportunity for the SME and enterprises from EU

and Japan to cooperate further in terms of smart

city development and provide opportunities for

further partnerships in business, research and

city-to-city cooperation. There is a wide range

of sectors, which offer market and cooperation

opportunities, from sustainable construction to

renewable energy production and urban consulting.

Complex business practices and competition could

potentially make market access difficult, however

these opportunities could eventually translate into

long-term business in the smart city sector in Japan.

Establishment of ‘Regulatory Sandbox’ system:

In the ‘Growth Strategy 2017’ (Cabinet Decision

on June 9, 2017), the government announced a

‘regulatory sandbox’ system to the encourage

development of business models through trial and

error to foster new innovative businesses. The

system is expected to be used when companies

start new businesses that are not envisaged by

existing regulations in fields such as IoT, AI, Big

Data, drones and autonomous vehicles, which have

been developing rapidly.

In addition to the establishment of the ‘sandbox’

regulation system for individual projects, the

‘Growth Strategy 2017’ will establish a framework

to ensure prompt and smooth implementation

of demonstration experiments of automated

driving, drones and other near-term technologies

by fundamentally reviewing relevant preliminary

regulations and procedures also in the National

Strategic Special Zones.lxxix

R&D tax system: The Act on Partial Revision, etc.

of the Income Tax Act, etc. that was enacted

recently fundamentally revised the research and

development tax system that is a tax credit system

for experimental research. It’s most important

to note that for the for the points (for this tax

credit system) pertaining to development of new

“services” based on the Fourth Industrial Revolution

utilizing big data, etc. are included in the categories


to be supported by the R&D tax system in

addition to existing “manufacturing” R&D in

the manufacturing industry. This is a measure

to support the creation of new businesses

through the Fourth Industrial Revolution

leveraging IoT, Big Data, artificial intelligence

and other technologies. The revision of the

definition of costs of experimental research

has made the R&D tax incentive available also

for service development to create value using

data as a key factor in the age of the Fourth

Industrial Revolution.

Five Promises for Attracting Foreign

Businesses to Japan: The Council for

Promotion of Foreign Direct Investment in

Japan adopted “Five Promises for Attracting

Foreign Businesses to Japan” to address issues

frequently suggested by foreign companies as

“obstacles to convenience.” They are:

1. Strengthen advisory and consultation services

to support foreign businesses, in order to

develop an environment for foreign companies

to do business easily and improving the living

environment for foreigners

2. Overcome language barriers at retailers

and restaurants

3. Facilitate better Internet connectivity

4. Accommodate business jets at local airports

5. Enhance educational environment for

expatriate children

New Trend in Inward FDI in Japan: Given that

promotion of inward FDI in Japan will introduce

superior technologies and new know-how and

promote value enhancement of innovation

FIFTH PROMISE: STRENGTHEN ADVISORY AND CONSULTATION SERVICES TO SUPPORT FOREIGN BUSINESSES

Item Progress

Investment Advisor Assignment System

• The “Investment Advisor Assignment System” was established. In this system, State Ministers act as advisors to companies that have made important investments in Japan. Nine companies were selected in March of 2016.

• Operation of the system started in April 2016 and State Ministers interviewed the companies 12 times in total by the end of FY2016

Collaboration with local governments

• Portal site for creation of the global economic cycle for regional economies was built to attract companies to provincial regions and was launched in August 2015.

• The portal site was made multilingual (English, French, Chinese and Korean) in FY2016 to disseminate information of local products registered with the site.

Table 15


creation and technology accumulation in Japan, the

government positions the promotion of FDI in Japan as

one of the priority issues in its growth strategy. Japan

has an established reputation as “a huge sophisticated

market.” In addition, the existence of Japanese

companies and research institutes with advanced

technologies and infrastructure favourable for R&D

is also appreciated in recent years. Establishment of

R&D centres by foreign capital has become one of

the recent FDI trends in Japan. In this context, foreign

companies are actively working to promote innovation

in Japan by fusing their technologies with Japanese

companies’ technologies in the field of IoT (Internet of

Things) and artificial intelligence (AI) with a background

of rapid progress of the Fourth Industrial Revolution.

In a related development, foreign companies are

increasing their presence with the penetration of

“Open Innovation” that introduces technologies and

ideas from outside to create new values. Some of them

found commercial opportunities in Japan which is also

called a “frontrunner in overcoming global challenges”

and are contributing to solutions of various problems

Corporate Accelerators: New platforms for foreign

companies: Large corporates such as NTT DoCoMo,

Mitsubishi, Hitachi, Denso, Toyota and Keikyu

Railways have switched on to the opportunities of

open innovation and this includes collaboration with

foreign partners by setting up corporate accelerators

as platforms that could enable collaboration with

foreign companies.

Collaboration in Third markets: The British and

Japanese governments are both interested in

leveraging opportunities for British and Japanese

companies in 3rd markets in Asia, Africa and the

Middle East. Japanese companies have a strong

track record in large scale transport and infrastructure

projects, but they tend to go it alone. UK innovations

could improve their competitive advantage while also

providing export and R&I collaboration opportunities

for UK SMEs in the process.

Challenges to Market Entry for UK SMEsJapan, as the third-largest economy and second-

largest capital market in the world, has been

regarded as a difficult market for foreign

companies to penetrate compared with other

advanced economies. Domestically, the

economy’s slow growth has led to calls for

reform of its rigid structure, which often inhibits

the entrepreneurial spirit.

Language and culturelxxx: New entrants in the

market face real challenges in reaching their

business outcomes in Japan due to the Japanese

language and culture. It is a country with distinctive

formal and informal communication rules and

strong expectations on product quality and

corporate integrity which, when upset, may hurt

beyond recovery trust and business prospects.

l Although English language capabilities are

improving, the average proficiency level

among Japanese professionals currently lags

far behind that of other Asian countries such as

Singapore, India or the Philippines. In addition

to difficulties with business communication

in English, companies may also struggle with

Japanese-only official documentation and

information systems and may require the

help of an interpreter.

l Even when language is not a barrier, cultural

differences may hinder effective business

communications. Doing business in Japan

entails engaging internal teams and

collaborating with local third parties whose

basic expectations may differ from that of

international startups and companies. Foreign

companies need to take a strategic approach

to entering the Japanese market, rather than

an opportunistic one.


l Japan is a country of marked contrast, between

tradition and modernity, but also between

openness and insularity. As a nation, Japan can

also perform remarkable and decisive changes

of direction as it proved when it came out of

more than 200 years of self-imposed seclusion

to the rest of the world through the Sakoku

(“Locked Country”) policy which remained in

effect until 1853 to embrace international trade

and becoming the first Asian nation to adopt a

Western Style Constitution in 1889.

Natural Disasters: Japan is prone to and has

experienced numerous natural disasters such

as Earthquakes, Tsunamis, Typhoons and

Volcanic Eruptions. Such natural phenomena

are a frequent occurrence in Japan and

Japanese people are taught from a young age how

to prepare for them as much as possible. In addition

to human suffering, natural disasters of such

amplitude severely impact an array of business

activities, from supply chain and production to

sales. The potential for damage from natural

disasters cannot be completely mitigated, but

global companies with operations or suppliers in

Japan should prepare as much as possible with a

strong commitment to Safety Regulations, Business

Continuity Planning and Third-Party Management

Exclusive supplier Networks: Exclusive supplier

networks (Cross stock holding and interconnection

of business interests among Japanese companies)

and alliances between domestic business

organisations can restrict competition from

foreign companies.

Information Security: With the surge in high

profile corporate data breaches in 2014,

managing information security challenges has

become a prevailing concern among top decision

makers across the globe. Doing business in

Japan going forward entails adapting to

strengthening regulatory requirements

and addressing stakeholders’ increasing

expectations pertaining to the prevention of

the following three main issues:

• Cybercrime (hacking)

• Privacy Protection

• Third Party Providers

Routes to Market – How can UK SMEs Access these Opportunities? The combined influence of the Abenomics

policies and the prospect of stronger

corporate standards are boosting Japan’s

profile as a target for foreign investment

and contributing to improving conditions for

international business.

l Top-level sales and overseas seminars/

symposia: In FY2016, the Japanese

government held 163 seminars/symposia on

investment in Japan and encouraged foreign

enterprises and government officials to invest

in Japan. At the Invest Japan Seminar held

in Brussels (Belgium, in May 2016) and the

Invest Japan Symposium in New York (US,

in September 2016), Prime Minister Abe

took the platform for top-level sales to

foreign companies. The symposium held

in New York gathered more than 300

participants. Mayors also attended the

seminar and symposium to introduce the

attractiveness of their respective regions

mentioning the particular examples of foreign

companies that expanded into the region

and also publicized their incentive programs

including subsidies and establishment of

industrial parks. In addition to these seminars

and symposia, in September 2017


In FY2016, JETRO held 163 seminars/symposia

on investment in Japan in major cities in the

world including top-level sales by Prime

Minister Abe.

l Tokyo 2020: Japan has won the opportunity

to host the Rugby World Cup 2019 and the

Olympic and Paralympic Games in 2020.

These events could provide potential

business and partnership opportunities for

British companies – large and small. Whilst

Japan has a strong domestic industry and

previous experience in hosting sports events,

Tokyo 2020 could serve as a great platform

for UK companies to find opportunities to

contribute to these events - almost certainly

in partnership with Japanese firms.

Box 4

CYBER SECURITY

The Cambridge-based company Darktrace, for example, has identified in japan a market ripe for new approaches to cyber security as Tokyo prepares for 2020 Olympics and its largest group, such as Sony, become high profile victims of a new wave of financially motivated cyber attacks.

The Tokyo 2020 Committee has committed to

holding a Green Olympic. An ‘Action & Legacy Plan’

has been established in 2016 and is based on 5

pillars for which specific legacy sub-commissions

will be created in order to monitor the efforts. The

five pillars are sports and health; urban planning

and sustainability; culture and education; economy

Invest JapanSeminar in Brussels

Date: May 4 (Web), 2016Participants: 129 personsCo-organizers: Ministry of Economics, Trade and Industry (METI), Kobe City, Tsukuba CitySupporters: Japanese Embassy in Belgium, Ministry of Foreign Affairs of Belgium, etc.

Invest Japan Symposiumin New York

Date: September 19 (Mon), 2016Participants: 320 personsCo-organizers: Ministry of Economics, Trade and Industry (METI), Hamamatsu CitySupporters: Consulate General of Japan in New York, etc.

Europe

49 Asia

62

NorthAmerica

43

Otherregions

9

Figure 11: In FY2016, JETRO held 163 seminars/symposia on investment in Japan in major cities in the world including top-level sales by Prime Minister Abe.


and technology; and recovery from the Great

Earthquake, and national benefits and global

communication. The area of urban planning and

sustainability could be an attractive area for the

UK SMEs to collaborate with existing big UK

companies for opportunities.

l Liaise with Organizations/Subject Matter

Experts with Local expertise: JETRO

(Japan External Trade Organization), as

Japan’s central organisation for attracting

inward FDI, has provided support for more

than 16,000 projects aimed at entering the

Japanese market, and helped in the

successful establishment of over 1,600

companies. Experienced staff members

and specialists in Industry, law, accounting

and other fields cooperate to address the

challenges faced by Foreign companies

starting up in Japan, including those related

to language, business practices, rules and

regulations. Doing business in Japan for foreign

firms could be facilitated by organisations like

the British Chambers of Commerce Japan

(BCCJ) which could actively support UK

companies setting up. For example large real

estate owners such as Mouranchi have created

a one-stop-shop which helps facilitate the

creation of new businesses.

SME SURVEY

“It is difficult to enter the Japanese market without sufficient research, contacts (including local partners) and preparation due to its unique insular business culture”SME survey respondent

Box 5

l Support from pre-established Local and

UK companies: Support from pre-existing

large UK businesses (In the purview of R&I)

to new SMEs could pave a great way for

their entry into local markets. Many UK firms

initially opt to operate in Japan through a

distributor of another form of partnership,

although more than 450 British firms have

generated sufficient momentum to set up

their own presence in Japan. These range

from large FTSE 100 multi-nationals to

small companies for whom Japan is a key

market. The majority of these companies are

headquartered in the Tokyo area, with other,

smaller clusters in the Kansai region around

Osaka/Kobe, and in Yokohama. There is a

strong representation from the transport

services sectors, as well pharmaceuticals. The

most recent influx of new companies is in the

life sciences and energy sectors – evidence

of the changing economic landscape. For UK

SMEs that want to access the Japanese

market, Japan’s corporate accelerators are

clearly one of the main routes in. Companies

such as NTT DoCoMo, Hitachi have

already started to look at these models of

collaboration with foreign partners.

Tokyo


CASE STUDY: APICAL LIMITED

Apical Limited- A British company that pioneered exciting new technology for camera imaging found Japan to be the perfect launch pad for their product.

Overview: Established as recently as 2002, the company is headquartered in Newcastle-upon-Tyne and improves the connectivity of both trains and buses, giving passengers access to more reliable Internet connections, media entertainment and real-time information whilst they are on the move. Nomad’s expertise provides them with improved vehicle safety, increased efficiency and vehicle monitoring and maintenance.

Apical’s technology was introduced into the DSC and DSLR market by Olympus, Sony and Nikon, and was later adopted by smartphone companies pioneering high-quality cameras including Sony-Ericsson and Sharp. Its current business is in the smartphone market, with research into smart sensors for the next generation of products.

Interesting facts: Pioneered new technology for cameras based on how the eye works; Found success in Japan first before expanding globally; In the first four years of operation, 100% of the business came from Japan; Currently more than 1 billion products across the globe contain Apical technology.

“Our story is unique because we started out and built our success in Japan first, before breaking into any other markets. We knew we had technology that other companies wanted, and the idea of our potential is what gave us the confidence to keep coming back to Japan relationships that led to business. You really have to commit to Japan and have the right attitude for long-term business rather than a quick win. We did that with our engineering teams and considering our target customers.”

Michael Tusch, CEO, Apical Limited

Box 6

l Collaborate with Japanese companies to explore

opportunities in 3rd markets: Japan Bank for

International Cooperation (JBIC) and the UK’s

DIT at the British Embassy in Tokyo are actively

exploring opportunities for collaboration in third

markets. JBIC has an MoU with DIT on how UK

and Japanese companies can collaborate on

infrastructure development. The MoU with DIT

includes areas such as offshore wind, nuclear,

high speed rail and regeneration, as well as

collaboration/ cooperation in 3rd countries and

could present the UK SMEs great opportunities

to partner with Japanese companies to explore

business opportunities in 3rd markets.


ADDRESSING CHALLENGES

A common reason for lacklustre business

performance in the Japanese market by western

companies is the inability of such organisations to

fully grasp the nuances of the Japanese culture

and the inextricably linked social mores. Local

partnerships (which can be structured in many

ways) have been successfully used by many

organisations to ensure their products and services

are respectful of and in line with expectations of the

Japanese culture.

l Collaborate with bodies such as ‘Export to

Japan’ which provides companies with local on-

ground support: The Japanese business culture

attaches a high degree of importance to personal

relationships and these take time to establish and

nurture. A strong network of personal contacts is

vital in the Japanese market. It is also advisable

to understand the network of relationships, which

your partners and competitors work within. It can

be difficult for UK firms to gauge the real thoughts

and intentions behind the politeness of Japanese

people. This is where a local representative who

has experience of doing business in Japan can be

invaluable as they will be able to read between

the lines of the behaviour and language used

by your Japanese counterparts and interpret


them for you to minimise your chances of

misunderstanding and miscommunication.

The pace of decision-making in Japan

is generally much slower than in the UK.

Patience and repeated follow-up are typically

required to successfully close a deal.

However, once the Japanese have decided

to do business with you, things can then

move very quickly.

l Use Personal Advisors System for

Foreign Companies: SMEs could establish

connections with networks such as JETRO

(Japan External Trade Organization).

JETRO recently introduced an advisor

system in which their staff members serve

as ‘attendants’ to about 1,000 companies

to provide enhanced consultation and

solve individual problems specific to new

companies. Their aim is to realize more

projects by providing customized and highly

reliable services in cooperation with the central

and local governments. It will take measures

such as disseminating English information on

10 focused fields, enhancing consultations for

foreign companies, and resolving individual

issues by persons in charge and teams of

specialists through cooperation with related

ministries and agencies.

Develop disaster management plans: All

organisations seeking to enter or expand in

Japan must actively prepare to deal with the

human and business impact of the natural

disasters which the country frequently faces.

Ensuring that organisations design multi-faceted

disaster recovery plans is crucial, and these need

to be ideally co-developed with the relevant

government organisations, which are best-placed

to ensure the plan suits the Japanese context.

JETRO personnel in charge of attracting investment (Personal Advisors for Foreign Companies) proactively conduct hearings about the needs of JETRO-supported companies and provide detailed support.

Proactively hearing the needs of companies to solve the problems

• Need information on government and local incentives

• Request addressing of regulatory and procedural barriers and obstacles for business

Personal advisors for Foreign Companies

Proposals to the government:

• Recommendations for improvement of regulations and procedures

Cooperation with municipalities:

• Support for inspection mission and interview arrangement

• Providing incentive information

Support for individual projects:

• Providing market information

• Support for constructing business models through strategic proposals

• Consultation by an expert (administrative scrivener, judicial scrivener, tax accountant, accountant, etc.)

• Support for human resources and property search

• Provision of temporary office

1000 foreigncompanies

• Unsure of what kind of regulations or procedures are necessary

• Need information on policies and market trends in English

Local government, etc.Invest Japan HotlineGovernment, Ministries

Figure 12


Examples of government agencies dealing

with disaster management include Asian

Disaster Reduction Center, and National

Nuclear Safety Agency.

IUK should promote academic tie-ups

between Japanese and UK universities

to further develop bilateral relationships

in academics and research: The Fukushima

Prefecture has a longstanding collaboration

with the University College of London (a

Memorandum of Understanding was signed in in

2014) and is facilitating students to join a ten-strong

delegation to visit Fukushima in 2018 to promote

bilateral academic and research relationships.

Academic tie-ups could be an important instrument

to establish long-term research collaboration

and support in areas of interest such as

urban planning, infrastructure, design and

urban resilience. In addition, such tie-ups

would be greatly beneficial for SMEs as the

Japanese academic institutes nurture future

talent in relevant areas.

Establish a Dialogue with DIT Japan

towards Tokyo 2020: DIT Japan will be

leading a programme of activities and events

in the months leading to the Tokyo 2020

Olympics. As this will focus on the exchange

of lessons learnt from London 2012, UK

SMEs could engage in this dialogue in the

coming months.

EXAMPLES OF UK COMPANIES BASED IN JAPAN

Company Sector Japan HQ

GlaxoSmithKline Pharmaceuticals Tokyo

Rolls-Royce Automotive Tokyo

Arup Professional services firm (Design, planning and engineering) Tokyo

British Telecom Communications Tokyo

Astra Zeneca Pharmaceuticals Tokyo

Table 16


CHAPTER 2

CITY TYPOLOGIES

Source: The Business of Cities

CITY TYPOLOGIES: A STATE OF THE ART

Who Produces City Typologies? What tends to be the Focus? What Methods Do They Use?

Consultancies Sustainability Quantitative and spatial analysis

Energy companies Invest-ability Data from multiple indicators

Sustainability centres Future Economic Readiness Case studies

Research groups and think-tanks Smartness Stylised judgments

Universities City Clusters Statistical Methods

Table 17

This chapter provides a new and unique methodology for classifying the world’s cities. It looks at the world’s cities and categorises them based on rigorous and deep data to create a multi-level typology approach to determining which cities are, or in the future could, provide high potential opportunities across various market types including business-to-business and business-to-government engagements as well as research and innovation opportunities.

Given the growing significance of distinct city dynamics – across different countries and within the same country – it has become essential to adopt a novel lens of city typologies that focuses on cities and their dynamics, against the backdrop of national or regional dynamics.

This ‘hybrid’ approach begins to account for the ever changing political, economic, social and technological dynamics within the landscapes of cities that are playing a bigger role in determining the overall market potential and attractiveness for innovative, urban businesses.The core 2x2 framework categorises cities

according to growth (both per capita and population), and also city size. This creates multiple lists of cities that could, for example, be high growth and size, high growth and medium size or low growth and small size, among others. Users can then select the ‘type’ of cities they want to examine further to determine their capacity for cities with a high-public sector demand (B2G), cities with promising business-to-business (B2B) markets, and cities with strong R&I opportunities, all scored on a spectrum through rigorous data and research.This methodology produces a dynamic mix of cities from the initial filters to reveal emerging and established market opportunities and highlights cities beyond the ‘usual suspects’ for cities primed for partnership, growth and market development.

This chapter illustrates the uniqueness, usefulness and usability of the city typology methodology by highlighting several case studies of cities falling within different categories on the typology including: Tokyo, Varanasi, Nanyang, and San Diego.


2.1 OVERVIEW

Cities have been the foci of democracy, creativity, and

economic activity. Both productivity and growth are

strongly determined by densities and agglomerations of

people that cities provide. Cities also serve as catalysts

for collective action, decision-making and accountability

(World Bank, 2009).lxxxi For innovative businesses, the

scale of cities and their inherent efficiencies make them

well suited to design, test and pilot new business

models and products.

Increasingly, essential services including water, energy,

clean air and waste are being managed at the city level,

rather than by national authorities. This implies varying

models of urbanisation are adopted across cities.

Furthermore, cities tend to develop differently based

on legacy infrastructure, social and cultural preferences,

geographical location, financial resources, and political

and institutional capacity to plan and manage development.

These differences make it imperative to understand how

cities can be understood both individually and as clusters,

based on their performance across a set of parameters – in

this case, parameters that help determine the attractiveness

and market potential of cities within the innovation

and urban services domain.

To this end, in partnership with cities experts The

Business of Cities, we have designed an innovative

framework to build a typology that categorises global

cities into three types, each with defining characteristics,

as described further in the following sections.

This framework can be used to understand any given

city’s market, strength, and potential. This can ultimately

be extended to assess the replication potential of

innovative solutions offered by UK SMEs within global

cities, and to help identify a larger group of potential

city partners than is possible solely through

a focus on a limited range of national markets.

2.2 Methodology This exercise aimed at creating a city typology

framework that incorporates various relevant

dimensions in innovative ways to assess the R&I

and market potential of cities for urban services and

solutions. The approach is based on using evidence

and demand-led development of frameworks and

constituent indicators.

R&D

B2G

B2B

National Filter based on openness to UK

market and business environment

Identify the basic city types

Apply national market filters

Identify top cities in 3 sets

of key variables

Cities in non-conducive national markets filtered out

CITYTYPE 1

CITYTYPE 2

CITYTYPE 4

CITYTYPE 5

CITYTYPE 7

CITYTYPE 8

CITYTYPE 3

CITYTYPE 6

CITYTYPE 9

Figure 13: Process Map


2.3 Process MapCORE FRAMEWORK FACTORS

The primary filter framework categorises

cities based on two core factors:

l Rate of growth (GDP per capita and population):

This helps to differentiate cities at various stages

of growth and answer critical questions of:

• How fast is the population growing?

• How fast is per capita economic growth?

• How fast is this growth relative to their

wider region?

The growth stage of a city plays a crucial role in

determining its demand for urban services, mainly

in terms of ‘what or how advanced’ a service is

needed and also in terms of ‘how much’ is needed.

l City population size: This helps to differentiate

between:

• Cities of global scale (>5 million people)

• Competitive ‘middleweight’ cities (2 to 5

million people)

• ‘Goldilocks’ cities – Cities with large

enough markets, integrated leadership,

procurement capability, and civic engagement

(<2 million people)

Figure 14

TARGETGROUP 4

TARGETGROUP 5

TARGETGROUP 6

TARGETGROUP 7

TARGETGROUP 8

TARGETGROUP 9

Small

High

Medium

2 million + 5 million +

Low

500,000+

Medium Large

Rate of Growth/GDP + Population,

Populationsize

High performing ‘Goldilocks’ Cities (Target Group 1)

Rapidly growing competitive

middleweights (Target Group 2)

High growth, high need megacities (Target Group 3)

These core filters yield a list of around 500 cities

across different Target Groups, which can then be

analysed in subsequent filters across three types,

determined by different sets of indicators.

APPLYING NATIONAL FILTERS TO ELIMINATE CITIES IN LESS ATTRACTIVE COUNTRIES

The resulting target groups of the primary filter cities

are further run against a set of national filters to

eliminate cities that are made less attractive owing

to a range of country or bilateral political, cultural

and regulatory dynamics. Specifically, the following

filters have been used for this purpose: intellectual

property protection rules; ease of doing business;

rule of Law; and total recent trade with the UK.

These screen out nations and their respective cities

with business and trade environments that are not

currently conducive to UK SMEs in the advanced

urban services domain.


IDENTIFYING TOP-PERFORMING CITIES ACROSS IDENTIFIED CITY TYPES

The next phase allows for classifying cities into

three city market types, each characterised by a

unique combination of determining, measurable

indicators. The three types are intended to help

understand the suitability of various cities to focus

UK SMEs’ overseas strategy. These types are:

• B2G – Cities with high public-sector demand

• B2B – Cites with promising business-to-

business markets

• R&I – Cities with strong research and

innovation opportunities

Each of these types entails a set of measurable

indicators against which each city’s performance

is scored.

To illustrate the functioning of the framework, three

target groups of cities were randomly selected

and scored within each target group against the

relevant indicators for a particular city type, as

illustrated in figure 15.

INDICATORS USED FOR THE CITY TYPES

Figure 15

Target Middle-weight R&I Cities

Target LowerGrowth B2B markets

Small

High

Medium


Low

500,000+

Medium Large

Populationsize

Target High Growth ‘Goldilocks’ Cities for

B2G opportunities


For each of the city types, multiple

indicators were used to create the most

robust picture of the cities market potential

and strength. For example, when assessing

which cities might present a strong business-

to-government focus, indicators such as

city budget size, future city strategy, density

and government procurement processes

were assessed. For potential strong and

lucrative business-to-business focused

cities, indicators across large company

presence, talent pool, investment attraction

and competition, were employed. Lastly,

where a strong R&I market was of interest

data for R&D spend and growth were

combined with indicators on innovation

ecosystems and collaboration across

academia and industry.


Small

High

Medium


Low

500,000+

Medium Large

Populationsize

Dublin, Bucharest, Tel Aviv, Haifa, Prague, Budapest Bilbao, Edinburgh, Valladolid, Raleigh, Charlotte, Austin,

Nashville, Orlando, Salt Lake City, Indianapolis, Columbus (OH), Gold

Coast, Newcastle (NSW), Antofagasta, Konya, Antalya, Suqian, Datong, Huainan, Puning,Nanyang, Taian, Yancheng, Nanchong, Batam,

Putian, Zaozhuang, Linyi, Lianyungang, Chifeng, Baoji, Jinzhou,

Zhuzhou, Skopje, Doha, Sharjah, Ranchi, Rajkot, Tiruchirappalli, Asansol, Chandigarh, Tiruppur,

Jodhpur, Varanasi, Raipur, Srinagar

Athens, Manchester, Warsaw, Las Vegas, Denver, Weifang, Shantou, Shijiazhuang, Nanning, Lanzhou,

Zhengzhou, Fuzhou, Huizhou, Changchun, Taiyuan, Changzhou,

Nanchang, Kochi, Coimbatore, Lucknow, Indore, Kanpur, Huai’an,

Haikou, Luoyang, Patna, Visakhapatnam, Vadodara, Bhopal, Agra, Leeds, San Antonio, Portland,

Riverside-San Bernadino, Sacramento, Perth, Brisbane, Adana

Glasgow, Stockholm, Porto, Valencia, Gothenburg, Marseille, Amsterdam, Copenhagen, Lyon, Lille, Calgary,

Edmonton, Richmond (VI), Jacksonville, Memphis, Pittsburgh, Louisville,

Ottawa, Cincinnati, Auckland, Adelaide, Wellington, Gaziantep, Cixi, Xiangyang,

Handan, Yiwu, Qinhuangdao, Xining, Baoding, Hengyang, Taizhou, Qigihaer,

Guilin, Rizhao, Jining, Zhenjiang, Xiangtan, Yingkou, Wuhu, Palembang,

Liuizhou, Mianyang, Taizhou, Quanzhou, Jilin, Abu Dhabi, Guwahati,

Jabalpur, Kollam, Aligarh, Gwalior, Kota, Mysore, Jamshedpur, Ludhiana

Cologne, Zurich, Vienna, Oslo, Basel, Helsinki, Turin, Virginia Beach, Kansas City, QuebeC. Providence, Milwaukee,

Cleveland, Hamilton (NZD), Christchurch, Anyang, Jiangmen,

Yichang, Fushun, Yangzhou, Zhuhai, Yongin, Anshan, Chaozhou, Benxi,

Taichung, Zhanjiang, Macau, Kaohsiung, Gwangju, Daejon,

Suweon, Ulsan, Changwon, Daqing, Medina, Mecca, Bareilly,

Hubli-Dharwad, Guntur, Amritsar, Aurangabad, Moradabad, Meerut,

Madurai, Dhanbad, Allahabad, Salem, Vereeniging, Port Elizabeth

Munich, Frankfurt, Berlin, Hamburg, Rome, Naples, Boston, San Francisco, Montreal, Detroit,

Wenzhou, Guiyang, Taipei, Incheon, Shizuoka-Hamamatsu, Busan,

Changsha, Sapporo, Kuwait City, Calicut, Pune, Santiago, Cape

Town, Durban, Baotou, Shaoxing, Xuzhou, Hiroshima, Sendai, Daegu,

Gujranwala, Nashik, Pretoria, Brussels, St, Louis

Paris, Tianjin, Hangzhou, Wuhan, Dongguan, Beijing, Riyadh,

Chennai, Bangalore, Madrid, Barcelona, Washington D.C.

Ankara, Suzhou, Dalian

London, Chongqing, Nanjing, Chengdu, Ahmedabad, Mumbai,

Delhi, Houston, Atlanta, Dallas-Fort Worth, Haerbin, Xiamen, Xi’an,

Shenyang, Yangon

Lisbon, Birmingham, Phoenix-Mesa, Tampa-St. Petersburg, Seattle, San

Diego, Minneapolis-St. Paul, Vancouver, Melbourne, Izmir,

Tangshan, Zhongshan, Wuxi, Ji’nan, Kunming, Bandung, Ningbo, Hefei,

Wulumqi, Zibo, Dubai, Jeddah, Nagpur, Thrissur, Malappuram, Jaipur,

Surat, Nantong, Yinchuan, Yantai, Thiruvananthapuram, Vijayawada,

Baltimore, Bursa, Sydney*

Milan, Chicago, New York, Los Angeles, Istanbul, Guangzhou,

Kuala Lumpur, Shanghai, Foshan, Shenzhen, Seoul, Hong Kong,

Nagoya, Osaka, Tokyo, Hyderabad, Calcutta, Johannesburg, Toronto,

Miami, Philadelphia, Qingdao, Singapore, Fukuoka


Figure 16


2.4 OutcomesThe two phases (the primary lens of growth

and size, alongside the secondary lenses

of B2B, B2G and R&I) allow you to ‘pick’

different target groups to identify top-

performing cities. In this study, three target

groups of cities were selected at random

from Phase 1 and examined against the

three phase 2 types and their respective

data indicators.

The whole process reveals a dynamic mix of

cities from these initial filters and highlights:

l emerging and established market

opportunities

l beyond the ‘usual suspects’, towards

cities primed for partnership, growth

and market development.

However, it is important to note that these

rankings are propositional. They are not

definitive or conclusive and require further

in-depth testing and reviewing.

To provide an example of the outputs,

if you were to run the ‘Goldilocks’ cities

(small size but high growth) through the

secondary filter for Business-to-Government

you would see a selection of cities that

would include Varanasi, India; Edinburgh,

Scotland; and Budapest, Hungary.

Looking at some of the world’s largest

cities that have a lower rate of growth

and assessing them against Business-to-

Business opportunities show some of the

usual suspects in New York and Tokyo, but

perhaps some ‘unusual suspects’ in Osaka,

Japan; and Philadelphia, USA.

Finally, taking the ‘middleweights’, of

middle size and middle growth, and

running them through the filter for

Research and Innovation reveals cities

such as San Diego, USA; Hefei, China;

and Melbourne, Australia.

2.5 City Profile Case StudiesIntended to go in a bit more detail on some

of the top-ranking cities from each of the

three city types, the following city profiles

begin to illustrate the need for a more

detailed review of opportunities at a city

level going forwards.


CASE STUDY – Target High Growth ‘Goldilocks’ Cities for B2G opportunities: Varanasi (India)OVERVIEW

Table 18

MACRO INDICATORS DATA

GDP (PPP, 2015) $1.9bn

GDP Growth Rate (2015-25) 9.4%

GDP per Capita (2015) $3,790

Population (2015) 1.6 million

Population Density (2011) 14,598 per km2

Table 19 9

B2G POTENTIAL INDICATORS B2G POTENTIAL INDICATORS

RANK9

Plan and Strategy 8

Density 2

Governance 19

LG Procurement 36

Varanasi, also known as Banaras or Kashi, is one of

the oldest cities in the world. Varanasi has shown

a constant increase in population over the years.

Over the last few decades, the population has grown

sevenfold (from 207,650 persons in 1931 t to 1,435,113

persons in 2011). The economy of the city is largely

based on tourism, silk and cotton textiles, handicrafts,

metal and wood arts & artefacts. The city’s flourishing

9 Out of the 52 cities assessed under B2G type

tourism industry saw about 6.3 million tourists visiting

the city in 2013-2014.lxxxii

Varanasi ranked high on the secondary filter for

plan and strategy, governance and local government

procurement methods.

In 2016, Varanasi was chosen as one of the 27 cities

in the third round of the Indian government’s Smart

Cities Mission. Under the Mission, the central government

provides INR 500 crore (c. $75m) for each city over five

years with states making matching contributions. The

rest of the resources are expected to come from loans,

public-private partnerships (PPP), convergence of various

schemes of central and state governments besides own

resources of urban local bodies. So far, the government

has tied up multi-lateral lending from agencies Department

for International Development (DFID) of UK and Japan

International Cooperation Agency (JICA), who have

committed $500m each. Similarly, the Asian Development

Bank (ADB) and World Bank have committed $1bn.lxxxiii

KEY GOVERNMENT PROJECTS AND STRATEGIES“The entire concept of the Varanasi smart city

project will be focused on Varanasi’s socio-economic

growth, cleanliness, and smooth traffic movement.”

– Nitin Bansal, Commissioner, Varanasi Municipal

Corporation and CEO Varanasi Smart City, April 2018

The total estimated cost of the Varanasi Smart City Plan is

INR 2,520 crore ($378m), to be spent on the rejuvenation

of ‘ghats10’ , infrastructure, and e-governance. For area

development, there will be an estimated budget of INR

1,659 crore ($249m) and for pan-city solutions there is a

budget of INR 618 crore ($93m)lxxxiv. As per guidelines,

the duration of the Smart City Mission is five years, from

2015 to 2020. Some of the initiatives under the Plan

include:

l The provision of a single access card for the integrated

online payments for multiple means of transport.

10 Refers to a series of steps leading down to a body of water,

particularly a holy river.



In addition to this, there is also the provision of the

Varanasi metro. There would also be upgrades made

in the utilities and entry fees to the heritage sites in

the city. All the popular sites of historic importance will

receive digital signage along with interactive panels

and interactive maps. The ambitious Smart City plan

would also involve traffic sensors, public bicycle sharing

systems and even smart street lights with panic buttons

and LED lighting to brighten the overall city.lxxxv

l Some other projects include: single station IT solutions

for managing the city; 2-wheeler only parking based

on local mobility dynamics; decongesting streets by

moving stray cattle to a designated natural setting

with veterinary/shelter facilities outside city; age-old

‘ghats’ restoration; under the flyover placemaking;

beautification of water tanks; housing projects;

consolidation of 4 existing different land uses into

integrated business districts (Town Hall City Centre)

and redevelopment of old police stations

Other than the Smart City Plan, the City Development

Plan 2041 is a key program guiding projects in

Varanasi. The program is a joint Partnership Program

between the (central) Ministry of Urban Development,

Government of India and The World Bank.

Similarly, under the Atal Mission for Rejuvenation and

Urban Transformation (AMRUT), the city is working to

provide drinking water, sewage and drainage networks

and non-motorised transport to citizens.

B2G PARTNERSHIPSThe city of Varanasi is one of the few Indian cities that

appear to be well on their path to implementation

of various city projects. The city has already formed

strategic partnerships with leading companies such as

Philips, IBM, Uber, Schneider Electric, and Ericsson for the

delivery of its vision.

The city regularly invites bids for its projects periodically

on SmartNet, the Indian government’s online platform

for tenders and other opportunities. For instance, in

September 2017, the VSCL invited RFP for Master

System Integrator (MSI) who will be responsible

for the ‘Design, Development, Implementation and

Maintenance of the Varanasi Smart City – ICT Solutions.’

Recently, the city also partnered with the private sector

to use Building Information Modelling (BIM) for project

design to prepare the 7D Detailed Project Report

(DPR) that will provide a standard design for Smart City

modifications in Varanasi. Varanasi will be the only city

in India whose DPR will be prepared in 7D visualisation

under the Smart City project. For this DPR, the project

consultant Rudrabhishek Enterprises Pvt. Ltd (REPL)

has signed an MoU with a Hungarian company called

‘Graphisoft’ that specialises in the virtual visualisation of

projects beyond 3D.lxxxvi

OPPORTUNITIES FOR UK SMEsThe UK government’s DFID has been closely

associated with Varanasi’s Smart City proposal and

has also committed c.$500m to India’s Smart Cities

Mission. There is an opportunity for UK SMEs to

leverage this relationship to explore opportunities

within Varanasi urban projects and initiatives.

Although the city has signed an MoU with Japan11, it is still

ripe with opportunities for UK SMEs arising from projects

under the Smart Cities Plan and other urban development

initiatives in the city. However, as with a number of other

Indian cities, these opportunities often fall under basic

urban services such as infrastructure development, better

waste management, or repurposing of buildings, rather

than advanced urban services.

Indian domestic firms are often well-equipped and

11 In 2014, a Partner City MoU was signed between Kyoto city and

Varanasi to develop Varanasi as a smart heritage city based on

the Kyoto model. The MoU provides for cooperation in heritage

conservation, city modernisation and cooperation in the fields of art,

culture and academics, sMOU between India and Japan


capable of delivering on these relatively basic urban

services. Furthermore, UK SMEs may not be able to

compete on prices with Indian competitors; hence,

it is imperative to identify opportunities for which UK

SMEs offer unique or more advanced capabilities and

solutions.

KEY EVENTSVaranasi Municipal Corporation and Varanasi

Smart City Limited, along with Businessworld

Media Group, is organizing Smart City Conclave

– a National Summit on Urban Infrastructure, IT &

Transportation on 13th October 2018 in Varanasi.

The Summit will see the participation of government

officials, thought leaders, industry experts and other

eminent stakeholders from across the country. Smart

City Conclave Varanasi will be a platform to the key

stakeholders to interact on important topics around

Smart Cities, Smart & integrated Transportation, IT,

Electronics, Startup & eGovernance, Energy & Power,

Safe & Secure Cities, Skill Development, Smart

Healthcare, and arrive on solutions to enlarge the

Smart City ecosystem.

CASE STUDY – Target Lower Growth B2B markets: Tokyo (Japan)

OVERVIEW

Table 20

MACRO INDICATORS DATA

GDP (PPP, 2015) $1.7 trillion

GDP Growth Rate (2015-25) 1.27%

GDP per Capita (2015) U$45,360

Population (2015) 38.0 million (TMA)

Population Density 6,158 per km2

Table 21 12

B2B POTENTIAL INDICATORS RANK12

Global Firms’ Presence Rank 7

Innovation Rank 6

Talent Pool Rank 1

Foreign Investment Rank 3

Overall Rank 2

According to the United Nations, the Tokyo

Metropolitan Area (TMA) ranks as the largest

urban agglomeration in the world, encompassing

42 million people or approximately one-third of

the Japanese population.lxxxvii

As expected for a city with such a large population,

Tokyo is a major national and global economic hub,

contributing approximately 40% of the national

GDP. In 2015, Tokyo’s GDP (at Purchasing Power

Parity) amounted to $1.7tnlxxxviii, the 15th largest

in the ranking of national GDPs, between Korea

and Saudi Arabia in 2015.lxxxix FDI Intelligence

and AT Kearney rank Tokyo as the world’s fourth

most global city, after New York, London and Paris,

stating that its market size, economic dynamism

and highly qualified human capital make it a major

business hub. Tokyo hosts over 2,000 foreign

affiliated companies and is the headquarters of

36 Fortune Global 500 companies (2017).

Furthermore, the 2020 Summer Olympic and

Paralympic Games, set to be hosted by Tokyo,

have accelerated urban development across Japan

with heavy investment in sustainability initiatives.

Environment and sustainability are increasingly being

promoted by the International Olympic Committee.

12 Out of the 24 cities assessed under B2B type



Tokyo’s development strategies rely on

improving infrastructure, making energy

efficient initiatives and policies which include

high-efficiency systems, local power storage and

electric vehicles and enhancing overall smart

urban development that can make the city strong

enough to combat the future climate changes

and an ever-increasing population. This presents

numerous opportunities for the UK to support the

city in deploying energy efficiency, management

and renewable energy solutions.

The Tokyo Metropolitan Government (TMG) is

strengthening its efforts to attract ‘fourth industrial

revolution’ companies to the city. Specifically, it

is seeking to invite companies in the areas of

Internet of Things (IoT), big data and artificial

intelligence (AI), and foreign financial corporations,

such as asset management and FinTech to set

up their Asian regional headquarters and R&D

centres in Tokyo.xc

TMG plans to introduce a financial one-stop

support service to help with administrative

procedures as well as comprehensive consulting

services for foreign financial firms that are

considering setting up their bases in Tokyo.

The Tokyo One-Stop Business Establishment

Centre (TOSBEC) will set up a satellite centre in

Shibuya district to provide English-speaking advice

about the protocols that need to be followed when

establishing a business in the city.

KEY PROJECTSAccording to Analysys Mason, Japan’s smart city

projects are guided by two key motives: improving

energy security and efficiency and showcasing

advanced technology. In Tokyo itself, smart-

city projects have introduced energy efficiency

solutions, including high-efficiency systems, electric

vehicles and local power storage.

For instance, Toyota plans to sell more than

30,000 hydrogen-powered vehicles annually by

2020 – ten times its 2017 production target. It

also aims to introduce more than 100 fuel cell

buses in the Tokyo area ahead of the Olympics.

To support this growth and to make the scheme

economical, Toyota estimates that 900 hydrogen

stations will be needed to supply 800,000 vehicles

nationwide by 2030.

In support, Honda is designing hydrogen fuelling

stations that can generate and store gas.

Meanwhile, Iwatani, Japan’s biggest supplier of

hydrogen, has invested up to ¥500m on building

each of its 80 hydrogen fuelling stations and plans

to add another 10 a year until the Olympics. The city

of Tokyo has subsidised the cost of fuelling stations,

however, the roll-outs are still costly. With the logic

that the only way the required infrastructure will

be built is if a variety of automakers are in the

market, Toyota has opened its hydrogen patents

to competitors.xci

SMART COMMUNITY PROJECTS IN TOKYOUnlike subsidies and grants allocated by the

government to eligible targets in a top-down

fashion, smart community projects involve public

and private players from the conception stage. A

consortium of companies and local government

is formed. While the government might provide

subsidies, some coordination between consortium

members is expected in order to achieve a

concerted plan. Some initiatives are also

completely led by enterprises only.

1. HYDROGEN SOCIETY INITIATIVES xciiThe Hydrogen-Powered Olympic Village This

currently includes three main projects, scheduled

to be completed by 2020. One project is the

Olympic Village in Harumi which should be hydrogen

powered – hydrogen should be distributed to

support the activities of some



17,000 athletes and other guests. Residential facilities,

training centres and buses should be hydrogen powered.

After the 2020 Games, the Olympic Village will be

converted to a high class residential area. A number of

technical issues remain to be solved, such as affordable

pipeline network construction.

Fuel Cell Vehicle deployment The second major project

has broader targets: the deployment of 6,000 fuel cell

vehicles (FCV) and 35 stations by 2020 in a ¥45.2bn plan.

Since January 2015, subsidies from the national and local

governments are available so that the FCV costs ¥4.2m

to the buyer. As the first carmaker to commercialise an

FCV with the launch of its Mirai in December 2014, Toyota

benefits directly from this initiative.

RESIDENTIAL FUEL CELL GENERATED ENERGYThe third initiative is the hydrogen fuel cell production

of electricity in the residential sector. The goal is to equip

150,000 new houses by 2020, to reach a generation

capacity of 100 MW, and to have one million new

apartment blocks provided by hydrogen FC, amounting

to a 700 MW capacity in Tokyo. The use of FC generated

electricity in the commercial and industrial sectors was

expected to be introduced by 2017.

2. SMART COMMUNITY CONSORTIUMS

Some municipalities of Tokyo are members of the

Future City Council, leading the Future City Initiative

(FCI), a continuation of the Eco-model City programme

from 2009, which now includes some smart city

projects. The FCI is supported by the Cabinet Office

since 2011 and promotes green innovation in cities.

In Tokyo, the wards of Arakawa, Chiyoda, Chuo, Itabashi,

Koto, Minato, Toshima, as well as Musashino and Chofu

cities (in Tama area) are members of this network. The

following table lists a few smart city projects in Tokyo.

The table includes projects financed by 2012 and

2013 budget for selection of projects expanding smart

community initiative (marked with a *). The main

industrial group involved is indicated in brackets.

Table 22

MUNICIPALITY (PREFECTURE)

SMART CITY PROJECT

Arakawa ward (Tokyo) Minami Senju: Smart Energy Network (SMAENE) for the optimization of heat and electricity use between buildings and communities based on ICT (Tokyo Gas)72

Itabashi ward (Tokyo) EMS introduction and DR in schools and residence*

Ota (Tokyo) Tokyo Institute of Technology, Okayama campus: minimum power system with advanced social infrastructure initiative

Otemachi, Marunouchi and Yurakucho wards (Tokyo)

OMY smart city: low carbon and Business Continuing District (Mitsubishi Real Estate)

Suginami (Tokyo) Kugayama: emergency energy security (Tokyo Gas) *

Toshima ward (Tokyo)

Ikebukuro Fukutoshin district smart community: local production for local consumption with an emission trading goal for businesses (Tokyo Institute of Technology) *

3. PRIVATE SECTOR INITIATIVES Some real estate developers are contributing

to the development of a smarter Tokyo by

providing energy management systems (EMS).

For instance, Mitsui Fudosan promotes the use

of EMS, gas co-generation and Ene-farm, while

Mori Building has introduced BEMS, thermal

storage, and district EMS. The diverse measures

under the Tokyo Green Building Program

also encourage facility owners to conduct an

assessment of their buildings as they gain market

value with higher levels of energy performance

in green labelling certificates.xciii


In the area of urban mobility, Toyota and Park24

(a Japan-based parking and mobility company) recently

partnered on a trial car-sharing service

in central Tokyo that utilizes Toyota’s Mobility

Services Platform (MSPF).xciv

Apart from local and central government bodies, real

estate developers (such as Mitsubishi Real Estate,

Mitsui Fudosan, Sumitomo Realty & Development,

and Mori Building) and railway companies (such as JR,

Tokyo Metro and the Tokyo Group) are also influential

in land development as they are key landowners and/

or leading negotiating players in land redevelopment

planning.

In the healthcare domain, Saison Information Systems

has partnered with Kashiwa City located in Chiba,

a prefecture bordering Tokyo to provide HULFT,

middleware for managed file transfer (MFT) for

implanting a point card system to enhance civic

health services as part of their “Kashiwa-no-ha

Smart City” initiatives.xcv

MEDICA Cloud Inc., Tokyo-based firm, which develops and

provides IT solutions for hospitals and clinics, is supporting

Kashiwa City’s healthcare initiatives by providing the

signage stations that track the physical activity of citizens

such as how far they walked each day.xcvi

Based on this data, citizens can earn points

which can be exchanged for shopping

certificates. MEDICA Cloud has set up signage

stations in the city’s major shopping centre.

These provide residents with health support

services. Residents can get information on

their health points and obtain shopping

certificates without needing to use their

own smartphones or PCs.

Opportunity AreasA fast-growing segment of the smart city

market in Japan is the smart house service

sector. Initially, smart house service providers

such as Mitsui Fudosan and Fujitsu focused

on offering solutions that contribute to global

warming mitigation and low carbon society

realisation. However, since March 2011, there

has been a shift in market demand and

companies now offer smart services that help

to achieve energy self-sufficient houses in the

face of blackouts in Tokyo. The HEMS market

is growing rapidly, boosted by local demand,

TEPCO’s ambitions, and subsidies from the

national and Tokyo governments. Besides

the expanding HEMS market in Tokyo, the

solar and hydrogen-based energy generation

SUB-SECTOR OPPORTUNITIES IN TOKYO

Industry Solutions Retail businesses/ Homes Transportation Public Services

Energy management systems Energy management systems & devices

Electric vehicles Public safety

Energy saving devices Lighting Recharging infrastructure City data exchange

Back-up Batteries Home Appliances Connected Car Train-as-Service

System controllers Back-up Batteries Predictive maintenance

System controllers Fleet management

Table 23



sectors are also growing thanks

to the subsidies of the TMG

KEY CHALLENGES FOR UK SMESl Intense competition between large

enterprises and start-ups

Table 24

COMPANY URBAN SERVICE PRODUCTS AND SERVICES

Sumitomo Electrics Contributes to the development of social infrastructure through its innovative R&D activities and extensive business operations in five fields: automotive; information & communications; electronics; electric wire & cable and energy; and industrial materials.

Azbil Corporation Energy management systems (BEMS, FEMS, etc.)

Hewlett-Packard Japan IT solutions for the interconnected operation of energy generation/conservation/storage devices and green vehicles.

Honda EV and alternative fuel cars

Kaneka Corporation Provides products for energy conservation and higher quality of life, such as thin-film photovoltaic modules, organic EL lighting panels, highly heat-insulating materials and construction methods.

Kawasaki Heavy Industries Diverse lineup of eco-friendly products and technologies, including rail cars for transportation infrastructure and in-demand energy equipment like gas turbines and gas engines. Kawasaki is also contributing to the development of low-carbon cities and disaster prevention centers.

Kokusai Kogyo Group By using geographic information systems (GIS), it provides comprehensive consulting services for environment, energy, disaster prevention and mitigation and asset management.

LG CNS Offers total IT solutions encompassing planning, development, and operation services to all the industries, including the public, manufacturing and financial sectors.

Mitsui Fudosan Mitsui Fudosan strives to develop towns that continue to thrive and maintain their appeal even as time passes and values change, and actively promotes the development of living spaces and facilities, as well as the formulation of communities.

Mitsui Home Mitsui Home is a leading pioneer in the two-by-four method of constructing homes, which are exceptional in terms of earthquake protection, thermal insulation, and other key features.

NEC Corporation Supports social information infrastructures by utilizing ICT in various fields such as energy, transportation and healthcare.

Nikken Sekkei Nikken Sekkei offers environmental urban planning across the globe. In addition to taking full advantage of our know-how, we also use energy simulation tools to forecast the reduction of environmental loads.

NTT Communications Offers comprehensive SaaS (Software as a Service) to deliver only necessary software functions to each user, as well as superior networks with high cost-performance and high reliability and security

Panasonic Partnered with Toyota to develop batteries for electric vehicles and other green cars

Saison Information Systems Engages in the system development and operation, and software package businesses in Japan. The company offers HULFT, a suite of enterprise middleware that enables secure data transfer, conversion, and integration

l Difficult to partner in any games-related projects

as most projects are already well underway

KEY JAPANESE PRIVATE URBAN SERVICES COMPANIES IN TOKYOxcviii (SELECT)

Table continued on page 100


SAP AG A total of more than 2,200 electricity, gas and water companies in 70 countries are using SAP applications. SAP has also participated in smart grid-related projects across the globe. Based on such a wealth of expertise, SAP provides cutting-edge solutions including AMI, customer care & billing, energy management, in-memory computing (HANA), and mobile solutions, and contributes to the global promotion of the Japan-based Smart City solutions.

Sekisui House A leading housing company looking to provide conomical and eco-conscious smart houses (the eco-friendly “Green First” house) by introducing solar power generation and fuel cells to high-quality houses with high safety/insulation/air-tightness.

Shimizu Corporation Based on the concept of ecoBCP®, Shimizu globally implements projects to construct high-quality and high value-added facilities and infrastructures that harmonize with environments. We offer green and clean technologies to reduce CO2 emissions from facilities, such as Micro Grid technology, Smart BEMS to coordinate energy supply and demand,

Tokyo Gas Co. Tokyo Gas is fostering the development of a Smart Energy Network, which uses ICT to network buildings and areas for their optimal shared use of heat and electricity generated by natural gas cogeneration systems and renewable energy supply facilities

Tokyo Electric Power Company (TEPCO) Has deployed more than 10 million advanced meters and sensors with Landis+Gyr's IPv6 IoT utility network across Japan[i]

Toshiba Corporation Toshiba is fostering the creation of a Smart Community where individuals can lead comfortable lives in an environmentally sustainable manner, by integrating a range of solutions and technologies it has developed mainly in the area of social infrastructure building

Toyota Alternative fuel vehicles such as EVs, hybrids and hydrogen fuel cell vehicles

COMPANY URBAN SERVICE PRODUCTS AND SERVICES

Table continued from page 99.


CASE STUDY – Target Middleweights with Strong R&I Potential: San Diego (US)

OVERVIEWSan Diego lies on the coast of south-eastern US

and along the border with Mexico. With more

than 1.3 million people, it is the 8th largest city

in the US and 2nd largest in California. As the

3rd largest urban area in the US, the population

of San Diego has grown steadily over the years.

Its urban area has now extended beyond the

administrative city limits. As one of the fastest

growing US cities, San Diego is the economic

centre of both San Diego County and the San

Diego-Tijuana metropolitan area, which includes

San Diego, California and Tijuana, Mexico.

Of all the urban issues, housing is the biggest

challenge for San Diego. The Mayor of San Diego

has recently announced action plans to tackle

the homelessness and housing affordability crisis

in the city. In addition, there are also continuing

plans to improve San Diego’s public safety and

neighbourhood quality of life, such as cleanliness.


R&I LANDSCAPESan Diego has the most concentrated scientific

R&D market in the U.S., and it acts as a

global leader in innovation by providing

sufficient resources for company creation and

commercialization. The city makes available a wide

range of assets for commercialization and strategic

partnerships, which includes 16 incubators and

accelerators, world-class talent and facilities, and

abundant lab and R&D space.xcix As a result, the

city is home to as many advanced technology

start-ups as its counterpart in Silicon Valley.

As a global leader in the development and

deployment of smart city technology, San Diego

has set up ‘Smart City San Diego’, a broad public-

private collaboration to improve the region’s

energy independence, empower consumers to

use electric vehicles, reduce greenhouse gas

emissions, and to encourage economic growth.

The collaboration combines the resources of

the City of San Diego, San Diego Gas & Electric,

General Electric, the University of California San

Diego, and Cleantech San Diego – a non-profit

association with a mission to advance these

technologies. Led by these visionary organizations,

Smart Cities San Diego brings together expertise

and ideas from government, business, universities,

and the non-profit community in a public-private

partnership that rivals the advances of any of

its global counterparts.

KEY R&I BODIES IN SAN DIEGO

R&I ORGANIZATIONS ROLE

Cleantech San Diego Cleantech San Diego is a non-profit trade organisation set up to foster collaborations across the private-public-academic landscape, lead advocacy efforts to promote cleantech priorities, and encourage investment in the San Diego region.

Energy management systems (BEMS, FEMS, etc.)

San Diego Gas & Electric (SDG&E)

SDG&E is a regulated public utility company that provides energy service in Southwestern California. As part of ‘Smart City San Diego’, SDE&G is actively supporting San Diego’s smart city development, e.g. smart grid and electric vehicle.

General Electric (GE) GE is an American multinational digital industrial company that provides software-defined machines and solutions to transform industry. As a key partner of ‘Smart City San Diego’, GE is supporting San Diego in deploying the world's largest smart city IoT platform.

Provides products for energy conservation and higher quality of life, such as thin-film photovoltaic modules, organic EL lighting panels, highly heat-insulating materials and construction methods.

UC San Diego UC San Diego is world-leading public research university in San Diego. As a billion-dollar research enterprise, UC San Diego oversees a wide range of innovative and multidisciplinary research units and plays an active role in promoting research collaborations and speeding discoveries to the marketplace.

San Diego Innovation Council

The Council is set up to convene the region’s premier research institutions to promote a shared vision for growth through innovation, entrepreneurial activities, and education.

Table 25


Partnerships

San Diego is one of the 10 US cities that have been

selected to join Envision America – a programme

in which cities could leverage technology

collaborators and businesses to tackle climate

change challenges and improve urban services.

The City of San Diego and UC San Diego are

involved in the MetroLab Network – a group of

city-university partnerships focused on bringing

data, analytics, and innovation to city government.

With members from 44 cities, 5 counties, and 59

universities, the network aims to bring together

university researchers with city policy-makers to

conduct research, development, and deployment

projects that could improve city infrastructure,

public services, and environmental sustainability.

In 2017, it was announced that San Diego will

join the ‘2030 District Network’ and become an

urban area where the private sector and local

building industry leaders commit to sustainability

and economic growth. The objective is to reach a

50% reduction in energy, water and transportation

emissions in participating buildings by 2030.

In 2017, San Diego announced an investment

of $30m to deploy its smart city programme

in partnership with technology companies GE,

AT&T and Intel. The programme will include the

replacement of the city’s streetlights to reduce the

city’s energy costs and carbon emissions, as well

as transform them into a connected digital network

that could optimize parking and traffic, enhance

public safety and track air quality.


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lxxv http://www.smam-jp.com/documents/

www/english/market_info/2014/10/22/

SMAMMarketKeywordNo018.pdf

lxxvi https://www.jetro.go.jp/ext_images/invest/

reference/report2017/pdf/jetro_invest_japan_

report_2017en.pdf

lxxvii http://www.metro.tokyo.jp/ENGLISH/ABOUT/

PLAN/FILES/pocket_english.pdf


lxxviii Australia: Country Overview and Innovation


lxxix https://www.jetro.go.jp/ext_images/invest/

reference/report2017/pdf/jetro_invest_japan_

report_2017en.pdf

lxxx https://www.crowehorwath.net/uploadedfiles/

crowe-horwath global/tabbed_content/

businessrisksinjapan_risk16316.pdf

lxxxi ‘Systems of Cities’, The World Bank, 2009

lxxxii http://smartcities.gov.in/upload/uploadfiles/files/

Varanasi_SCP.pdf

lxxxiii https://timesofindia.indiatimes.com/india/27-

new-cities-including-PM-Modis-Lok-Sabha-

constituency-Varanasi-make-it-to-Smart-City-list/


lxxxiv https://www.financialexpress.com/infrastructure/

varanasi-smart-city-project-how-pm-modis-

constituency-is-being-transformed-in-a-unique-

way/1135889/

lxxxv http://www.smeventure.com/varanasi-smart-

kashi-smart-city-plan/

lxxxvi https://timesofindia.indiatimes.com/city/

varanasi/varanasi-to-have-a-7d-smart-city-plan/


lxxxvii EU-Japan Centre for Industrial Cooperation,

Tokyo Smart City Development in Perspective

of 2020 Olympics

lxxxviii McKinsey Urban World App Data, Accessed on

24thApril, 2018

lxxxix http://zambiamf.opendataforafrica.org/oyhqaqc/

world-gdp-ranking-2015-data-and-charts

xc https://www.smartcitiesworld.net/news/news/

tokyo-government-aims-to-attract-industry-40-

companies-1534

xci Financial Times, Japan’s gambles on Toyota’s

hydrogen powered car

xcii https://www.eu-japan.eu/sites/default/files/

publications/docs/smart2020tokyo_final.pdf

xciii https://www.eu-japan.eu/sites/default/files/

publications/.../smart2020tokyo_final.pdf

xciv https://www.zoom-mobility.com/single-

post/2018/04/05/Toyota-and-Park24-to-Partner-

on-Carsharing-Pilot-in-Tokyo

xcv http://home.saison.co.jp/english/pdf/library/

pr171006_01_en.pdf

xcvi http://home.saison.co.jp/english/pdf/library/

pr171006_01_en.pdf

xcvii https://www.eu-japan.eu/sites/default/files/

publications/docs/smart2020tokyo_final.pdf

xcviii http://www.smartcity-planning.co.jp/en/

participants/index.html

xcix http://www.sandiegobusiness.org/sites/default/

files/Research_Institutions_EIS_2015_EDC.pdf


Report authors

Rimaljit Kaur Likhari (Lead), Future Cities Catapult

Dr. Amy Hochadel, Future Cities Catapult

Dr. Daniela Melandri, Future Cities Catapult

Karuko Kuga, Future Cities Catapult

Priyanka Raj, Independent Consultant

AcknowledgementsAdditional contributions from the wider project

team, specially, Alexandra Lockhart, Anja Maerz,

Bin Guan, Darren Pangbourne, Darren Balcombe,

Ivor Wells, Natalie Collymore, Peter Young, Reza

Akhavan and Terje Svinning from the Future Cities

Catapult; Ewa Bloch from Innovate UK; and Tim

Moonen and Jake Nunley from The Business of

Cities, are gratefully acknowledged. The project

team also expresses its gratitude to the SMEs and

stakeholders from cities who participated in the

stakeholder survey and interviews and offered their

insights on current issues and expert advice on

existing barriers and future opportunities.

Future Cities Catapult accelerates urban ideas

to market, to grow the British economy and

make cities better. It brings together businesses,

universities and city leaders so that they can work

with each other to solve the problems that cities

face, now and in the future.

https://futurecities.catapult.org.uk/

Funded by Innovate UK, the UK’s innovation

agency. Innovate UK works with people,

companies and partner organisations to find

and drive the science and technology innovations

that will grow the UK economy – delivering

productivity, new jobs and exports. Our aim

at Innovate UK is to keep the UK globally

competitive in the race for future prosperity.

www.gov.uk/government/organisations/

innovate-uk

The Business of Cities is an urban intelligence

firm based in London that reports and advises on

global trends in cities, leadership, and development.

It works internationally with public and private

sector leadership in more than 100 global cities,

global firms and inter-governmental organisations.

http://thebusinessofcities.com/

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and graphical images as well as the organisation and layout

of the report) are owned by Future Cities Catapult and/or its

licensors and are licensed to the Innovate UK. You may not copy

or adapt this publication without first obtaining permission from

all parties through [email protected].

Disclaimer

The content of this publication does not reflect the official opinion

of Innovate UK. Responsibility for the information and views

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