CEE in the spotlight

Macroeconomic insights for decision making in Central and Eastern Europe

Jens Hörning
PwC Partner, CEE Industrial Manufacturing and Automotive Industry Leader

How smart cities can be epicentres of the CEE growth story 

By Jens Hörning, PwC Partner, CEE Industrial Manufacturing and Automotive Industry Leader

Transforming metropolises into “smart cities” has been at the centre of the thoughts of local authorities, business leaders and citizens across the world for decades. Smart cities harness technology to improve quality of life and increase the efficiency of urban mobility and access to services. Through adopting a smart city mindset, urban stakeholders also aim to make cities more sustainable and competitive in the race to attract investment and talent.  

While there has been some great progress in transforming CEE cities into epicentres of innovation and growth, they are largely playing catch-up with more established smart cities in Western Europe and elsewhere. This article shows how smart cities have transformational potential to improve the lives of citizens in CEE, and puts the spotlight on improving urban mobility — which underpins all aspects of smart city living.

1. The “smart city” of Prague and CEE cities in context 

Prague is not only one of Europe’s most historic and beautiful cities, but also an example of progress in being one of the foremost “smart cities” in the CEE region. The Czech capital is the only CEE city to make the top 20 of the 2023 global IMD Smart Cities index

Prague has also been named as number two in Timeout’s 19 cities with the best public transport in the world – according to locals, which reported that an overwhelming 96% of Prague locals find their city easy to get around by public transport. At an early stage in its smart city journey, PwC’s global data governance and management solvers helped design and implement a data platform, allowing the City of Prague to better use existing data and identify new opportunities to improve citizens' lives.

Despite its status as one of the smartest cities in the CEE region, Prague still faces significant challenges to improve various aspects of livability for its citizens. PwC research on Smart Cities: Mobility ecosystems for a more sustainable future shows Prague should make improvements related to urban mobility on traffic congestion, air pollution, road safety and active mobility such as walking and cycling. 

According to the United Nations, the urban population worldwide is projected to grow, so that 68% of the world’s population will live in cities by 2050. This represents a significant increase on the 55% of city dwellers now. Europe’s current urban population is already considerably higher than global averages — with three quarters of EU citizens today living in cities. 

CEE cities are broadly reflective of global growth trends, but the story is one of incremental growth rather than the urban population explosion which is ongoing in some other parts of the world. As the below data on a selection of cities in various CEE sub-regions shows, some CEE cities experienced a decline in growth during the last year. 

Overall, however, projections point to urban growth. As shown by the data below, Riga is a notable exception to overall trends, which can be explained by patterns of population decline particularly prevalent in Latvia. Also, even before Russia’s full-scale aggression, Ukraine’s population was expected to decline by as much as 50% by 2050, which explains Kyiv’s negative growth projection.

Selected CEE cities population growth — World Urbanization Prospects

What the above data certainly shows is that each city is unique, with city-specific geographical, political, economic, demographic, historical and cultural circumstances. With this overall growth, cities will remain important social and cultural hubs and the main centres of economic growth, innovation and development in the CEE region. Responding to challenges posed by population growth (or decline) requires bespoke solutions to urban management which talk to each city individually.

2. Smart, sustainable cities 

Given the diversity of local circumstances, it is clear that the conceptual framework for smart cities isn’t one-size-fits-all. The United Nations Economic Commission for Europe (UNECE) offers this definition: “A smart sustainable city is an innovative city that uses ICTs and other means to improve quality of life, efficiency of urban operation and services, and competitiveness, while ensuring that it meets the needs of present and future generations with respect to economic, social, environmental as well as cultural aspects.” 

This intentionally loose definition reflects the complexity of adapting global solutions to local circumstances. Smart cities, however, need to be built with an ecosystem approach that includes smart strategy, design, and implementation. In the European context, work by the Capgemini Research Institute identifies “transport and mobility” as a key smart city indicator which underpins all others — healthcare, public security, energy utilities, water utility, waste management, citizen service and sustainable development. 

The idea that mobility is integral to the smart city is also implied by the European Commission. The Commission’s Smart Cities Marketplace aims to bring cities, industries, SMEs, investors, banks, researchers and other smart city actors together and puts “sustainable urban mobility” at the top of its list areas of cross-cutting operations. 

For CEE-EU countries, the European Green Deal commits all EU member states to at least 55% less net greenhouse gas emissions by 2030 and complete carbon neutrality by 2050. This represents a huge challenge for city stakeholders because, as growing population centres, they are integral to finding solutions for smart mobility ecosystems and other green urban initiatives. In case of extreme climate events, local populations are always most severely affected, so city actors are integral to finding, implementing and adapting solutions too.  

There is clear evidence that cities in the region are increasingly developing smart city mindsets. As many as 28 CEE cities are participating in the European Commission’s Cities Mission to develop climate-neutral, smart cities by 2030. CEE cites — Elbasan (Albania); Sarajevo (Bosnia and Herzegovina); Gabrovo and Sofia (Bulgaria); Zagreb (Croatia); Liberec (Czech Republic); Tartu (Estonia); Budapest, Miskolc and Pécs (Hungary); Liepāja and Riga (Latvia); Taurage and Vilnius (Lithuania); Podgorica (Montenegro); Krakow, Łódź, Rzeszow, Warsaw and Wrocław (Poland); Bucharest, Cluj and Suceava (Romania); Bratislava and Košice (Slovakia); Kranj, Ljubljana and Velenje (Slovenia) — were selected to be experimentation and innovation hubs. The ultimate aim is to put all European cities in a position to become climate-neutral by 2050. 

The selected CEE cities are now in the process of developing Climate City Contracts, which will include an overall plan for climate neutrality across sectors such as transport, energy, buildings, and waste management. Importantly, these cities have access to significant EU funds, as well as access to expertise and advice. 

For instance, these CEE cities are now part of a network and can learn from cities such as Copenhagen, which is a lot further along on its smart city journey. The Danish capital, for example, aims to be the first carbon neutral capital by 2025 and places collaboration at the heart of its approach, with the city stating — “Copenhagen will only achieve our goals through cooperation. Therefore, the city also works as a facilitator in the transformation, joining forces with residents, companies, and authorities. The City of Copenhagen is open for new collaborations that will make a more liveable and sustainable city.” 

It is notable that three CEE cities from EU membership candidate countries — Elbasan, Sarajevo and Podgirica — are included in the cities mission and there is also clear evidence that smart city thinking has spread elsewhere in the CEE region. For instance, academics and urban planners in Baku propose that the establishment of Smart Cities in Azerbaijan is doable and possible despite significant financial and logistical challenges. This is backed up by the actions of the City of Baku, which has engaged high profile companies like Honeywell and IDC to assist in finding tech-led smart city solutions. 

In neighbouring Georgia, the City of Tbilisi has been implementing smart initiatives, such as a Sustainable Urban Mobility Plan, with provision for street management for increasing cycling and walking, and an intelligent transport management system. 

Even in the face of full-scale Russian aggression, the City of Kyiv has made significant progress in promoting its smart city initiatives. In recent years, the city has engaged a host of local companies, as well as international companies like SAP and VISA, to integrate technologies, use resources more efficiently and create new opportunities for business and increase living standards. 

smart city

Despite all the above activities demonstrating smart cities thinking has taken root across CEE, the region is playing catch-up with high-performing Western European and other cities further afield. This is illustrated by Prague being the only CEE city to make the top 20 of the 2023 IMD Smart Cities index, but also from an apparent absence of CEE cities in global smart city networks. In the case of C40, a global network of nearly 100 mayors around the world working together to confront the climate crisis, only one out of 17 European cities involved, Warsaw, is in the CEE region. 

CEE cities, however, find themselves in a position to learn from what has worked, and perhaps more importantly what didn’t work, elsewhere as they find their own specific urban solutions. The evolution of smart cities has technology as a fundamental component, but collaborative approaches are needed. Local and national governments, the European Union, the private sector, local and international networks, NGOs and of course, citizens, must work together to turn visions of connected, efficient, and citizen-centric CEE cities into reality.

3. Intelligent mobility as a driver of smart cities

Efficient and environmentally sustainable mobility systems clearly underpin what it means to be a smart city. Various aspects of citizens’ lives in cities such as — access to public services, utility management, waste management, public security, housing and the built environment — are all very important. However, any efforts to improve these challenges in terms of a city’s carbon emissions and livability are dependent on smart mobility.   

This raises the question: what does transportation look like in a smart city? Amsterdam, which is typically rated among the smartest cities in the world, defines a smart transportation system as one that focuses on “various modes of transportation, infrastructure, vehicles, traffic management, stakeholders, and smart mobility.” Furthermore, “an Intelligent Transportation System strives to innovate, plan, operate, evaluate, and manage transportation systems by leveraging advanced information and communication technologies.” 

Further afield in Japan, data-driven smart mobility solutions seem poised to reach another level of ambition in Toyota’s “woven city” project. In the woven city, people, buildings, and vehicles can communicate with each other via real-time data and embedded sensors, allowing Toyota to test out how advanced AI technology works in the real world, with minimal risk. The city is powered by clean energy sources like solar energy, hydrogen fuel cells, and geothermal energy, and a variety of mobility-related pilot experiments are scheduled to begin in 2024. 

While the aims of the woven city are somewhat more ambitious than those of CEE municipalities, one key element of the project that the region’s cities can learn from is the project’s commitment to a perpetual improvement cycle. Smart mobility is about more than just combining technology and data. Learning from elsewhere, amending best practices to local contexts and creating affordable, inclusive, safe, and sustainable mobility solutions can help deliver a better quality of life for citizens. 

PwC’s Smart Mobility Hub proposes that smart cities need to be built with an ecosystem approach that includes smart strategy, design, and implementation. PwC provides support on strategic and business model innovation related to real estate, transportation, infrastructure and energy projects. 

Initiatives aimed at developing smart cities should use an ecosystem bespoke to each individual municipality. Real collaboration between different stakeholders is central to delivering smart mobility and other interlinked aspects of smart city living which continually improve the everyday lives of the citizens who make every city unique. 

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Contact us

Jens Hörning

Jens Hörning

Partner, CEE Industrial Manufacturing and Automotive Industry Leader, PwC Central and Eastern Europe

Tel: +421 259 350 432

Jeffery McMillan

Jeffery McMillan

CEE Director of Brand, Marketing & Communications, PwC Central and Eastern Europe

Tel: +48 519 506 633

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