Big Project ME’s Gavin Davids speaks to the CEO of Siemens Infrastructure and Cities about the rise of smart, urban developments
Throughout history, humanity has always gravitated towards urban centres, turning them into centres of commerce, culture and scientific growth. In fact, the Middle East is home to some of the world’s oldest cities, with the likes of Damascus, Aleppo, Byblos and Luxor all inhabited for thousands of years.
So prevalent has the growth of the urban human population been, the World Health Organisation estimates that by 2010, more than half of the world’s population lived in urban areas. That’s more than 3.5 billion people.
To put that into perspective, 100 years ago, two out of every ten people lived in an urban area. By 2030, WHO predicts that six out of every 10 people will live in a city; a mere 20 years later will see that number rise to seven out of every ten.
At present, more than half of all urban dwellers live in cities with between 100,000 and 500,000 people, with fewer than 10% living in ‘megacities’ (defined by UN HABITAT as a city with more than 10 million people).
Given that the numbers are so staggeringly high, the need to manage the infrastructure of these cities and developing countries is vital. While infrastructure development and construction are what gets the most attention, it often serves little purpose if those multi-million or multi-billion dollar investments are not managed properly.
This can be seen in third world countries where billions are spent on infrastructure development, with very little to show for it.
However, this is where Siemens Infrastructure and Cities comes in to play. Although not a traditional contractor of infrastructure development, nor a supplier of building materials, the division offers urban planners a chance to truly control and manage their cities through practical technology that is sustainable.
“We don’t build roads, we don’t build buildings, but what we do is provide the technology part of infrastructure,” explains Doctor Roland Busch, member of the managing board at Siemens AG and the CEO of Infrastructure and Cities Sector.
“We automate infrastructure and make it more efficient. This includes rolling stock and rail bound transport. But also, inter-modal management. That means we’re managing the streets,” he adds.
“The old type of thinking is not doing the trick anymore. If we’re going to manage a city of two million, five million or ten million people, you cannot constantly add new streets and rail routes, you have to do it smartly and increase capacity by using what is there in a more intelligent way.”
Speaking during the launch of Siemens’ new Masdar based headquarters, Dr Busch tells Big Project ME that the Middle East region is set to play an important role for the Infrastructure and Cities division of Siemen.
“It’s a very important region. Siemens has been present in the Middle East since 1856, when our founder supervised the laying of cables in the Red Sea, and we’re here to stay. It’s an important region because it’s dynamic and there are a lot of things happening here,” he asserts.
“Talking about infrastructure, there are plans for building infrastructure, but also for the whole traffic system, because this region is booming. The railway connection between the UAE and the rest of the GCC, is being planned and will come.”
“It starts with freight and then the passengers will also come. And then also the local transport, major transport projects. We can provide this infrastructure. We don’t do buildings, we don’t provide the concrete parts, but we provide the intelligent high-tech part, which is really adding value to these plans. So we’re embedded here, we want to be here and we want to be seen as a local partner, providing top technology.”
Not only is this limited to building and civil infrastructure, Dr Busch points out that Siemens Infrastructure and Cities’ technology can also be applied to a wider range of industries, including the oil and gas sector, which is of course a major segment of the market here in the Middle East.
Furthermore, he points out that another area of significant interest is the healthcare division, which has seen tremendous investment from the GCC governments, which will continue over the next few years, with an estimated $133.19 billion set to be spent by the year 2018.
“Siemens is working in the areas of energy, industry, healthcare and infrastructure and cities. I would like to focus on the latter one, as we believe that our new headquarters is a great showcase. The new building is LEED platinum certified. It is sitting in the desert with temperatures reaching 40oC or 50oC So of course that’s unique.”
“That’s a blend of architecture and top technology. And that’s where Siemens comes into play. But that’s only one part of it. This building and other buildings to come are interconnected with a lot of infrastructure features. The grid and power supply have to be more intelligent, in particular, if we want to make it more sustainable, in the spirit of Masdar. This is what attracts us,” he explains further.
“On top of that, it is the whole transport infrastructure that needs to be developed in a sustainable manner. That is a nice combination. Firstly, sitting on a booming market, secondly having the right and strong partners – Mubadala, Masdar – and thirdly, having the chance to deploy technology at its best.”
According to Dr Busch the next few years are destined to be dominated by rail transportation led by government investment.
“This is definitely a boom now, which is, I would say, a little bit unusual compared to the other trends, like energy and infrastructure development. Rail is really something now. For the first time it’s on the agenda and will be in the news over the next three years,” he says.
This is a thread that Dr Busch picks up on again a few days later when Big Project ME travelled with Siemens to the launch of the tramway in Doha Education City.
Speaking after a ceremony to showcase a mock-up of the Siemens designed and built trams that will be used on the project, Dr Busch elaborates on why he thinks that rail construction will be the next major boom industry for the GCC region.
“The way forward is clear to me. There is a growing awareness in this region that the level of public infrastructure has to be raised in particular rail bound metro, but also intercity connections, which are the backbone of any country,” Busch says. “If you want to develop your economy in a sustainable manner, you have to invest in its infrastructure. There are examples all over the world where it’s proven that doing so will really boost your growth and development. So we see a lot of opportunities and we want to be part of it.”
However, while it’s easy to say that there’s a lot of potential and growth in the GCC market, there remain concerns about actually implementing these systems and technologies.
Not only is the market fairly unaware of these developments, it’s also likely to suffer from a lack of experience.
Given the value and scale of these rail projects, it’s no surprise that Dr Roland Busch has been giving this careful consideration. He says that his division has taken care to ensure that they work together with the local governments and people to ensure a successful outcome.
“We will develop along the way, together with our customers. That means we identify the needs and requirements from customers and we are trying to bring in the best technology to solve the problem,” he explains, pointing out that one of Siemens’ biggest strengths is customer trust.
“Establishing trust is of the highest importance as you can imagine. If you go new ways, bring innovations, by definition, it’s something new. You cannot predict where it ends, and you always have some issues. I think having a good, trustful relationship is mandatory to solve those issues. This is one reason why we are also investing in our management capacity, to be able to talk and solve problems on all levels, as high as you have to go to solve them.”
Clearly then, the region is one that he views with considerable interest. This is starkly evident when he’s asked about Siemens Infrastructure and Cities performance in 2013. Having endured a tough 2013, Dr Busch has overseen a strong overhaul of how Siemens I&C does business, with a more selective approach to new projects underway so as to boost profitability.
The stricter policy came into play after a financial year which saw its margin on earnings before interest, tax, depreciation and amortization (EBITDA) fall to 3.7%, making it the least profitable of Siemens’ four main businesses, behind Industry, Energy and Healthcare.
The current financial year, however, could see I&C reach the low end of its 8% to 12% target margin, a Reuters report has quoted Dr Busch as saying.
Projects in Britain and Germany are expected, along with the tighter management review for critical projects, to drive profitability.
“Regarding last year’s performance, we’re not satisfied. However, our effort is paying off now: we have made major steps in transforming our businesses towards higher profitability and lower risk,” Dr Busch explains.
“We are going to continue to benefit from shaping our portfolio, avoid or substantially reduce project charges and continue to benefit from our transformation program. And we will continue to focus on our growth markets.”
“We want to look forward now, and we’re leveraging the investments we made in this fiscal year, for the benefit of our profitability in the future. So I’m very excited and confident it will go forward in the right direction,” he tells Big Project ME bullishly.
“And, please, do not forget, we are market leaders in intelligent infrastructure automation. The region will play an important part because if you look at all the regions globally, and where infrastructure investment is high on the agenda, this is the place to be.”