The Smart City Sector in Croatia

April 2017 Embassy of Belgium – Economic office By Alina AL-GARBY , Goran SELAK, Ana-Marija ČIČAK, Lucija GLAVIČIĆ, Gabrijela GOŠOVIĆ

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Summary

1 A FEW NUMBERS ON CROATIA................................................................................................4

2 ECONOMIC OVERVIEW OF CROATIA........................................................................................8

3 SMART CITY............................................................................................................................93.1 TERMINOLOGY..........................................................................................................................93.2 SIX ESSENTIAL TECHNOLOGIES.......................................................................................................9

3.2.1 Smart energy....................................................................................................................93.2.2 Smart transportation......................................................................................................103.2.3 Smart data......................................................................................................................113.2.4 Smart infrastructure.......................................................................................................113.2.5 Smart mobility................................................................................................................123.2.6 Smart IoT devices............................................................................................................12

3.3 TECHNOLOGY FRAMEWORK........................................................................................................133.4 HUMAN INFRASTRUCTURE.........................................................................................................143.5 INSTITUTIONAL FRAMEWORK......................................................................................................153.6 MAP OF SMARTEST CITIES IN EUROPE..........................................................................................163.7 EUROPEAN MARKET..................................................................................................................163.8 CONVERGENCE OF COMPETITION................................................................................................173.9 HORIZON 2020 AND SMART CITIES.............................................................................................19

4 SMART CITIES IN CROATIA.....................................................................................................214.1 PROJECTS IN CROATIA...............................................................................................................214.2 STRATEGIC CHALLENGES............................................................................................................254.3 CONTRIBUTION OF INDUSTRY.....................................................................................................274.4 ORGANIZATIONS SERVING AS A PLATFORM FOR COOPERATION..........................................................27

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A smart city is an urban development vision to integrate information and

communication technology (ICT) and Internet of things (IoT) technology in a

secure fashion to manage a city's assets. These assets include local

departments' information systems, schools, libraries, transportation systems,

hospitals, power plants, water supply networks, waste management, law

enforcement, and other community services. A smart city is promoted to

use urban informatics and technology to improve the efficiency of services. ICT

allows city officials to interact directly with the community and the city

infrastructure and to monitor what is happening in the city, how the city is

evolving, and how to enable a better quality of life. Through the use of sensors

integrated with real-time monitoring systems, data are collected from citizens

and devices – then processed and analysed. The information and knowledge

gathered are keys to tackling inefficiency.

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1 A Few Numbers on Croatia

On 1 July 2013, the Republic of Croatia became the 28th member of the EU. This event is a break point to the path of the country in the following years.

Croatia is a country of 4 429 000 inhabitants. It is a democracy whose official language is Croatian, but many people speak English (49%) and other foreign languages, mainly German (34%) and Italian (14%). The capital is Zagreb. Other main cities are Osijek, Rijeka and Split.

Croatia had a GDP growth of 2.9% (Q3 2016). In 2017, the economic activity should accelerate mildly, to 2.1 percent. For 2017, the IMF expects an increase in inflation by 0.8 percent. The estimate of this year’s surplus in Croatia’s current account should slip to 2.2 percent.

Unemployment is relatively high and, according to official sources, reached 14.8% of the workforce in December 2016. Despite the government’s efforts to stimulate employment with various incentive programs for employers, the level of unemployment remains a significant social and economic burden. Nevertheless, it is worth mentioning that Croatia has a high skilled and educated workforce in different fields, including the IT sector.

The national currency is kuna (HRK). The average monthly paid off net salary is 5 676 HRK (760 euros), which represents a nominal increase of 0.1% and a real decrease of 0.4%, when compared to the first quarter of 2016. In comparison to the same period of 2015, it shows a nominal increase of 1.2% and a real one of 3%.

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INDICATOR MONTHS YEAR VALUE

GROSS DOMESTIC PRODUCT, % REAL ANNUAL GROWTH RATES q3 2016 2,9

INDUSTRIAL PRODUCTION, % ANNUAL CHANGES 10 2016 1,8

CONSUMER PRICES, % ANNUAL CHANGES 10 2016 -0,5

PRODUCER PRICES, % ANNUAL CHANGES 10 2016 -2

RETAIL TRADE, % REAL ANNUAL CHANGES 10 2016 5,3

TOURISM - NIGHT STAYS, % ANNUAL CHANGE 9 2016 11,5

CONSOLIDATED CENTRAL GOVERNMENT BALANCE, HRK MILLION, ESA 2010

2015 -10.706

CONSOLIDATED CENTRAL GOVERNMENT BALANCE, % OF GDP, ESA 2010

2015 -3,2

AVERAGE MONTHLY NET WAGE, HRK 9 2016 5,624

UNEMPLOYMENT RATE, % EOP 10 2016 14

NUMBER OF REGISTERED UNEMPLOYED PERSONS 10 2016 225,703

AVERAGE EXCHANGE RATE EUR/HRK 10 2016 7,5

AVERAGE EXCHANGE RATE USD/HRK 10 2016 6,8

AVERAGE EXCHANGE RATE CHF/HRK 10 2016 6,89

EXPORT OF GOODS, EUR MILLION (CBS) 8 2016 927

IMPORT OF GOODS, EUR MILLION (CBS) 8 2016 1,568

CURRENT ACCOUNT BALANCE, EUR MILLION q2 2016 152,2

CURRENT ACCOUNT BALANCE, % OF GDP q2 2016 4,6

EXTERNAL DEBT, EUR BILLION, EOP 8 2016 43,672

EXTERNAL DEBT, % OF GDP 6 2016 97,3

PUBLIC DEBT, % OF GDP, ESA 2010 2014 85,1

OFFICIAL INTERNATIONAL RESERVES, EUR MILLION, EOP 10 2016 12,993

MONEY (M1), HRK MILLION, EOP 10 2016 78,783

TOTAL CREDITS, HRK MILLION, EOP 10 2016 259,746

DEPOSITS WITH COMMERCIAL BANKS, HRK MILLION, EOP 10 2016 207,261

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2 Economic overview of Croatia

Croatia is included in the group of countries with small and open economies, which are largely connected to other foreign markets. The priority of Croatia’s economic policy is the continuation of making a stable and strong market-oriented economy competitive in the global market, the constant reinforcement of macroeconomic stability and the continuation of structural reforms for the purpose of securing stable and sustainable economic growth, increase in production, especially import, and increase in employment. A particular emphasis is put on creating a favourable business environment harmonized with the business environment prevalent in the European Union, further development of the market economy, stimulation of private investments, promotion of international competitiveness, and entrepreneurial and market freedom. In terms of primary goals of economic policy of the Republic of Croatia, a special position is given to foreign investments which are very important for the future development of the country and further restructuring and modernization of the economy. The basic economic goals include export growth, quality standards introduction, meeting ecology requirements and achieving expenditure efficiency. One of the primary goals of the economic policy of the Croatian government is to create a stimulating business environment, harmonized with the standards used in the EU and countries with developed market economies. The basic features of Croatia’s economy are industry, agriculture, forestry, fishing industry and food, drink, tobacco production, construction, transport&communication and trade.

Croatia is mostly an exporter of transport equipment, machinery, textiles, chemicals, foodstuffs and fuels. On the other hand, Croatia is an importer of machinery, transport and

electrical equipment, fuels and lubricant and foodstuffs. Croatia mainly exports to Italy, Bosnia and Herzegovina, Germany, Slovenia, Austria and Serbia.

The Croatian economy decelerated in the first quarter of 2017 but nevertheless recorded another period of healthy growth, supported by strong private consumption and a pickup in fixed investment, but constrained by a negative contribution of net foreign demand. GDP growth softened from the 3.4% recorded in the fourth quarter of last year to 2.5% in Q1, the weakest expansion in over one year but nonetheless marking the tenth consecutive quarter of growth. The economy is benefiting from an improved external environment and strong private consumption, and so far seems to have been only slightly affected by the consequences of food and retail group Agrokor’s ongoing restructuring process. In the first four months of the year, exports expanded by almost a fifth—with shipbuilding recording exceptionally strong growth—on the back of robust demand from both European Union trading partners and the Balkan states. Moreover, the latest available data on tourist inflows shows that in the period from January to May arrivals surged by 15%, which translated into unemployment reaching fresh multi-year lows in both May and June. This, together with

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rising wages, both in the public and private sectors, is fuelling the private consumption, as suggested by healthy retail sales readings so far this year. In July, Fitch Ratings affirmed Croatia’s BB rating with a stable outlook, highlighting favourable cyclical conditions but also the country’s weak potential growth compared to peers due to adverse demographics and structural rigidities.

Croatia is a member of the IMF, the European Bank for Reconstruction & Development and the World Trade Organization.

Source: http://www.tradingeconomics.com/croatia/gdp, http://www.focus-economics.com/, http://www.mvep.hr, http://www.dzs.hr

3 Smart City

3.1 Terminology

It is difficult to distil a precise definition of a smart city. Deakin and Al Wear list four factors that contribute to the definition of a smart city:

1. The application of a wide range of electronic and digital technology to communities and cities

2. The use of ICT to transform life and working environments within the region3. The embedding of such ICTs in government systems4. The territorialisation of practices that brings ICTs and people together to enhance the

innovation and knowledge that they offer.

Deakin defines the smart city as one that utilizes ICT to meet the demands of the market (the citizens of the city), and that community involvement in the process is necessary for a smart city. A smart city would thus be a city that not only possesses ICT technology in particular areas, but has also implemented this technology in a manner that positively impacts the local community.

3.2 Six essential technologies

3.2.1 Smart energy

Both residential and commercial buildings in smart cities are more efficient, using less energy, and the energy used is analysed and data collected. Smart grids are part of the development of a smart city, and smart streetlights are an easy entry point for many cities,

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since LED lights save money and pay for themselves within a few years, as reported previously by TechRepublic.

"Lighting is ubiquitous—it's everywhere that people work, travel, shop, dine, and relax. Digital communications and energy-efficient LED lighting are revolutionizing urban lighting infrastructures already in place, transforming them into information pathways with the capacity to collect and share data and offer new insights that enable, and really drive, the smart city", said Susanne Seitinger, PhD., Philips Lighting, professional systems.

Overall energy usage is also part of a smart city. "Many may have experienced this already with the installation of smart meters at their homes. But with the rise of home solar power systems and electric vehicles, hardware and software technology will allow for the potential of better grid management, optimization of power production through different sources and distributed energy production. Furthermore, buildings that monitor their energy usage actively and report this data to utilities can reduce their costs. This will ultimately lead to lower pollution and much better efficiency as cities become more urbanized", said Herman Chandi, co-founder of CommunityLogiq.

And there are also smart grids and smart meters. "Smart grid solutions play an important role in the development of smart cities. From prepaid energy applications to advanced metering infrastructure, there are several solutions to enhance energy services. With a smart grid, you can improve outage detection, speed of data capture, continuing and disaster recovery, field service operations and overall grid modernization techniques”, said Mike Zeto, general manager and executive director of AT&T Smart Cities.

3.2.2 Smart transportation

A smart city supports multi-modal transportation, smart traffic lights and smart parking.

"One of the key areas that we have seen a lot of activity on has to do with mobility. Anything around transportation, traffic monitoring, and parking", said Sanjay Khatri, director of product marketing and IoT services for Jasper. "These are areas where cities are seeing a very fast return on investment. It not only helps to reduce the cost of monitoring parking and making sure that they are collecting fines, it is also reducing congestion."

By making parking smarter, people spend less time looking for parking spots and circling city blocks. Smart traffic lights have cameras that monitor traffic flow so that it's reflected in the traffic signals, Khatri said.

Even city buses are becoming connected, so that people have real time information on when a bus will arrive at a bus stop. In Australia, traffic lights are prioritized based on the bus schedules so that traffic flows more freely during rush hours, Khatri said.

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Chandi said, "it is using sensors to collect data about the movement of people, all forms of vehicles and bikes. A smart city is one that greatly reduces vehicle traffic and allows people and goods to be moved easily through various means.

Intelligent traffic systems are an example of this and the achievement of autonomous vehicle transportation would be a prime example of success for a smart city, as this could reduce vehicle related deaths. All these efforts would reduce pollution as well as people’stime stuck in traffic, resulting in a healthier population."

3.2.3 Smart data

The massive amounts of data collected by a smart city must be analysed quickly in order to make them useful. Open data portals are one option that some cities have chosen in order to publish city data online, so that anyone can access it and use predictive analytics to assess future patterns. Companies such as CommunityLogiq are working with cities to help them analyse data, and they are in the Startup in Residence (STiR) program for the city of San Francisco.

"The pervasiveness of technology and the expansion of open data policies is about to unleash an economic growth engine for urban innovation that we have never seen. We are moving from analysing data that exists within the city hall, to generating new data from sensors that are deployed all across cities for use by multiple departments and people for multiple uses", said John Gordon, chief digital officer at Current, powered by GE.

Even the data collected by streetlights can be used to benefit citizens. "Hidden within the exponential volumes of data collected from connected lighting systems and other IoT devices are valuable insights and information about how citizens interact with cities. For instance, traffic data captured by streetlights can uncover a prime location for a new restaurant in a revitalized neighbourhood. Predictive analytics helps cities filter and translate data into relevant and actionable information that make city life better, easier, and more productive", Seitinger said.

3.2.4 Smart infrastructure

Cities will be able to plan better with a smart city's ability to analyse large amounts of data. This will allow for pro-active maintenance and better planning for future demand. Being able to test for lead content in water in real time, when the data shows a problem is emerging, could prevent public health issues.

Having a smart infrastructure means that a city can move forward with other technologies and use the data collected to make meaningful changes in future city plans.

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3.2.5 Smart mobility

"Mobility refers to both the technology and the data which travels across the technology. The ability to seamlessly move in and out of many different municipal and private systems is essential if we are to realize the promise of smart cities. Building a smart city will never be a project that is "finished." Technology needs to be interoperable and perform to expectations regardless of who made it or when it was made. Data also needs to be unconstrained as it moves between systems, with all due attention to intellectual property, security and privacy concerns. For this, public policy and legal technology needs to be state of the art", said Tom Blewitt, director of principal engineers, UL.

3.2.6 Smart IoT devices

And finally, one of the key components that ties everything together in a smart city is IoT devices.

"Whether we like it or not, sensors and actuators in our cities are here to stay. Fusing sensor information into our daily life and integrating it all with third party social networks will knit the fabric of society closer together, while leaving city leaders to grapple with serious privacy and security challenges", said Carl Piva, vice president of strategic programs at TM Forum.

Sensors are essential in a smart city, said Scott Allen, CMO of FreeWave Technologies. Allen said that a smart city has "a wide range of reporting devices such as sensors, visibility devices and other end points that create the data that makes a smart city work."

Blewitt said, "In a smart city, information will increasingly be obtained directly from purposefully deployed sensors or indirectly from sensors deployed for another purpose but which gather and share useful information. With this information, freely exchanged, complex city systems can be managed in real-time and, with sufficient integration, to minimize unintended consequences. As dependence on sensors grows, so too will the need that they be reliable and that the systems to which they are connected will be able to tolerate the inevitable failures."

Beacons are another part of IoT, and one of the problems with a smart city is the vast amount of information. Too much information can be overwhelming. Information received at a time when one is unable to take advantage of it is essentially noise, Blewitt said.

"As cities move from millions to billions and then trillions of devices transmitting usable and potentially unusable information, bandwidth efficiency and capacity could be challenged. Short range notification that a user-selected need can be fulfilled nearby, whether it is the

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location of a subway station or a service, provides convenience without tying up some of the bandwidth of the carrier data networks.

Perhaps this will have the side benefit of a reduction in the number of signs and therefore the visual clutter that they cause on our city streets", he said.

Each of these technologies work together to make a smart city even smarter. As the world's population grows, and more people move into urban areas, the need for smarter cities will increase to make the best use of available resources.

Sources: http://www.techrepublic.com/article/smart-cities-6-essential-technologies/

3.3 Technology framework

Several concepts of the smart city rely heavily on the use of technology; a technological smart city is not just one concept but there are different combinations of technological infrastructure that build a concept of smart city.

Digital city: It combines service oriented infrastructure, innovation services and communication infrastructure; Yovanof, G. S. & Hazapis, G. N. define a digital city “a connected community that combines broadband communications infrastructure; a flexible, service-oriented computing infrastructure based on open industry standards; and, innovative services to meet the needs of governments and their employees, citizens and businesses”.The main purpose is to create an environment in which citizens are interconnected and easily share information anywhere in the city.

Virtual city: In these kinds of cities functions are implemented in a cyberspace; it includes the notion of hybrid city, which consists of a reality with real citizens and entities and a parallel virtual city of real entities and people. Have a smart city that is virtual means that in some cities i the coexistence between these two realities s possible, although the issue of physical distance and location is still not easy to manage. The vision of the world without distance still remains unmet in many ways. In practice, this idea is hold up through physical IT infrastructure of cables, data centres, and exchanges.

Information city: It collects local information and delivered them to the public portal; In that city, many inhabitants are able to live and even work on the Internet because they could obtain every information through IT infrastructures, thanks to the sharing information method among citizens themselves. Using this approach, an information city could be an urban centre both economically and socially speaking; the most important thing is the linkage among civic services, people interactions and government institutions.

Intelligent city: It involves function as research or technological innovation to support learning and innovation procedure. The notion emerges in a social context in which knowledge, learning process and creativity have great importance and the human capital is considered the most precious resource within this type of technological city. In particular, one of the most significant features of an intelligent city is that every infrastructure is up to

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date, that means have the latest technology in telecommunications, electronic and mechanical technology. According to Komninos and Sefertzi, the attempt to build an „intelligent” smart city is more a radical innovation rather than an incremental innovation owing to a big quantity of efforts to use IT trying to transform the daily life.

Ubiquitous city (U-city): It creates an environment that connects citizens to any services through any device. According to Anthopoulos, L., & Fitsilis, P., U-city is a further extension of digital city concept because of the facility in terms of accessibility to every infrastructure. This makes easier to the citizen the use of any available devices to interconnect them. Its goal is to create a city where any citizen can get any services anywhere and anytime through any kind of devices. It is important to highlight that the ubiquitous city is different from the above virtual city: while the virtual city creates another space by visualizing the real urban elements within the virtual space, U-city is given by the computer chips inserted to those urban elements.

3.4 Human infrastructure

Human infrastructure (i.e. creative occupations and workforce, knowledge networks, voluntary organizations) is a crucial axis for city development.

Creative city: Creativity is recognized as a key driver to smart city and it represents also a version of it. Social infrastructures, like for instance intellectual and social capital are indispensable factors to build a city that is smart according to the human framework. These infrastructures concern people and their relationship. Smart city benefits from social capital and it could be possible and easier to create a smart city concept if there are mix of education and training, culture and arts, business and commerce as Bartlett said.

Learning city: According to Moser, learning city is involved in building skilled workforce. This type of city in the human context improves the competitiveness in the global knowledge economy and Campbell established a typology of cities that are learning to be smart: individually proactive city, city cluster, one-to-one link between cities, and city network. That leads a city to learn how it should be possible and realistic to be smart through learning process followed by city workforce.

Humane city: It exploits human potential, in particular the knowledge workforce. Following this approach, it is possible to focus on education and build a centre of higher education. According to Glaeser, E. L., & Berry, this view moves a smart city concept in a city full of skilled workforce; the same reasoning could be made for those high-tech knowledge-sensitive industries which want to migrate in a dynamic and proactive community. As a consequence of the above movement, the differences between smart city and not are getting wider; Smart places are getting smarter because they act as a magnet for creative people and workers (Malanga, S. 2004).

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Knowledge city: It is related to knowledge economy and innovation process; this type of smart city is very similar to a learning city. The concept of knowledge city is linked with similar evolving concepts of smart city such as intelligent city and educating city. The most important feature of this city is the fundamental concept of knowledge-based urban development, which has become an important and widespread mechanism for the development of knowledge cities.

3.5 Institutional framework

It is estimated that by 2050, 70% of the population will live in cities, pointing to the conclusion that cities must become more sustainable and as self-sufficient as possible to offer a better quality of life to their citizens. Only in China over the next 15 years, about 300 million people will migrate from rural to urban areas. For that reason, creating sustainable models and urban development policies is a global imperative. According to Moser, The Smart Communities movement took shape over the 1990s as a strategy to broaden the base of users involved in information technology. Members of these Communities are people that share their interest and work in a partnership with government and other institutional organizations to push the use of IT to improve the quality of daily life. Eger said that a smart community made a conscious and agreed-upon decision to deploy technology as a catalyst to solving its social and business needs. It is very important to understand that this use of IT could be more demanding without the institutional help. Indeed, institutional involvement is essential to the success of smart community initiatives. Moser explained that „building and planning a smart community seeks for smart growth”; a smart growth is essential in the realization of the objective pursued by the partnership between citizens and institutional organizations, that is a reaction to worsening trends in daily things, like for instance traffic congestion, school overcrowding and air pollution. However, it is important to notice that technological propagation is not an end in itself, but only a means to reinvent cities for a new economy and society. To sum up, it could be possible to assert that any smart city initiatives necessitate the governance support for their success.

Only by linking these three different dimensions, it is possible to develop a real concept of smart city. The importance of these three different dimensions consist that only a link, correlation among them make possible a development of a real concept of smart city. According to the definition of smart city given by Caragliu, Del Bo, & Nijkamp, a city is smart when investments in human/social capital and IT infrastructure fuel sustainable growth and enhance quality of life, through participatory governance.

Source: https://fr.wikipedia.org/wiki/Ville_intelligente - https://en.wikipedia.org/wiki/Smart_city , www.arhitekti-hka.hr/hr/novosti/dogadanja/konferencija-pametni-gradovi---gradovi-buducnosti,2935.html

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3.6 Map of smartest cities in Europe

3.7 European market

The smart city market will represent $ 1.4 trillion in 2020.

According to a study recently published by the Grand View Research, the world smart city market will reach 1.4 trillion dollars in 2020, with the intelligent transport sector as leader.

These forecasts are three times the size of the global market in 2013, which was $568 billion. The main factors leading to this increase are the rapidly expanding population, rapid urbanization and industrialization. Smart cities are built to meet a multitude of challenges such as water management, energy management, urban mobility, street lighting and citizen security. Rapid growth is expected to occur in the smart city market, with an estimated annualized 13.6 % rise each year between 2014 and 2020.

One of the reasons why companies and municipalities take initiatives in smart cities is that it will reduce the dependence on non-renewable energy resources. Today, most important IoT technologies are essential for the development of smart cities. This includes cloud computing, wireless communication, sensor networks and data analysis.

The smart security market in the smart city is facing a potential increase to reach a figure of $ 77.2 billion due to the increase in cyber-theft. The Intelligent Security sector is expected to grow by 14.8% per year between 2014 and 2020.

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With the increasing need for intelligent systems and communications infrastructure integration, industrial automation is expected to have an annual growth of around 14.4%.

Intelligent transportation sector promotes strong growth - in 2013, the largest segment was smart transport, covering 16.1% of the market. The growth of transport solutions including ticket management, guidance systems, parking and traffic management could increase demand in the smart city market. Over the next few years, smart transport is expected to increase by 15.2% per year.

2013 2014 2015 2016 2017 2018 2019 20200.00

200.00

400.00

600.00

800.00

1000.00

1200.00

1400.00

1600.00

568.00644.68

731.71830.49

945.10

1077.42

1228.25

1400.21

Forcast Smart City market

In B

illio

n Do

llars

Source: http://www.objetconnecte.com/smart-city-marche-etude-1504/

3.8 Convergence of competition

The European Market constitutes 51% of the total market share, with Latin America and Asia Pacific regions expected to witness high CAGR of 39.41% and 38.14% respectively over the period 2014 to 2020, due to the number of smart city projects sanctioned in the region. Though Europe and North America will continue to constitute the biggest market size, the proportion of market share of the regions will decrease considerably. The countries leading in the technology are European countries such as Germany, France, UK, Netherlands, Norway and Belgium, U.S and China.

The market is large and competitive, and is primarily dominated by giants such as ABB Ltd., CISCO Systems, Hewlett-Packard, IBM, Ericsson, General Electric, Delta Controls, Hitachi Ltd; who are innovating and developing new solutions in the domain.

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The market can be broadly segmented based on type as Smart Homes, Smart Transportation, Smart Utilities, Smart Integration, Smart Healthcare, Smart Education, and Smart Energy Management among others. Each of these segments has been subdivided in the report on the basis of end-user, application, product, solution, utilities and technology. The Smart Home has been segmented on the basis of application as Lighting, Consumer Electronics, Safety, Security, Environmental Controls, on the basis of product as thermostat, security, HVAC, Lighting, Entertainment and Monitoring, and on the basis of technology as Zigbee, Z-Wave, Knx, Insteon, X10, Lonworks, and C-Bus. Further, Smart Transportation has been segmented on the basis of technology as Parking Guidance Systems, Connected Vehicles, Location-based Services and RFID Tags, on the basis of Solution as Traffic Management System, Passenger Information System, Ticketing System, Parking Management System and Integrated Supervision for an in-depth analysis of the market.

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3.9 Horizon 2020 and Smart cities

Horizon 2020 is the biggest EU Research and Innovation program ever with nearly €80 billion of funding available over 7 years (2014 to 2020) – in addition to the private investment that this money will attract. It promises more breakthroughs, discoveries and world-firsts by taking great ideas from the lab to the market. Horizon 2020 is the financial instrument implementing the Innovation Union, a Europe 2020 flagship initiative aimed at securing Europe's global competitiveness. Seen as a means to drive economic growth and create jobs, Horizon 2020 has the political backing of Europe’s leaders and the Members of the European Parliament. They agreed that research is an investment in our future and so put it at the heart of the EU’s blueprint for smart, sustainable and inclusive growth and jobs.

By coupling research and innovation, Horizon 2020 is helping to achieve this with its emphasis on excellent science, industrial leadership and tackling societal challenges. The goal is to ensure Europe produces world-class science, removes barriers to innovation and makes it easier for the public and private sectors to work together in delivering innovation.

Horizon 2020 is open to everyone, with a simple structure that reduces red tape and time so participants can focus on what is really important. This approach makes sure new projects get off the ground quickly – and achieve results faster.

The EU Framework Programme for Research and Innovation will be complemented by further measures to complete and further develop the European Research Area. These measures will aim at breaking down barriers to create a genuine single market for knowledge, research and innovation.

The objectives of the smart city initiatives are generally aligned with those of city innovation and development strategies and the overarching Europe 2020 targets.

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Smart city initiatives can be considered as a useful vehicle for cities to achieve their Europe 2020 targets. Cities are conurbations that house a significant number of people, often in densely populated areas. Therefore, cities as Smart entities may be particularly well suited to initiatives addressing local public goods problems, such as energy and climate change. Moreover, the impacts may be highly visible, especially compared with less densely populated areas. The density and diversity of inhabitants (population and business alike) facilitates mutual recognition of problems, mobilization of critical mass, efficient reallocation and monitoring of roles and responsibilities. These are some potential uses and characteristics of smart city initiatives:

The Europe 2020 energy target could be addressed through initiatives that focus on Smart Environment or Smart Mobility.

Smart Economy and Smart People initiatives are oriented towards employment and education targets, which include e-skills development. Moreover, improving citizens’ skills should make them more employable which in turn supports the Europe 2020 employment targets.

Smart Governance and Smart Living initiatives address poverty and social exclusion through measures including improvements to the quality of life, a focus on citizen connectivity (including e-government services) and the use of open data to create citizen services.

The majority of smart city initiatives have the potential to support innovative growth and R&D. They are funded by a variety of sources, including government and private companies, which share a common interest in progress in this area. To contribute to the innovation and R&D target by further stimulating private sector R&D investment, it is essential that projects are evaluated and lessons learnt from them to enable further development.

In reality, a smart city initiative aims to make improvements in relation to a number of the Europe 2020 targets. For instance, a project that enhances mobility may make it easier for individuals to travel to the most appropriate school or job (thus contributing to the employment and education targets). This, in turn, can help alleviate location-based problems of poverty and social exclusion, although the impacts are likely to be less than the primary contribution to the energy and environment targets.

Sources: http://www.europarl.europa.eu/RegData/etudes/etudes/join/2014/507480/IPOL-ITRE_ET(2014)507480_EN.pd, https://ec.europa.eu/programmes/horizon2020/en/what-horizon-2020

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4 Smart Cities in Croatia

More than 40 out of a total of 128 cities in Croatia use smart solutions, which means applying new technologies and social concepts that enable better management and living for their residents.

What do cities need to know to get access to EU funds that can help them invest in smart city solutions?EU smart infrastructure funds, such as smart lighting, cover up to 40% and up to 100% of the amount of investment needed to realize such projects. Therefore, it is important for cities to get acquainted with the conditions of availability and the prerequisites needed to fund EU funds to maximize their benefits to their citizens and to reduce their own investments to a minimum.

What are usually the biggest challenges in realizing these projects?One of the major challenges is the fact that the separate initiatives of city administration offices must be mutually related. Their efforts must be linked to the full potential of "Internet of Things" and create synergy. Apart from the mutual cooperation of certain city offices, this includes the participation of citizens in the process of launching innovative ideas. In order to achieve this, it is necessary to use open platforms and open standards. This is the only way to ensure citizens long-term connectivity with city data. Looking from the technological perspective, cities need an open, adaptable, horizontal and expandable IP-based architecture ("Internet Protocol"), as it allows any competent body, citizen or supplier to connect to it. Proprietary protocols and data formatting should be avoided. Pilot projects allow testing smart city solutions on a smaller scale and give insight into their impact. Also, it is possible to try several configurations without the risk of interrupting public services. At the testing stage, it is possible to identify individual needs that can then be transferred to a larger project. Moreover, pilot solutions are regularly funded with the support of state institutions, as well as international organizations such as the European Union. This way, cities get an open infrastructure for testing a variety of different applications.

4.1 Projects in Croatia

PROJECT SMART CITY DUBROVNIK"Thanks to this pilot project, Dubrovnik will officially become the first innovation, testing, development and sales Smart City Center of Croatian Telecom. Citizens and numerous tourists will be significantly facilitated, and traffic safety and energy efficiency will be improved. This HT project is at the very top of the regional and European technological leaders in promoting, presenting and implementing the Internet of Things / Smart City Technology Framework. Our investments in the development of mobile and fixed

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infrastructure, as well as increasing the capacity for broadband internet access and IP transformation have enabled us to begin the realization of this demanding project, "said Davor Tomašković, CEO of Croatian Telecom.

Work began with the installation of the most modern magnetic parking sensors in 30 parking spaces, which will allow drivers to know the real parking situation. Informative parking screens with information of free spaces will be located above the road, and in the first phase will contain information on places that already have sensors, as well as in public garages. Smartphone users will be able to use an application that will provide information on the real state of occupancy of all city parking.

The security of the city will be enhanced thanks to a multisensory video monitor which will record traffic violations, excessive speed, overcrowding, unauthorized use of the left traffic lanes and inappropriate parking.

The smart city project will provide free city-wide Wi-Fi high speed and bandwidth (50 Mbit / s). In addition, this project includes a system of remote-controlled public city lighting management and regulation of lighting intensity and consumption of public lighting depending on movement of pedestrians and motor vehicle traffic in the vicinity of the lighting. When there is no traffic around, public lighting will function with decreased intensity, and if movement is detected, lighting intensity will increase. Also, many sensors will be installed that will monitor the air quality and other parameters that affect the environment. The information will be available in the first phase to the academic and research community and public health institutions, and in the second phase it is planned that certain information are published in an appropriate way in public.

All systems will be interconnected by a common platform, but also with the existing systems that the city is already using, and part of the data collected will be accessible to anyone who can further innovate with each other's individual knowledge and experience, such as local start-ups and models for development and entrepreneurship.

Apart from Croatian Telecom, the renowned global and domestic technology included partners are: CISCO Systems, Sensity, Zumtobel, RAO, Mobilisis, SmartSense, Electrotechnics and many others, and HT is constantly expanding its network of partners including renowned domestic companies and start-ups that can effectively contribute to the development of this technological framework.

Citizens, as key users of such infrastructure will also be involved in project evaluation through a special volunteer expert body appointed by the city, which will consist of a team of IT professionals living and working in Dubrovnik. The project is in progress from 15th March 2016.

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KOPRIVNICABy measuring the indicators of quality of life Koprivnica received the ISO certificate 37120: Sustainable development – indicators of city services and quality of life. Koprivnica became the first city in the region and the seventh city in Europe with this ISO certificate.

Project certification for obtaining the certificate was carried out by the World Council on City Data (WCCD). From a total of 100 indicators in 17 areas relevant to cities, which are measured and analysed in the process of certification, Koprivnica has proved correct measurement of 46 basic and 48 additional indicators, which won the highest levels of certification – Platinum. The results were published on the website WCCD and allow comparison Koprivnica with other certified cities regardless of the size of the city and the area in which they are located – due to the methodology applied in certification.

Cities who obtained ISO 37120 certification can use results for assessment of city services and quality of life in the city, for the prioritization of the city budget, to improve operational transparency to the citizens, to support ICT smart city solutions, the harmonization of public and private investment in infrastructure and for communication towards the citizens that become aware of continuous efforts and work of the city administration and services to improve the quality of life in the city.

In cooperation with the utility company, Croatian Telecom, and other partners, certainly developing in the direction of smart city, which rationally manage its resources and brings better quality service to the citizens, which is confirmed by ISO certificate whose results serve better management of the community in the direction of smart solutions and sustainable development.

Koprivnica became the head of electromobility in Croatia with the Civitas Dynamo project. In addition to strategic planning, the project is aimed at addressing the lack of public transport, which is a common problem for small towns. Special innovations are electric buses whose market and service base are still underdeveloped in Croatia. Energy efficiency is particularly pronounced to the degree of electromagnetism where the city has already established car-sharing electric vehicles for city administration employees and businesses and developed the infrastructure for fast-moving electric vehicles in the city that were built in partnership with the HEP-ELEN program and are accessible to all citizens and visitors to the city. Through the CBC Croatia-Hungary Bicycle Oasis project, a Public Bicycle System was established, including seven terminals with a total of 60 bicycles. One of the terminals is next to the railway station and makes an additional offer of public transport. The introduction of the first experimental city bus line further reduced the problem of lack of public transport. The system should be further developed, adding new lines to surrounding settlements and thus reducing the need for usage of personal vehicles.

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RIJEKAThe City of Rijeka launched the Startup Incubator for Youth in February 2013 with the aim of creating a stimulus for self-employment of young people through the realization of their own business ideas, raising their employment competences for employability and influencing the development of entrepreneurial culture. Young people in Startup have been provided with free mentorship and counselling assistance in setting up a business model and developing a business plan. Start-ups in three generations had 122 users who worked through 47 teams as business idea providers and created a network of 27 mentors, experts and entrepreneurs ready to share their knowledge and experience. The fourth generation started the incubation process in early May 2015 and has 48 users organized in 16 teams. Teams have developed and developed ideas in IT, mobile applications, energy, mobility / publishing, e-book publishing, tourism, marketing, recreation, biotechnology, medicine, manufacturing and hospitality. Incubator participants have so far opened five business entities and indirectly and directly self-employed and employed 25 people.

JASTREBARSKOE-roads Online project of the city of Jastrebarsko was launched in the first half of 2014. Its main objective was to improve solving citizens’ problems in the daily work of local government and the establishment of a more efficient system of management and maintenance of non-classified roads. The system is designed in a way that any authorized person having access to the system has the ability to report field problems in the area of traffic infrastructure or road maintenance by using a smart device takes a picture or makes a video of a problem, which is then automatically recorded in the system by getting the 'intervention' tag. With the introduction of this system, the city has managed to merge multiple individual organizational systems into one central system, thus making the process at least 50 percent faster than the previous mode of operation. By implementing the E-road Online project, fast and efficient communication of multiple services has been achieved simultaneously with the total cost control and field intervention orders via a single WebGIS interface.

PLETERNICAOne of the goals of the town of Pleternica is to become an energy-independent city by 2020 for public needs. That is the reason why the city decided to build a small hydro power plant, which represents an innovative approach to the use of renewable energy sources in the narrow local area on the existing natural resources of the Orljava River. A small hydro power plant of 220 kilowatts has been put into trial in early December 2012 and has been in full operation since March 2013. Last year, more than 965,000 kilowatts of electricity were produced and revenues of more than 806,000 were generated, covering 95% of the energy costs of public lighting in Pleternica and all the 37 settlements. These 95% cost savings are now the financial capital of Pleternica for other infrastructural and social cultural projects.

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The project's result is the reduction of CO2 emissions, which in 2014 amounted to 362.9 tCO2. Thus, by the production of electricity from renewable sources, hydro power plants directly affect the reduction of environmental pollution.

4.2 Strategic challenges

Smart city concept, which brings together a large number of city-level ICT projects, is a complex system that requires solving the following set of problems:

1. Lack of co-ordination for the planned implementation of ICT projects2. Lack of legal regulations and guidelines3. Lack of local companies and professionals for the implementation of ICT projects

The real problem is in engineers, actually in the shortage of engineers of all kinds, from programmers, makers, hackers, designers, artists and creators. Insufficient number of young people completes engineering studies, which results in a lack of qualified staff. This is a consequence of an inadequate education system and a large drop in students. At this point you become aware that what is missing and what is needed for smart city is community. Indicators show that the ICT sector has a potential to open at least 5,000 new jobs by 2020. That's why hackathons, such as Hackathon Dubrovnik, is a perfect event to gather everyone interested in one place, with one goal - to make smart city. Perhaps in big cities hackathon is not necessary, every city is special in its own way and that needs to be taken into account.

4. Lack of innovative forms of governing

„Decision-making within contracting authorities (especially on the local level) is generally carried out by a small number of government officials who, generally, do not have in-depth ICT and IoT knowledge in solving a public issue.”1 „Many of the challenges faced by smart cities surpass the capacities, capabilities, and reaches of their traditional institutions and their classical processes of governing, and therefore require new and innovative forms of governance.”2

5. Unfamiliarity of the local community on modern technical capabilities and low involvement of the local community

„Alongside ‘top-down’ master-planning, we need to enable ‘bottom-up’ innovation and collaborative ways of developing systems. The notion of the 'smart citizen' as a co-creator draws on a rich intellectual backdrop in both technology design and urban design. In practice, engaging citizens in these processes is immensely challenging.”3

1 M. Milenković, LL.M, M.Rašić, LL.M and G. Vojković, Ph. D. „Using Public Private Partnership models in smart cities– proposal for Croatia “(MIPRO 2017/DE-GLGPS), page 16602 Ibid. 3 Ibid.

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6. Lack of financial resources

There is a need to better use the limited public financial resources and change the model for financing new „smarter” infrastructures. This requires that the funding model to realise a smart city shifts from the use of "traditional" tools such as public (e.g. municipal, regional, national) resources to contractual models of Public Private Partnership (PPP), able to attract private capital. „Cities should ensure the visibility of procurement and PPP opportunities through a single portal and use problem-based methods for solving key issues.” 4 „Agency for Investments and Competitiveness is a Croatian Agency set up by the PPP Act whose main tasks are to give investors full view of services to invest and implement in projects for the improvement of the economic growth and business environment and to promote Croatian PPP model as competitive.”5 Other than private entrepreneurships projects and national and local subsidies, there are European Structural and Cohesion Funds. „The European Union (EU) is encouraging Member States to develop smart cities by allocating 365 million euros for this purpose. Also, the EU brought new financial instruments supporting environmental and climate action projects from which, cities can withdraw the funds. They include: The Financial Instrument for the Environment and Climate Action (LIFE) Programme, Horizon 2020 and Intelligent Energy Europe (IEE).”6

„Certainly, it is unreasonable to expect Croatian cities to become ‘smart’ in a short period but by implementing the measures and strategies like creating walkable localities – reduce congestion, air pollution and resource depletion, boost local economy, promote interactions and ensure security bring Croatian cities step closer to the 'smart cities'. (…) However, it should be noted that cities cannot simply copy the best practices from successful 'smart cities', hence must develop approaches that fit their own mind set, organization and culture in terms of broader strategies, human resource policies and demographics.”7

Sources: http://www.udruga-gradova.hr/inpuls/dubrovnik-smart-city-dubrovnik-2020/,

http://www.netokracija.com/dubrovnik-hackathon-smart-city-118022,

https://lider.media/tehnopolis/ict-sektor-ima-potencijal-od-minimalno-5000-novih-radnih-mjesta-do-2020/,

https://eu-smartcities.eu/sites/all/files/Guideline%20Financing%20Models%20for%20smart%20cities-january.pdf

4 Ibid.5 Ibid., page 16596 Ibid., 16577 Ibid., 1660

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4.3 Contribution of industry

Smart cities are the new industry of the 21st Century. The development of smart solutions based on real-world data is a new potential for global commercialization. Usually, there are several fields of activity which are described in relation to the term smart city: industry, education, participation, technical infrastructure, various ‘soft factors’. In association with economy or jobs the term „Smart City” is used to describe a city with a „smart” industry. That implies especially industries in the fields of information and communication technologies (ICT) as well as other industries implying ICT in their production processes.

There can be found many domestic companies offering innovative solutions for smart cities, such as Ericsson, Nikola Tesla, Croatian Telecom, Končar, Energy Institute Hrvoje Požar, HEP, King ICT etc.8

Croatian Telecom (HT, Deutsche Telekom Group’s Croatian subsidiary), together with its strategic and local partners, is currently the only one in Croatia offering a comprehensive solution in the smart city concept, from a basic infrastructure level to fully developed applications. Dubrovnik was chosen as the first innovation, testing, and reference Smart City Center of Croatian Telecom.

Sources: http://www.smacc-project.eu/,

https://www.tportal.hr/tehno/clanak/doznajte-kako-nastaju-hrvatski-pametni-gradovi-20160223, www.davor-skrlec.eu/pametni-gradovi-buducnost-ili-stvarnost/

4.4 Organizations serving as a platform for cooperation

Competence Centres are associations that are based on innovative cooperation between the public authorities, research and development institutions and enterprises. They are focused on developmental and industrial research prompted by the industry and its marketability within specific thematic areas and fields of competence. They are connected to one or more thematic priority areas and/or intrasectoral themes recognised by the Strategy for smart specialisation. For example, there is Competence centre for smart cities in Rijeka (CEKOM), whose key activities combine innovative and developmental projects devoted to implementation of a strategy for a smart, sustainable and inclusive local community, active support to local administrative units on the introduction of service components of 'smart cities', the establishment of scientific, technological and organizational starting points for the application of integrated intelligent technologies and business models to implement solutions within 'smart cities'. The aim is to find partners from the private and research sectors interested in joining CEKOM through collaborative projects for the development of new products and services related to smart cities.

8 Mr. sc. Branko Burazer, dipl. ing. el. “Normizacija u procesu kreiranja „pametnih gradova“, page 6

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Development agencies, such as the City of Dubrovnik Development Agency (DURA, dura.hr/) and Development Agency Zagreb (www.raza.hr/), encourage cooperation and provide information related to smart city projects. DURA serves as a link between city departments, the private sector – supporting development of entrepreneurship and civil society. Their work mostly revolves around the coordination and implementation of multiple smart city projects in the City of Dubrovnik. Development Agency Zagreb launched the first equity pre-acceleration program in Croatia - Startup Factory Zagreb (startupfactory.tehnopark.hr), in cooperation with leading ICT companies in the country - Croatian Telecom, IBM and SmartIS, and supported by the City of Zagreb, the Zagreb Tourist Board, the Prague Startup Center, Lean Startup Croatia, eSTUDENT and Spin City. The project aims to strengthen the ecosystem that encourages the development of start-up entrepreneurship and the sustainable development of innovative tourist solutions for a smart city. The University of Zagreb is also partnering on the project.

In general, Universities and students are playing an important role. The Faculty of Electrical Engineering and Computing of University of Zagreb (www.fer.unizg.hr) initiated the establishment of an energy platform „living lab” to encourage research, development and innovation. The Faculty of Civil Engineering, Architecture and Geodesy of the University of Split (gradst.unist.hr/), together with Urban Data Management Society and ISPRS (The International Society for Photogrammetry and Remote Sensing), organized the first international conference "Smart Data and Smart Cities" held in Split in September 2016. Second International Conference on Smart Data and Smart Cities will be held in Puebla, Mexico in October 2017. The conferences aim at presenting novel research concerning the use of information and communication technologies in Smart Cities as well as at providing a forum for senior researchers to establish collaborations on new research projects in this domain.

The Croatian Chamber of Economy (HGK, www.hgk.hr) also has an active role in promoting the smart city concept. For example, its organizational unit - Professional Group for Information Technology (www.hgk.hr/zupanijska-komora-split/strukovna-grupacija-za-informacijske-tehnologije), together with Innovatio Proficit d. o. o. organized a panel discussion on the theme: „Split 2020 – The Vision of the City’s Future through Smart City Innovation”. The aim of the conference was to encourage and give an opportunity to all IT companies to participate in the realization of the envisaged projects.

It is also important to pinpoint the project Smart cities – cities of the future initiated by Poslovni dnevnik (www.poslovni.hr ), Croatian newspapers and internet portal. The aim of the project is to promote excellence and innovation of 'smart city' and related initiatives implemented in Croatian cities, as well as to raise public awareness of the importance of developing new technological, organizational and logistic solutions aimed at improving the quality of life of Croatian citizens. Their conference Smart cities will be held, for the third time in a row, in November 2017 at the Franjo Tuđman Airport Zagreb.

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Sources: http://www.poslovni.hr/tehnologija/bolja-suradnja-znanosti-i-industrije-za-gospodarski-rast-i-kvalitetniji-zivot-299212, https://www.eas.ee/service/centres-of-competence/?lang=en, https://www.rijeka.hr/en/themes-for-citizens/business-and-investments/competence-centres/, https://konferencije.lider.media/smart-cities-2017/sessions/rijeka-centar-kompetencije-pametne-gradove-cekom/, http://www.total-croatia-news.com/dubrovnik-blog/18313-meet-the-people-of-dubrovnik-niksa-vlahusic-smart-city-strategist, http://startupfactory.tehnopark.hr/, http://www.t.ht.hr/en/Press/press-releases/3269/Startup-Factory-Zagreb.html, https://www.fer.unizg.hr/_news/59300/FER_Lider_EPLL_Smart_City_2015_05.pdf, http://apoliticni.hr/zk-split-odrzan-okrugli-stol-split-2020-vizija-grada-buducnosti-smart-city-inovacije/, http://www.unist.hr/novosti/najave-i-doga%C4%91anja/otvorena-prva-me%C4%91unarodna-konferencija-smart-data-and-smart-cities-68539, http://ing.pue.itesm.mx/udms2017/ , http://www.total-croatia-news.com/tell-me-something-about-split/17659-split-2020-the-vision-of-the-future-of-split-through-smart-city-innovation/

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