These Asian cities are becoming smarter, but at what cost?

Why Singapore is a perfect place for innovation

Innovation does not always have to mean a lighter phone or a slimmer TV: Hong Kong and Singapore are innovating to become smarter cities aimed at social improvement for their urban populations.

Singapore's Smart Nations program is focused on making every aspect of life, from transport to water systems to even garbage disposal, more efficient. Under that program, the government is placing sensors in cars, roads and homes to measure how things run, and then tapping that data to make them run better.

When asked why his country is able to foster innovation, Singapore's foreign minister and head of its Smart Nation initiative, Vivian Balakrishnan, told CNBC that a large urban population and a lack of bureaucracy in its single-tier government are part of what makes the city state an ideal laboratory for new ideas.

"We are a single layer of government. So we may not have invented the autonomous car, but in terms of speed, the change in rules and regulations, we can do so far more quickly than in many other places," Balakrishnan said.

While Singapore continues to rise in the field of innovation, its long-time competitor Hong Kong slipped two notches in World Economic Forum's Global Competitiveness index in 2016 to ninth place. The WEF cited innovation as the weakest factor in the city's performance.

Nicholas Yang, Hong Kong's secretary of innovation and technology, told CNBC's "Squawk Box" on Thursday that innovation is a continuous process, and that it was a topic outgoing Chief Executive CY Leung had been focused on.

Leung called for financial and policy support to promote growth in Hong Kong's technology and innovation sectors in his final policy address in January this year. He also announced 18 billion Hong Kong dollars ($2.3 billion) would be invested in the sector.

Yang also highlighted the need for changing Hong Kongers' mindset from short-term profit to longer-term growth.

"You've got to think about what innovation can and technology can do in terms of social improvements. And this is something that the current administration is trying to do it's not just economic growth it's also social improvement," he said.

Telcos are driving innovation in Hong Kong

Paul Berriman, chief technology officer of international telecommunications provider PCCW, highlighted one possible flaw as Hong Kong begins its push into becoming a smart city. He used the anecdote of road tunnels built in Hong Kong, which all used different automated payment systems. This meant that drivers had to purchase separate cards to access separate tunnels.

"As we move towards smart cities and start to have smart parking, what we don't want to have is each different carpark having a different system on a map, and a different app. We need to have a single method, and that can only come from some leadership and guidance and standards from the government, and I think that's when there's a gap at the moment," he said.

The smart city idea is also fraught with privacy concerns that emerge from recording data from every aspect of citizens' lives. The Singapore government has said it is working on firewalls and additional cybersecurity measures to curtail this threat.

Industrial revolution 4.0

Some call this emerging data-driven innovation wave the fourth industrial revolution.

"This is different from the previous revolutions, where value is the rise from scarcity where people are trying to create monopolies and walled gardens," Balakrishnan said.

Like every industrial revolution, this one would bring a sea change to the workforce of this century.

More than 40% of work tasks will be automated: McKinsey

"I think many people are worried. You know if you've been doing the same job in the same way for 20-30 years, you suddenly now need to do it differently. You know that that comes with a little bit of stress," Oliver Tonby, Southeast Asia managing partner at McKinsey & Company told CNBC.

McKinsey chose Singapore as the Asian hub for its Digital Capability Center, which trains the workforce to keep up with the disruptions of the fourth industrial revolution.

Hong Kong's Yang, meanwhile, said innovations in manufacturing technology could help develop his city's workforce, which he said is at full employment. "We try to develop robotics and artificial intelligence. What we are trying to do is, we're trying to free some of human resources up so they can do higher-value-added jobs," he said.

Asia's start-up hub

Smart Nation is not the only innovative pursuit for Singapore; the city state boasts a strong start-up ecosystem, and in 2016 the World Bank ranked Singapore as second easiest place to do business in the world.

Taavet Hinrikus, CEO of European payment platform Transferwise, told CNBC that Singapore's cooperative government, ease in dealing with regulators and a central location as regional hub, make it a great place for starting a business. Transferwise announced its new APAC Headquarters in Singapore on Thursday.

Hong Kong: Fintech center of China?

Fintech is an area the regulators in Singapore really care about, according to Hinrikus, and he said establishing his online payment solution, which is already a leading money transfer platform in Europe, in Asia was "a great experience."

These innovations are not only concentrated within the shores of Singapore, but make Singapore a regional hub in Southeast Asia from which business can operate.

For Hong Kong, its proximity to China's innovation hub Shenzhen is also an advantage as pointed out by PCCW's Berriman. "We can be the guinea pig. Hong Kong is a great place, it's right next to Shenzhen and they can try some of their innovations on us, and if they work, take it to a wider market," he said.