Interview with Nick Chism, Head of Global Infrastructure Practice at KPMG
Ross Westgate
Meanwhile, the latest debt crisis in the Middle East as well has highlighted the fragility of the infrastructure sector and its need for investment—not only in the region, but worldwide. $40trn is apparently needed globally in the next 20 to 30 years according to a study by KPMG released today. Joining us for more on that, Nick Chism, Head of KPMG’s Global Infrastructure practice. Larry Hathaway is still with us. Well infrastructure very much obviously once again put on the front page with the State of the Union address last week as well.
Nick Chism
Yes.
Ross Westgate
It’s interesting, you’re saying there’s a need for funds but we also hear that in the States actually there’s a huge amount of money that’s yet to be spent. So what is it: we need money or we need to work out how to spend it?
Nick Chism
Well actually Obama highlighted some of the findings of our report last week. Stimulus is a start, but only a start in what has to be a massive investment program for many years to come; and governments around the world need to start thinking how they’re going to manage that program of investment.
Ross Westgate
But we’ve got money sitting, at the moment, in the States they can yet work out how to spend.
Nick Chism
Yes, indeed.
Ross Westgate
I mean is that because they don’t know what to do or the processes are difficult?
Nick Chism
Well, in the short term, stimulus is good for getting shovel-ready projects going, and the Chinese have been particularly effective at that. But longer term you have a much bigger challenge thinking through how are you going to deliver $40trn worth of investment.
Nicole Lapin
So Nick, this is Nicole in the United States. You’re essentially saying that the stimulus projects were shovel-ready and not necessarily long haul or perhaps strategic. So while it may have been a shot in the arm to the US economy, did the stimulus actually, for lack of a better word, stimulate the economy?
Nick Chism
Stimulus is great in the short term for creating jobs and getting projects going that are sitting there on the shelf, but there is a much bigger challenge beyond that delivering $40trn worth of investment.
Lisa Oake
Nick, hi, it’s Lisa over in Singapore. Are the problems that we see in, say, countries like the United State—when it comes to getting the money approved for infrastructure spending actually out there and approved for the projects—are the same sort of problems applicable in Asia as well, in countries like China?
Nick Chism
Well, what we found doing the three surveys that we’ve done is general concerns within business at-large, within private sector infrastructure companies and government over lack of funding, concerns over government effectiveness and the need for public and private sector to work much more closely together. The concerns over lack of funding are less in Asia-Pacific; the concerns over government effectiveness are greater.
Ross Westgate
Well, let’s look at this. I mean, you keep talking about we’ve got problems trying to implement it, so is the key problem? Well, A) there’s lack of funds, what else is there? Is there a problem with the process?
Nick Chism
Yes. There’s a government effectiveness process which boils down to generalizing horribly about public sector officials worldwide, because there are many good officials. In general, they are firefighting short term problems and not thinking through the long term consequences of investing in things like infrastructure, nor plunging a generalist public sector official into the procurement of a massive complex infrastructure project; is that person necessarily going to be able to think through the consequences of that investment?
Larry Hathaway
You mentioned before the issue of public/private partnership and perhaps one of the reasons is the long term funding problems that a number of governments have, and the, perhaps, reduced willingness of some who have a good fiscal position to maybe commit to the long term. Is there therefore a role here for sovereign wealth funds to also partner in this, in terms of providing the funding that’s required for such a massive outlay over the next 20 to 30 years?
Nick Chism
Yes, definitely, there’s going to be an increasing role for sovereign wealth funds and the pension funds in funding infrastructure. But what we have to do, and government has to take a lead in this, is find effective models for bringing that funding into infrastructure. And that’s a giant experiment that’s been going on for about fifteen years now, but we really have to step up the pace if we’re going to deliver this sort of level of investment over the next generation, which has to happen.
Ross Westgate
Okay, Nick, thanks for that. Nick Chism, Head of KPMG’s Global Infrastructure practice.