Global

Global infrastructure challenges 

Infrastructure development is one of the great challenges of the 21st century. With the global population set to top 9 billion by 2050*, governments around the world are facing an unprecedented demand for infrastructure development and renewal.

Transcripts:

Gautam Chemburkar on Infrastructure in India


One of the biggest bottlenecks India's going to face is the issue of infrastructure.


You're talking about a country which is almost 70 percent size of Europe as a continent. There are a lot of opportunities especially in the context of the port sector, the road sector, the power sector and some water projects. If you compare the best port in India – say the airport in Mumbai - the turn around time is much much higher when you compare it to Dubai port or Singapore port – there's huge opportunity there.


Look at the road projects – look at the time it takes for a transporting company to shift goods from Delhi to Mumbai – it takes close to about 2 ½ days on average. Now if you compare that to the speed at which the trucks progress on European highways?


The government have announced a very interesting freight corridor between Mumbai and Delhi. A lot of investment is likely to happen around the entire corridor. Besides this there's also this very interesting lateral road project - essentially connecting the four metros – Mumbai, Delhi, Calcutta, and Madras.


The government definitely understands that without putting infrastructure – the right level of infrastructure - in place, the seven percent growth that it has spoken about in the past is going to be a pipe dream. It has clearly set out an objective of having to spend about half a trillion US dollars investment and infrastructure in the next five years.


The government really believes that a larger part of this requirement of half a trillion has to come from outside and from private sources.


This is a market that you've got to be seriously looking at for long term perspective.


Julian Vella on infrastructure in the Asia Pacific region


The ASPAC (Asia Pacific) region covers pretty much every country East of India. It is a huge region geographically; it's a very large region in terms of its population. It's very diverse in terms of the needs of its people and therefore the infrastructure required to be built


There's a range of mature economies, Australia, New Zealand, Japan. And developing, very fast growing economies such as China and many of the South East Asian countries.


There is a continuing need for investment in infrastructure that has been compounded by the recent financial crisis.


The sort of dialogue KPMG firms are having, with governments that we're working with, is discussion around how infrastructure might be financed and what we as an organisation can do in terms of bringing ideas to the table, to assist them in their thinking.


One of the ways that governments can increase the economic efficiency of their countries, through infrastructure, is not just by investing in new infrastructure, but getting more out of their existing infrastructure assets.


As well as being a huge market for investors in both primary and secondary infrastructure assets, it is also the location of a number of major investors both in the region and globally. In fact Australia is one of the highest holders of institutional capital in the world.


There's an increasing trend towards infrastructure funds as well as sovereign wealth funds becoming direct investors in infrastructure.


In Japan there are a number of major trading houses who have recently announced and are now pursuing strategies to make direct investments around the world.


The region stands out because it is so large and there is such a huge demand for new infrastructure investment.


Sarah Al-Ghais on Infrastructure in the Middle East


Things have slowed down globally but in the Middle East, in general, it's been an upwards trend.


It's all happening very quickly in the Middle East which makes it a very exciting place to be right now. I would say for investors the Middle East is a very attractive place.


What makes infrastructure development in the Middle East quite unique is the fact that a lot of this infrastructure is entirely new.


I guess the most exciting infrastructure developments are the new cities that are springing up all over the Middle East. There are six new economic cities in Saudi Arabia - and King Abdullah Economic City, for example, has within it an education city, an industrial zone, a media city. They're big real estate developments but they require all of the supporting infrastructure. They can't just plug in to a power grid so they've had to build their own electricity generators, their own water treatment plants, their own roads, transport systems hospitals and education facilities.


The government has participated in enabling private entities come in and develop infrastructure in the region. Governments are increasingly turning to the private sector. They want to know how this has been done elsewhere and how those models apply to their particular country.


So the vision is government but the implementation has been by semi- private or private entities.


For example Egypt and Jordan - they are leading the strategy and the vision and also participating heavily in the procurement of their infrastructure.


The hot sectors for me are the utility sector, so water, lots of schools, lots of hospitals, energy projects, transport - you name it, it's happening in the Middle East.


Srinivas Sampath on Infrastructure in Africa


I think the next frontier in infrastructure is going to be Africa.


A recent estimate talked about something like one trillion dollars of investment over the next four years in just twelve selected countries - because they want to grow, they want to prosper and infrastructure is perhaps one of the best ways to actually leapfrog in economic development.


For example, Botswana which, thanks to the commodities boom, particularly in diamond mining over the last few years, has been able to build a sizeable amount of foreign exchange corpus which they want to now use for development and infrastructure.


Another interesting example is from Kenya, which has actually very successfully closed their maiden infrastructure fund - which was over subscribed at about 40 percent. In the middle of this economic crisis, this shows that there are good opportunities that exist in Africa.


South Africa has gone through a huge transition in terms of how new infrastructure has been built. It is continuing to build large scale infrastructure, given the fact that they're going to host the FIFA 2010 Soccer World Cup. So there is specific infrastructure being built around that.


The requirements are so huge that you, you have to be very innovative. KPMG firms are increasingly talking to the likes of the African Development Bank and try and see if there are any possibilities to do pan-Africa projects. In southern Africa - across Botswana, Mauritius, Namibia and Zambia. You'll have Uganda, Tanzania, Kenya, perhaps coming together in east Africa. And you'll have Nigeria, Ghana, potentially Cameroon, combine together in west Africa.


Infrastructure is critical, it's like a backbone of the economy, it's fundamental to economic growth and the long term prosperity of any country.


Stephen Beatty on Infrastructure in the Americas


Infrastructure in the Americas is very different depending on where you are - from Canada right down to the tip of South America.


The United States is probably the largest developing market in the world. They haven't invested in 50 years in any substantial way, and they've now turned their mind to investing in infrastructure. Canada is a more established market, particularly in the public private infrastructure space. And in Latin America the range is even greater, from very small countries with very limited population, to massive countries like Brazil or Mexico.


The biggest single challenge is dealing with scarcity and congestion, and whether that be in Sao Paulo, Brazil, or in Los Angeles or New York in the United States, we have used up a lot of the excess capacity in our infrastructure, and we need to find ways to either ration the capacity, or build new capacity. The problem is, is that it really affects the ability of the region, the municipality, or the country to compete with its neighbours and its trading partners. We're talking about trillions of dollars of capital investment, both in repairing old infrastructure, and in building new infrastructure.


Let, let me give you the example of the Panama Canal - where the country of Panama has decided to twin the canal, and this will double the effective capacity of the canal and has led to a substantial and climate of positive investment throughout the country.


Infrastructure right now is probably at its most exciting. We're asking the 'why do we have to do things…' questions, not just the 'how do we do things' questions - and that's fascinating.


Now is a brilliant time to invest in infrastructure both from the public sector and the private sector perspectives. It's important however, to make sure that we're spending money on the best possible strategic assets. Now is the time where we should be investing for our children and grandchildren, and doing so on a manner that makes them proud.

 

The OECD estimates more than US$40 trillion could be spent worldwide on infrastructure projects before 2030 – an enormous investment.


To further explore some of the unique challenges and opportunities facing infrastructure investment, use the map above to watch video perspectives from KPMG infrastructure professionals working in specific countries and regions around the world.

Nick Chism

Nick Chism

Global Chair, Infrastructure, Government & Healthcare

+44 (0) 20 7311 1000

Stephen Beatty

Stephen Beatty

Partner and Americas Head of Global Infrastructure

+1 416 777 8500

Darryl Murphy

Darryl Murphy

Partner and Europe, Middle East and Africa Head of Global Infrastructure

+44 (0) 20 7311 1000

Julian Vella

Julian Vella

Partner and Asia Pacific Head of Global Infrastructure

+61 3 9288 5555