Infrastructure development globally is threatened by a lack of effectiveness on the part of governments, according to a new survey of the private sector by accounting firm KPMG.
According to the survey of 455 infrastructure executives from around the world, 69 percent cited governmental effectiveness as the top barrier to delivering infrastructure, followed by economic conditions (63 percent) and availability of financing (60 percent).
In the US, these concerns were even more pronounced, with 76 percent of providers saying that government effectiveness was their top concern, followed by the economy (74 percent) and availability of financing (68 percent).
The concerns over governmental effectiveness are “a call to action” for the private sector to engage with the public sector, says Rich Lee, lead partner for the US infrastructure group of KPMG.
“The US market is not one market – it's 50 separate markets. And it's an emerging market, so there's a lot of education that still needs to take place,” he said.
On the bright side, Lee says that more US state and local governments are willing to look at alternative infrastructure financing models, such as public-private partnerships. “I’m optimistic that this model will continue to evolve in this market,” he says.
In the UK, which has had a streamlined public procurement process called PFI, or private finance initiative, in place since 1992, concerns over governmental effectiveness were not as pronounced. Industry practicioners in the UK ranked governmental effectivess (66 percent) just below economic conditions (67 percent), with availability of financing in third place.
Still in the UK, 80 percent of respondents claimed they were either “somewhat concerned” or “very concerned” about whether current levels of infrastructure investment are sufficient to support long term economic growth.
Globally, 46 percent of respondents believe the level of infrastructure investment is not sufficient to support the long-term growth of their respective economies. And 72 percent believe it is not even enough to support the growth of their own businesses.
KPMG’s UK partner and head of its global infrastructure group Nick Chism emphasised the urgency of addressing the issues highlighted by the survey: “Of course, a lot is being done – but everyone can see that more needs to happen and we cannot afford delays. Otherwise, this will come to a head when the lights start to go out, transport grinds to a halt, and our critical social infrastructure crumbles and fails”.
The most popular suggestions globally for improving governmental effectiveness in infrastructure development were improved transparency and depoliticisation of infrastructure project priorities.
On the issue of availability of financing, only five percent of respondents said that the dearth of financing will resolve itself. The most popular recommendations to address this were direct government contributions, more favourable risk allocation and government loan guarantees.
Even without government action, though, the private credit markets are willing to put capital to work on a selective basis. “I think there's a sense that if there is a good project, there will be money for that project,” Lee said.
Cezary Podkul contributed reporting to this article.