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Infrastructure: KPMG survey lays bare the extent of private sector misgivings

Source KPMG

As if addressing the infrastructure challenge wasn’t already a big enough task for many national governments around the world, some nagging doubts persist amongst the private sector about those governments’ ability to get the job done, according to a research released by KPMG recently.
Bearing in mind the key role that private sector infrastructure providers will likely have to play in delivering the infrastructure improvements demanded by society, the survey - undertaken by KPMG International in cooperation with the Economist Intelligence Unit - suggests that some governments may have something of a battle on their hands to get the private sector providers fully behind them.
According to the survey, entitled “The Changing Face of Infrastructure”, infrastructure providers have concerns over government effectiveness, the politicization of the infrastructure debate, bureaucracy, transparency and even the lack of a sense of urgency.
All of these are seen as factors which could inhibit the providers’ own ability to contribute towards tackling the infrastructure challenge – or which may impede further investment being made in infrastructure.
Topping the list of concerns, 69 percent of respondents stated they are concerned that government effectiveness would inhibit their own ability to deliver new infrastructure assets that would support the growth of their national economies. Such is the strength of the scepticism around government effectiveness that economic conditions (63 percent) was only ranked second.
When asked about the greatest public sector impediments to increased infrastructure investment, 42 percent said it was the politicization of infrastructure projects. This was followed by frequent changes in public policy, lack of appropriate public policy and a lack of urgency (all at 28 percent).
Commenting on the survey results, Daniela Nemoianu, Head of Advisory and a partner in KPMG in Romania, said: “Romanian government should not meet the challenge of providing 21st century infrastructure alone. Much has been spoken about the role of public-private partnerships in delivering the necessary infrastructure improvements and squeezing every last drop of efficiency out of investments from the public coffers. However, partnerships tend to work best when both sides have faith in the other’s ability to deliver what is expected of them. These survey results suggest that governments in general and private sector infrastructure providers are not yet on the same page and getting there will likely require substantive actions, not more talk.”
“It would appear that many private sector providers are dispirited at the way in which infrastructure has become tangled up globally in political process. Over half of respondents are concerned with the bureaucracy which they believe contributes to government ineffectiveness in this area. Around a third are also concerned about short-term planning horizons, the neglect of existing infrastructure maintenance, project over-runs and perceived corruption in the selection of infrastructure providers. Put all this together and this does not look like a particularly harmonious relationship.”
As well as outlining the respondents’ key concerns, the KPMG survey does also provide something of a wish-list in terms of what private sector providers believe might produce the greatest improvements in governmental effectiveness. Top of that list – supported by 45 percent of respondents – is the wish to depoliticize the infrastructure process.
Transparency also features heavily with providers keen to see greater transparency around infrastructure planning and project selection (44 percent). Forty percent of respondents also advocated greater use of public-private partnerships; an encouraging response which suggests that – despite all the perceived problems – the appetite to partner with governments still remains.
Respondents also voice a number of options which they believe would help to ease the obvious financing issues which continue to hamper infrastructure development in the current economy. Direct government contributions or co-lending is the most popular choice (37 percent), followed by more favorable risk allocations (36 percent) – i.e. where the public sector takes a greater share of the risk – and government loan guarantees (35 percent).
Nemoianu continued: “The infrastructure process will never be completely depoliticized as it is an emotive topic involving large amounts of taxpayers’ money. However, the private sector providers are quite clear on how they believe certain aspects of the political process are slowing or preventing the delivery of much-needed infrastructure improvements. I guess the question should be how much credence governments are prepared to give to these concerns. After all, there is an inevitable degree of self-interest from those who stand to benefit from a smoother, more reliable process for infrastructure delivery. However, the unique view they have from working with many governments on the front line of infrastructure delivery should afford their views some weight and credibility. If governments are going to sit up and take notice of this, they should do so quickly though. As with all aspects of this infrastructure debate, the clock is ticking.”

About KPMG:

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 140 countries and have 135,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In Romania KPMG operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chiºinãu. We currently employ more than 600 partners and staff, both Romanian and expatriates.

© 2009 KPMG Romania S.R.L., a Romanian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

About the survey

“The Changing Face of Infrastructure”: To understand the challenges that providers face in creating and maintaining infrastructure, the Economist Intelligence Unit (EIU), on behalf of KPMG International, conducted a survey during June and July 2009 of 455 senior executives who are directly involved in the development, delivery, operation / maintenance, provision of financing or providing advice in the transportation, energy, social services and water sectors. Of these, 63 percent were C-suite or board level, with 22 percent being CEOs. Respondents came from 69 countries and 38 percent of survey takers came from companies with annual revenues of $1 billion or more. Sixty percent operate in more than one country.
Respondents are broken down as follows by region: Asia-Pacific (25 percent), Eastern Europe (7 percent), Latin America (7 percent), Middle East and Africa (7 percent), North America (28 percent), Western Europe (25 percent).