Many of the challenges we saw in 2012 carried over into 2013. However the hottest topic has been the continuing inability of governments to bring projects to the market. The public debate has evolved and the conversation about infrastructure has become more coherent. There is an emerging consensus from the general public that more money needs to be spent on infrastructure although people are still reluctant to dig into their own pockets to pay for it. However, the most important challenge for 2014 is taking that critical next step and improving the flow of projects from a robust pipeline of development into procurement, construction and ultimately operations when the benefits will be felt.
In the latest special edition of Foresight, four of KPMG’s Global Infrastructure leaders (Nick Chism, James Stewart, Julian Vella and Stephen Beatty) sit down with John Kjorstad to look back on their 2013 predictions and outline some additional trends that are expected to change the way infrastructure will be delivered over the next 5 years.
“The Romanian Government has come a long way in overcoming obstacles that have been built over a decade, to lay down a strategy and create the content for the national infrastructure master plan, to update the legal framework through the new PPP law, reintroduce FIDIC standards, and optimize budget allotment for medium and long term priorities. Romania should take into account that its infrastructure projects are under significant competitive pressure, with regard to financing, the interest of large contractors, and availability of specialized resources. In this complex global context, strategic planning, transparency, and the application of international standards in the field are crucial,” says Daniela Nemoianu, Executive Partner, KPMG in Romania, specialist in infrastructure and PPPs.
Population drives demand
Completion of projects is paramount for progress in 2014. If governments intend to stay ahead of increasing demand, they need to take action now and commit investment decisions. The underlying need for infrastructure never changes – with 7.2 billion people having welcomed the New Year in 2014, the need for services is undoubtedly led by population growth. Looking ahead, the United Nations projects the world’s population will increase by another billion by 2025 and reach 9.6 billion by 2050.
Investment leads to growth
The world believes that infrastructure is a path to economic growth. At the end of 2013, Global Chairman and CEO of KPMG Michael Andrew commented that the “Infrastructure Revolution” is upon us. The World Bank has calculated that a 10 percent increase in infrastructure provision can result in a 1 percent increase in output.
For international businesses active in infrastructure, new markets continue to be the focus for growth outside of Europe and North America. Supported by domestic export- credit, regional development and other multilateral finance institutions, the race to compete is intensifying in Asia, Africa and Latin America as companies push the boundaries of their traditional markets to develop projects and sell materials in faster developing jurisdictions. We’ve seen increasing outbound capital from investors in Japan, South Korea and China making a strong push into lucrative global markets, and we expect this to continue in 2014 and beyond.
Trends that carry over and are still relevant in 2014
• Trend 1 - People will pay, but what can they afford?
• Trend 2 - More projects need to be completed.
• Trend 3 - Cities are still the future
• Trend 4 - The war for talent has intensified
New emerging trends expected to make an impact in 2014
• Trend 1 - Asset ownership is diversifying
• Trend 2 - Energy is going back to the future
• Trend 3 - Transparency is rising up the agenda
• Trend 4 - The war for talent is intensifying
“We believe that we can play an active role in developing the local infrastructure sector by sharing our insights and experiences from around the globe. Having advised infrastructure organizations in more than 130 countries in the past year, our infrastructure professionals are
ideally positioned to deliver practical advice and actionable insights to support the full range of infrastructure activity across the asset life-cycle,” said Nemoianu.
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 155,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG in Romania and Moldova operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chişinău. We currently employ more than 650 partners and staff; Romanians and Moldovans as well as expatriates.