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KPMG - Government bigger threat to infrastructure than lack of finance

Government competence to address infrastructure issues is called into question by those building the infrastructure, according to a new surveyu by KPMG and the Economist Intelligence Unit.

undertaken by KPMG International in cooperation with the Economist Intelligence Unit - infrastructure providers are questioning the ability of

The survey: “The Changing Face of Infrastructure” suggests that leading private sector providers are worried that investment in infrastructure is threatened by a lack of vision and planning by government.

KPMG UK partner and head of KPMG’s Global Infrastructure Group, Nick Chism, said: “In my view, governments – in the UK and internationally – cannot dismiss such a consistent and urgent message from nearly 800 business leaders around the world.

“In two KPMG surveys (one with leaders across industries, and another with those who understand infrastructure better than anyone) we are being told that governments need to take the lead in tackling this long-term challenge, which is inextricably linked with economic development and the challenge of sustainability,” he said.

In the UK, 80% of respondents said they were: ‘concerned’ or ‘somewhat concerned’ that current levels of infrastructure investment would be enough to support the long term growth of the UK economy.

Government effectiveness was one of the biggest concerns for infrastructure providers. Top was Economic conditions (67% of respondents), followed by Government effectiveness (66%), then Availability of financing (54%).

To improve the effectiveness of government, respondents cited transparency top at 43%, followed bythe depoliticisation of infrastructure project priorities (35%).

“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,” said Chism.

“These survey results suggest that many governments 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 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.

“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.”

Internationally, results suggested that only 5% think that financing availability issues will resolve themselves. Many private sector providers believe that government intervention is needed, with 37% calling for direct government contributions or co-lending, 36% suggesting more favourable risk allocation, and 35% suggesting government loan guarantees.

Despite stimulus funding, 46% of global respondents are very concerned that the level of infrastructure investment is not sufficient for the long-term growth of their national economies. 72% are even more concerned that spending is not enough to sustain the long-term growth of their own businesses.

Respondents indicated that they may be facing skills ongoing shortages. 47% of global respondents expressed concern about a lack of availability of people and skills. 68% suggested steadier spending on infrastructure, while 66% proposed increased training and education to help combat the issue.

“The Changing Face of Infrastructure

Written 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.

  • 455 senior executives were quizzed 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% were C-suite or board level, with 22% being CEOs.
  • Respondents came from 69 countries and 38% of survey takers came from companies with annual revenues of US$1bn or more. 60% operate in more than one country.
  • By region: Asia-Pacific - 25%, Eastern Europe - 7%, Latin America - 7%, Middle East and Africa - 7%, North America - 28%, Western Europe - 25%.

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