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|By Julian Vella - Head of Global Infrastructure Asia-Pacific KPMG|
Many trends are ones we have been talking about for years. What has changed, however, is that many are becoming intertwined and interdependent, with increasing pressure for action.
In KPMG’s global report on emerging trends in infrastructure for 2020, we look at the implications of major changes affecting governments, investors, developers, and operators, as well as highlight what these stakeholders must do to stay relevant, respond, and reform.
From co-ordinated climate strategies to protest marches around the globe, citizens are demanding more accountability and customer-centricity. Most notably, the ubiquity of social media and smartphones is helping them synchronise their voices.
Facing global developments such as climate change, ageing assets, technological disruption, and increased urbanisation, governments must work out how to balance current and future needs. What is clear, however, is the need for risk-informed investment-planning decisions that prioritise capital deployments to address and mitigate these disruptive risks, and ultimately ensure safety and resilience across the asset life cycle.
I have mentioned previously that Asia-Pacific stood at the threshold of a new golden era of economic and social development. Out of the 10 trends identified in KPMG’s global report for 2020, here are the six critical factors for this region.
With the West increasingly looking inward, capital has started moving towards projects with greater risk-adjusted margins in the East. Led by China, we continue to see the slow but steady effects of innovation and internationalisation ripple across the region. While the fruits of this trend will take some time to materialise, we foresee that the winds of globalisation will continue to blow from the East.
Investment continues to be constrained by low levels of transparency, sophistication, and project planning in many markets. However, these winds are more likely to speed up than shift direction as greater sophistication, innovation, transparency, and competition are achieved.
Backed by the realisation of a lack of access to public resources that would fund infrastructure, emerging markets across the region are becoming increasingly serious about creating an investment climate conducive to the participation of private finance. While not all governments are moving at the same speed, or indeed in the same direction, we still see an overwhelming shift towards the institutionalisation of private investment within emerging markets.
In the coming years, we predict this trend will gain pace as governments look for better ways to manage their debt sustainability while also improving competition and transparency.
New technology continues to redefine the future of InfraTech, and in this regard the centre of gravity is shifting towards the emerging markets. China, already at the forefront of 5G as well as the solar-energy market, has been making significant leaps in AI and robotics. With hegemony over each new technology come new skills, capabilities, and opportunities.
Similar stories, albeit on varying scales, can be found across Asia-Pacific – from Malaysia’s tech hubs to Indonesia’s smart cities. Free from legacy infrastructure, we expect the InfraTech agenda will increasingly be driven by the region’s emerging markets.
We anticipate a bigger role for organised data and analytics approaches to replace the bottom-up, disjointed strategies that have governed infrastructure developments of years past.
For example, many cities across Asia-Pacific continue to invest heavily in their digital infrastructure including data sharing platforms as the availability of more data, the need for more customer-centric planning, the shifting expectations and needs of consumers, and the rebalancing of global competition all make it apparent that a shift towards greater data and analytics capabilities will continue to be a major evolving trend.
As concerns about climate change and sustainability become increasingly part of public discourse, pressure on governments and corporations is growing. We are seeing financial markets becoming more passionate about sustainability and, in particular, focusing on corporates with clearly defined decarbonisation strategies. For new infrastructure projects, environmental, social, and governance compliance has become a “go or no-go” issue for investors and financiers.
Major developments banks such as the Asian Infrastructure Investment Bank are also seeking to drive the agenda. That lender’s Environmental and Social Framework is designed to support the achievement of sustainable outcomes, and it is also developing new financing products and sources, often in partnership with other organisations.
We expect to see financiers and corporations push governments towards action.
Over the past few years, we have seen more megaprojects of greater scale and complexity than ever before being proposed and progressed.
High-profile examples include the new bridge linking Hong Kong to Macau and Zhuhai; Thailand’s Eastern Economic Corridor; Australia’s Inland Rail project, and Indonesia’s new capital city, to be located in Borneo, which is estimated to cost $33 billion.
However, the approach to delivering megaprojects is being reconsidered as the associated delays, cost overruns, and disruptions are frustrating both citizens and governments.
They want projects that are nimble and can pivot according to changes in demand or technology, and they want solutions that are faster, smaller, and more local.
We expect megaproject plans will be unpacked, using an entirely new philosophical approach to infrastructure delivery that more closely mirrors the mantra of tech firms: move fast, make customers happy, and continuously update technology to deliver ongoing value.
In this rapidly evolving global environment the governments, planners, investors, developers, and operators will need to listen carefully, respond quickly, and proactively reform.
New listening skills will be critical and new ideas will be required.