Concern About Infrastructure Seen Across All Regions; Business Leaders See Public/Private Partnerships as Part of the Solution
The majority of C-level executives (77 percent) surveyed for KPMG International, the global network of audit, tax and advisory firms, believe that the current level of infrastructure investment is insufficient to help sustain the long-term growth of their organizations. Only 14 percent of business leaders globally believe the infrastructure currently available to support their organizations is completely adequate.
Analysts estimate that two trillion dollars will be spent on infrastructure globally on an annual basis until 2015. However, executives in every region expressed concern that infrastructure investment would not be adequate. While business leaders in Eastern Europe and Asia Pacific were most focused on the issue, with 89 and 84 percent of business executives, respectively, expressing concern, the study reported a high level of concern as well in mature markets with 74 and 64 percent of executives respectively in the United States and Western Europe expressing the same opinion.
The KPMG survey, conducted by the Economist Intelligence Unit, also revealed that:
The Importance of Infrastructure is Growing
The vast majority of respondents - 80 percent - say that infrastructure will be even more important to their businesses in five years. While Asia Pacific sees the biggest increase in the impact of infrastructure, with 87 percent saying it will be more important in five years, it's especially interesting to note that the U.S. is closely grouped with Middle East/Africa, Latin America and Eastern Europe - with more than 80 percent of respondents seeing infrastructure being more important in five years. In Western Europe, that number is 63 percent.
Infrastructure Drives Where Businesses Locate
An overwhelming majority (91 percent) of the executives surveyed said that the availability and quality of infrastructure affects where they locate their business operations.
"The Chinese Government has long recognized the importance of developing an effective infrastructure network as being the keystone to the success of its 'Go West' policy to attract companies to Western China," said Matt Walker, Head of KPMG's Corporate Finance Infrastructure Team in China. "Further, a central focus of the current stimulus package is to accelerate such infrastructure development."
Partnering with the Private Sector
With depleted coffers at the federal and local government levels, 80 percent of executives surveyed say governments need to work to a greater extent with the private sector to finance infrastructure improvements. "Infrastructure is at a critical crossroad, and governments have an incredible opportunity to make decisions that will impact many future generations," said Nick Chism, Head of KPMG's Global Infrastructure practice, and partner in the UK firm. "Almost three-quarters of the executives surveyed in the U.S. and Western Europe expressed concern that poor economic conditions along with the challenges facing governments will prevent the needed investment in infrastructure. They are looking for government to partner with the private sector to develop effective financing solutions."
Roads and Power Supply Top Concerns in Every Region
Two-thirds (66 percent) of executives in the KPMG survey reported that both transportation and energy/power supply infrastructure are resulting in increased operating costs for their business. According to the survey, roads and power generation are the most urgent infrastructure needs globally and in every region. For example, in the United States, almost two-thirds (61 percent) identify roads as an urgent need and almost 40 percent in Western Europe while approximately one-third of respondents in both regions identify power generation and schools as critical infrastructure needs.
"Many businesses in developed countries may not be feeling the impact of aging infrastructure in their pocketbook yet," said Chism. "But with the average infrastructure project taking several years from project start to completion, governments should act now to develop strategic approaches to the issue before it becomes a crisis situation."
"While it is important for developing - but faster growing - countries to make a commitment to infrastructure investment, it is equally important for more mature markets to replace their aging infrastructure or risk losing their competitiveness."
The KPMG survey "Bridging the Global Infrastructure Gap" was conducted by the Economist Intelligence Unit during late November and December 2008 with 328 global C-level executives, including 47 percent of who are CEOs. Almost half (48 percent) have annual revenues of more than US $500 million. For a copy of the full report, please visit www.kpmg.com.
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About KPMG's Global Infrastructure Practice
KPMG's Global Infrastructure practice has extensive local and global experience advising government organizations, contractors, operators, and investors in planning, structuring and management of new infrastructure investments; procurement and financing support; improvement and monitoring of construction and operations; restructuring of distressed projects; investment due diligence assistance; and infrastructure related audit, tax, accounting and compliance issues.
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