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Large-scale infrastructure and development

By Michael Sudarskis
Secretary General, Internatonal Urban Development Association

Sudarskis HS60% of infrastructure spending between now and 2025 will be made in Asia-Pacific, driven by China, India and Indonesia.

7%-9% expected annual growth of infrastructure spending each dollar invested in infra will add 5% to 25% to GDP.

A coherent infrastructure policy is a central factor in the global economy – delivering the urban built environment and social infrastructure for communities and thereby enabling all other economic activity. Construction alone contributes about 6% to global GDP and is also the number one consumer of raw materials. Traditionally, the sector has seen little technological advancement and is substantially lagging behind other industries in terms of productivity. At the same time various global megatrends, such as climate change, rapid urbanization, the infrastructure gap of more than $1 trillion and the bleak performance in delivering megaprojects, challenge the status quo and provide a strong call for action.

The industry is transforming.

New developments and disruption are currently reshaping the construction industry – from digital technologies to new construction methods and processes that boost productivity and enhance efficiency; however, the main challenge is finance.

To keep pace with population growth (+25% by 2040) and expansion of the middle classes, far-reaching development in infrastructure, including upgrading and mass urbanisation, is needed. Many countries in the global South are catapulting economic development by accelerating infrastructure projects like fast intercity-train, MRT, LRT, toll-roads, sea-tolls (hub-spoke ports), airports, dams… This is to increase the connectivity locally, regionally and internationally and to lay the foundation for industrial estates, integrated tourism resorts, and massive urban development. The downstream projects include New Towns, LRT cities, aeropolis, integrated tourism development area, smart and resilient cities, one million housing programmes, etc.

Maintaining and replacing current infrastructure, while tapping into funding sources for expensive new projects, is a daunting challenge for City Council and administration. Every City maintains its infrastructure assets to protect its investment; but the job is becoming increasingly difficult. The average age of infrastructure is over 30 years and their average life expectancy is 50. To meet the demand for new infrastructure, while ensuring that existing one remains safe and reliable to maintain service levels, every City requires significant investment to renew or replace deteriorating assets.

This surge in infrastructure spending encouraging urbanisation is linked to the political will to boost economic prospects as possible and underpin growth through job creation.Urban Dev 2

Large-scale urban development seems to be an almost accidental consequence of this infrastructure surge, and several governmental actors like State-owned enterprises and the local governments have placed the onus on public construction companies to build the infrastructure and the urban components together.

There seems to be a lack of clarification of the role of other stakeholders like private sector, industrialists, foreign-enterprises or NGO’s in this overwhelming task of developing the huge programme rising from this massive infrastructure investment.

Separately and almost accidentally the private investors have reacted positively to the increased pace of making more and more land ‘within reach’ or available for development with very large-scale real estate programmes. It seems that both the public and the private sector may overestimate their capacity to carry such mega projects.

Infrastructures are not profitable if they are not integrated in a project that expresses a convergence of interests and will of the actors; isolated operations in a globalized world have no future.

Infrastructure impacts urban equilibrium: It attenuates or accentuates certain dysfunctions: social mix, urban congestion, access and supply of leisure spaces, etc. Cities are searching a variety of innovative asset management tools to ensure that limited capital resources are wisely invested. However, the focus has shifted to developing solutions; finding innovative ways to maintain and replace existing infrastructure while dealing with increased demands to support growth. Innovation can help reducing the cost of infrastructure while improving the quality and range of services to the population.

Urban Dev 3-minThe management of this “balance” implies the capacity and the vigilance of the local government to ensure the necessary regulation that cannot be achieved without planning and finance mechanisms, at the level of the regional or metropolitan urban system and at the lower levels. The ideal being that the main public and private actors co-construct their regulation mechanism.

The G20 should voice the many unsaid concerns about future infrastructure, innovation and territorial development and indicate the way forward. Many countries do not have anymore a tradition of strong centrally controlled planning but seems to overrate the power of the quasi-public enterprises to enact large-scale urban & industrial development. A good time for the G20 to make a meaningful intervention, if not a disruption.

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