Thus, there are more and more effective transportation systems, reliable and low-carbon energy, safe and secure water networks, and efficient and scalable social infrastructure will all play central roles in the smooth transition to urbanization.
So it is hardly surprising that political and business leaders are now keenly focused on cities and their impact on everything from economic growth and social well-being to climate change and sustainability. It is in this context that KPMG’ Global Infrastructure Practice launched “The Infrastructure 100: World Cities Edition”, a showcase of 100 innovative and inspiring examples of urban infrastructure projects that are changing cities around the world. Features in the KPMG publication were selected by industry experts from five regions of the world, including: North America, Latin America, Europe, Asia Pacific, and the Middle East and Africa, by independent judging panels which assessed hundreds of project submissions based on their feasibility, social impact, technical and/or financial complexity, innovation and impact on society. The result is what we hope you will find to be 100 of the most inspirational projects globally.
EDUCATION
The landscape for education infrastructure is shifting, and much of this change is related to the global financial crisis. Governments and school boards are rethinking their facilities needs, bank financing for education continues to be short-term, higher education institutions are looking for new markets and technology is altering the very fundamentals that, until recently, underpinned the delivery of education in mature markets. The Princess Nora Bint AbdulRahman University for Women in Riyadh, Saudi Arabia, is an outstanding example of an integrated infrastructure project that is expected to have a huge social impact. The university not only furthers the cause of advancing education among Arab women but it also sets new standards for built infrastructure in the education sector globally.
The project is spread across eight million square meters and has been built with a total investment of ?11 billion. The university will have the capacity to offer places to 60 percent of Riyadh’s female high-school graduates. It will offer degrees in medicine, pharmacy, management and IT – subjects which have typically been male-dominated and difficult for Saudi women to access. Looking forward, it seems clear that – while some dramatic changes may be underway – the education sector will continue to provide opportunities: refocused schools and higher education projects in the mature markets; a steady growth in new school development in emerging markets; and even a number of significant new mega-projects in the form of new university campuses and education cities around the world.
HEALTHCARE
In the developed world, we are witnessing a dramatic increase in demand for health services which is largely being driven by rising patient expectations, shifting demographics and aging populations. In the developing world, the combined forces of urbanization and a marked increase in universal health coverage are putting renewed strain on already-stretched health systems. As a result, the health infrastructure sector is also encountering a significant change in both the type of projects and services being procured by health systems and, with it, their funding and financing structures.
The Royal London Hospital has clearly struggled to cope with the demands and expectations of modern 21st-century healthcare. As a result, Barts Health NHS Trust initiated a ?1 billion Public Private Partnership (PPP) that included upgrading two historic hospitals over a nine-year construction period. The ?650 million redevelopment of the Royal London specifically, is an intriguing case study on preserving a long and illustrious past, yet delivering the kind of world-class facility one would expect from a leading global city.
The hospital now occupies an area equivalent to 40 soccer pitches and its level of diagnostic care has been doubled. It is home to London’s air ambulance and a leading trauma and emergency care center. It also houses a range of specialist centers including one of Europe’s largest renal services and a dedicated Women’s Center and Children’s Hospital.
There are clearly signs that Public Private Partnerships (PPPs) in healthcare are moving from what has largely been a very well understood and defined procurement model with clear risk transfer approaches to instead embark on an era of locally-managed estates procurement that often embraces a new array of models such as joint ventures and leasing arrangements.
The eventual success of many of these programs is going to be entirely dependent on the ability of governments and system administrators to find sustainable sources of long-term finance. It is clear that the global financial crisis and in particular the current European Sovereign crisis is putting a huge strain on the project finance bank market which is under regulatory pressure and may prevent long term lending (for example above 10 years). In turn, this will start to influence the way policy makers approach healthcare funding, with some now exploring the potential of offering some form of value/debt underwrite or other medium-term assurance that can unlock the bank’s ability to offer shorter-term funding that can be more easily refinanced at a later time.
GLOBAL CONNECTIVITY
As governments and private enterprise look to improve their cities’ global connectivity, there are a number of looming challenges on the horizon that must be overcome. The need for integrating planning and funding for the various primary and support assets must be well understood. Indeed, there is little point in developing plans for a new airport or port without first gaining a clear view of how other connecting assets such as roads or railways are impacted. So, for example, while a port operator may want to expand its facilities, it would need to work closely with the related road and rail owners to ensure that capacity is increased in step, which often leads to complex funding challenges (particularly in instances where one or both are privatized).
The Delhi-Mumbai Industrial Corridor is the largest infrastructure project India has ever undertaken. The corridor will cut across the country, linking the nation’s capital Delhi with the financial capital Mumbai. The project has an influence area of 320 million people, with plans to include a high-speed rail line for freight, a six-lane expressway and a 4,000MW power station. At an estimated cost of US$90 billion, the vision is to create a globally competitive business environment with state-of-the-art infrastructure that will facilitate both local commerce and foreign investment.
Regardless of challenges, the outlook for global connectivity infrastructure looks fairly strong in the medium to long-term. And while much will depend on the aspiration and vision of local and national governments, it seems fairly clear that – to remain competitive and productive in global markets – activity in this sector will continue to grow.
NEW AND EXTENDED CITIES
Today’s urban populations are growing at an astounding rate. By 2050, it is estimated that more than 70 percent of the world’s population will live in cities, resulting in an influx of more than three billion people over the next four decades.
But building an entirely new city or extending existing urban areas is a notoriously difficult and complex proposition. It is not simply a matter of dropping downroads and sewage pipes and hoping for the best; today’s city planners must balance a host of critical components such as infrastructure, services, culture, interconnectivity, transit, energy and employment, in order to create a city that can withstand the growing expectations of an ever-expanding population.
The Tianjin Eco-city is a project driven by strong economic fundamentals and has attracted over 600 companies, including large multinational corporations and Singaporean companies, with registered capital of over RMB 50 billion. The Eco-city aims to be a fully functional community with amenities and jobs located close by. Local and centralized facilities are provided to serve the needs of residents in each neighbourhood and each district will be served by urban centers. The entire Eco-city will have access to key infrastructure services, such as recycled water, gas, broadband, electricity and heating by 2013.
Of course, building a new city from scratch, or redeveloping a declining city, requires significant funding to ensure that all of the critical components can be developed according to planning timetables. The involvement of the private sector will be key to this success, as national and state levels of government are themselves financially strained.
URBAN MOBILITY
Recently, a small but growing number of cities have begun to look at their urban transport plans through a different prism that starts with the recognition that the way that mass transit delivers value to a city is through creating more efficient connections between business, labor markets and consumers. And as a result, these cities are now taking a much wider view of the value of mass transit which, in turn, is radically changing the way they prioritize and select their transit options.
The East Side Access project in New York City is one of the largest public works projects ever undertaken and is set to dramatically change the lives of millions of people upon completion. The project is the first Long Island Rail Road (LIRR) expansion in over 100 years and will connect its Main and Port Washington lines in the borough of Queens to a new LIRR terminal beneath Grand Central Terminal in Manhattan.
It is now estimated that the city will have spent US$8.24 billion by completion in 2016. For many people, nothing is more precious than time and with 160,000 people using the LIRR daily it is expected that East Side Access could end up cutting commuters’ daily journey by up to 30-40 minutes.
URBAN REGENERATION
Almost everywhere you look, there are signs of urban regeneration. From small-scale projects to revitalize a single neighborhood to massive developments aimed at overhauling large swathes of the downtown core, many civic governments are eager to regenerate their urban environments. But while the symptoms may manifest themselves differently in each market and city, the underlying prognosis is remarkably similar around the world: economic decay. Recognizing this, many civic governments are now looking to infrastructure renewal as a viable way to revitalize their urban economies and, as a result, are avidly seeking new opportunities to create new jobs, increase tax proceeds and enhance productivity.
The Abu Dhabi 2030: Urban Structure Framework Plan is set to revitalize the city’s Shahama and Bahia areas. It is possibly the largest and most comprehensive urban regeneration masterplan in the region, and it will ensure that Abu Dhabi’s next phase of physical and economic growth takes place in a sustainable and competitive manner.
The plan aims to turn the central district into a “liveable and modern Arab capital,” which will encourage citizens to use public transport or walk rather than drive cars in what is already a heavily congested and polluted city. Seven axis corridors, each representing one of the seven Emirates, will lead into the central business district. Monuments and buildings of national importance will be built along these roads, and a federal precinct will be created to house national government buildings.
WATER
By 2030, one third of humanity will live in areas where water demand exceeds supply by more than 50 percent. This is not only a challenge to basic human rights; water scarcity is already fueling conflict and contributing to the pace of urbanization as more people relocate to cities in search of secure sources of potable water.
There is little doubt that water will continue to be both a critical imperative and significant challenge for urban governments going forward. Much will depend on not only the ability of administrators to bring greater efficiency to the system but the willingness of politicians to allow tariffs to reflect the true cost of what is clearly scarce and valuable resource.
Through integrated water management, Singapore’s national water agency PUB has successfully closed the “water loop” and manages the whole water cycle, from rainwater collection to the purification and supply of drinking water, to the treatment of used water and its reclamation into NEWater, Singapore’s own brand of high-grade reclaimed water. This has enabled it to put in place a robust and diversified water supply strategy known as the Four National Taps – water from local catchment, imported water, NEWater and desalinated water. NEWater and desalinated water will form the core pillars of the strategy, and are expected to meet 50 and 30 percent of the city’s future water needs respectively by 2060.
URBAN ENERGY INFRASTRUCTURE
The world is rapidly moving towards low-carbon energy generation and this should come as no surprise to anyone. Yet few seem to have truly understood the grand implications of this change. Indeed, it is not enough to simply add new energy sources into the existing grid without first thinking through the fundamental changes that will be required within the system itself.
Government, in particular, will need to place significant focus on reducing the market risk that accompanies this type of change. Some volatility can and should be expected, especially in price. But volatility in policy must be reduced (or, better yet, removed entirely) to encourage suppliers and utilities to make the types of investment – both in capacity and financing – that will certainly be required for the world’s urban areas to achieve a low-carbon energy future.
Cidade Inteligente Buzios is a planned ‘Smart City’ initiative in Rio de Janeiro, Brazil, proposed as one of a few pilot programs worldwide to employ new and sustainable energy resources in urban areas. The premise of the project is to improve the environmental impact of cities through the sustainable reduction of energy consumption and CO2 emissions.
The program is being carried out in four stages. The first involves measurement of the ecological impact of the proposals and their efficiency. The next involves assessing how best to manage efficient end use of energy systems via the internet and through other smart grid programing. The third tier of development will include self-generation possibilities and look at ways to store renewable energy.
This phase will include utilization of photovoltaic solar panel technology, and transmission and storage of renewable energy to the electric vehicle charging points. The last phase will address the smart grid energy distribution network and its operation. It will aim to achieve efficient integration of clean generation to the existing grid infrastructure.
RECYCLING AND WASTE MANAGEMENT
As countries and regions become increasingly aware of the need for more environmental approaches to waste management, we have seen dramatic growth in the development of recycling and waste-related infrastructure. Putting aside regulation and financial challenges, however, many recycling and waste management developers face four key challenges that need to be overcome: planning, technology, feedstock availability and off-take agreements.
These challenges are not insurmountable. Pulling together a consortium of parties can drive rich rewards to the victors. And while it is no means an easy sector in which to operate, it remains that the growing world can no longer treat waste as a consequence of one’s existence.
Across the North Sea, the proposed Tonsberg Waste to Energy PPP will serve one of the oldest towns in Norway. This project is another strong example of a city using a PPP to manage waste and put it to a productive use.
The project will help Tonsberg and other municipalities in Vestfold County to convert sewage sludge, food waste, organic commercial waste and manure into biogas which will then be used for heating and electricity production. The council also expects to use it for running buses which currently use about four million gallons of gasoline/diesel per year.
COMMUNICATIONS INFRASTRUCTURE
Most cities have recognized the competitive advantage that can be gained through improved communications connectivity. Indeed, most cities – both in the developed and the developing world – are now actively competing with each other to roll out ever faster and more secure communications infrastructure. According to the Master Plan on Asean Connectivity, a 10 percent increase in broadband penetration boosts GDP by an average of 1.3 percent; and a 10 percent increase in mobile teledensity increases the GDP by 0.7 percent.
One challenge that will urgently need to be addressed is the security of the information flowing through (or residing in) the communications infrastructure. A strong authentication mechanism would go a long way towards fully exploiting the power of strong ICT infrastructure in the urban economy. What remains to be seen, however, is how much government intervention will be required in order to stimulate some of the less commercially viable components (such as trunk infrastructure or submarine cabling) or the more innovative government-focused initiatives (such as smart cities, City Operating Systems or information security measures).
The BRICS Cable is one of the largest and most ambitious endeavors included in the Infrastructure 100. The BRICS submarine cable is a 34,000 kilometer, two fiber pair, 12.8 Tbit/s capacity, fiber optic cable system that will link cities in the BRICS economies – Russia, China, India, South Africa and Brazil – with the United States.The BRICS countries are currently home to 40 percent of the world’s population and 25 percent of global GDP. With urbanization rapidly increasing, access to a fast and secure global communications network is essential to the growth and prosperity of the BRICS states.
Currently the estimated completion date for the whole development is the second half of 2014, with an estimated budget of US$1.4 billion. While this amount may seem large, proponents say it is miniscule compared to the eventual benefits and impact on GDP growth.
With more than half of the global population already huddled into cities that – together – make up less than two percent of the planet’s land cover, the pressure now being placed on urban infrastructure is unprecedented.
Serban Toader, Senior Partner of KPMG in Romania is preoccupied by the challenges facing the world today:
“Already, the world’s cities are home to more than half of the global population; emit more than 70 percent of the world’s greenhouse gasses; use 80 percent of the world’s energy;1 and drive the vast majority of the world’s economic output. So it is hardly surprising that political and business leaders are now keenly focused on cities and their impact on everything from economic growth and social well-being to climate change and sustainability. Indeed, in both the developed and the developing world, cities are striving to provide a raft of critical infrastructure to support their burgeoning – in some cases unrelenting – growth; more effective transportation systems, reliable and low-carbon energy, safe and secure water networks, and efficient and scalable social infrastructure will all play central roles in the smooth transition to urbanization. But these challenges cannot be viewed in isolation. Difficult questions and complex considerations hold significant influence over the ability of governments to provide the improved public services and modern infrastructure that are required. Investment is an obvious challenge for governments of both poor and wealthy economies. Critical questions also surround considerations such as policy development and tax, the need for greater accountability, the role of the private sector, and the drive for improved sustainability. As a result, we have seen increasing activity to create ‘cities of the future’: sustainable and highly-livable urban areas that balance the needs of the population and the economy with those of the environment.
At KPMG, we are privileged to have a global perspective on the work that urban administrations and national governments are doing to develop sustainable and achievable solutions to these challenges. We recognize the value of sharing insights and lessons to help cities cultivate a clear approach to urban infrastructure development. Indeed, we believe that one of our most sacred challenges as an industry must be to share the innovations and best practices that we gather from urban infrastructure pioneers with those around the world who can benefit from our shared experience. One way in which we advance this goal is by publishing our firms’ professionals’ globally-applicable experiences, insights and advice as they work to advance the agenda on sustainable cities. From ground-breaking research reports with leading academics to in-depth analysis on key urban development challenges, our member firms are focused on helping city leaders to overcome the various challenges that stand on the road to sustainability.”
Daniela Nemoianu, Executive Partner and Head of Infrastructure at KPMG in Romania, highlights:
“The traditional approach to urban infrastructure cannot sustain the present, let alone the future demands of the emerging cities. Part of this burden will be on urban planners and infrastructure developers who will need to completely rethink their traditional approach to designing and populating communities. Politicians will also have a role to play by creating policies that encourage private investment and set a vision for the future that challenges status quo of urban development. Even individual citizens will be central to achieving a successful urban environment by changing their expectations of what it means to be part of a modern urban environment. It is not a case of simply building more roads and pumping more water. Land is at a premium, water is increasingly scarce and – likely the most limiting factor – finances are already strained simply trying to maintain the existing infrastructure. Indeed, barring a miraculous recovery of national economies over the next decade, most cities are facing an infrastructure funding shortfall in the billions of dollars.
However, the challenges of urbanization cannot be left to city governments to sort out alone. Urbanization is a national issue and demands a national strategy. Funding is certainly one area that will require inter-governmental cooperation, but so will conservation, the creation of national standards, and a host of other issues that are critical to the national agenda.
Government of all levels will have to develop consistent and complementary policies that strategically deal with the emerging urban centres throughout the country. Lessons learned need to be shared openly and equally with both mature and emerging centres of population, to ensure that past mistakes are not duplicated, or compound the already insurmountable financial strain on an urbanizing planet. We have developed these publications to act as a further catalyst to change. Within this report, KPMG has captured some of the most innovative concepts and practical insights from our firm’s publications and presented them here to provide what – in our opinion – is one of the most definitive reviews of literature on the subject of sustainable cities and successful infra projects.
And, as we continue our work with industry leaders, we hope to drive further innovation and action within the sustainable cities agenda, and help create a new approach to urban infrastructure delivery that responds to the needs of all stakeholders: governments, developers, businesses, investors and – most importantly – the citizens themselves. We encourage you to speak to the local KPMG firm for more information about our work on infrastructure for cities.”
