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56 Consulting Matters   Features 

7/27/2019 Why we invest in infrastructure, published in September 2013 Consulting Matters

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Consulting Matters 57

Why we invest in infrastructure

Current discussion about the national

importance of infrastructure investment

ought to have at its foundation the

implications for national economic prosperity.

But all too often these factors are overlooked

or misunderstood. In addition, there isinsufficient attention to engagement with

stakeholders: the community, the voting

public and shareholders, generally to the

detriment of project progress.

In considering models of stakeholder

engagement it is imperative that the debate

is not too heavily skewed toward those

that already have access to infrastructure

or indeed stand to gain the most from

infrastructure investment. The silent

stakeholder who is not represented in the

conversation is one of the more important

parties to the decision. We need to be

cognisant of how the silent stakeholder is

affected by our infrastructure decisions, bethey from a low socioeconomic group, a

future generation, unrepresented minority or

simply the under-informed.

The context

By 2020, Asia’s economic output will be

larger than Europe and North America’s

combined. If Australians are to maintain a

relatively high standard of living we must

either find additional products [or resources]

to sell to the world, mainly Asia, or increase

the efficiency at which we produce our

output. Without globally competitive

infrastructure assets that are more efficientthan those available at present, to increase

our productivity and our standard of living, we

are likely to lose some of the economic gains

of the last two decades.

Infrastructure Australia has noted that there is

a deep disconnect between the infrastructure

Australians want and the infrastructure

we are prepared to pay for. As a mature

economy we need to recognise the benefits

of paying directly for the infrastructure that

we use, rather than expecting that it be

provided at no ‘cost’. The engagement of

INFRASTRUCTURE COMPRISES BASIC PHYSICAL AND ORGANISATIONAL STRUCTURES NEEDED FOR

THE OPERATION OF A SOCIETY OR ENTERPRISE, OR THE SERVICES AND FACILITIES NECESSARY FOR

AN ECONOMY TO FUNCTION. IT CAN BE GENERALLY DEFINED AS THE SET OF INTERCONNECTED

STRUCTURAL ELEMENTS THAT PROVIDE A FRAMEWORK SUPPORTING AN ENTIRE STRUCTURE OF

DEVELOPMENT. IT IS AN IMPORTANT TERM FOR JUDGING A COUNTRY OR REGION’S DEVELOPMENT

AND CAN BE DEFINED AS ‘THE PHYSICAL COMPONENTS OF INTERRELATED SYSTEMS PROVIDING

COMMODITIES AND SERVICES ESSENTIAL TO ENABLE, SUSTAIN, OR ENHANCE SOCIETAL LIVING

CONDITIONS.’ 

stakeholders is key to explaining not only the

benefits of investing in our infrastructure, but

also the consequence of not investing or not

leveraging our assets better.

 At the same time a lack of transparency in

infrastructure decision making often leadsto inefficiency, community distrust and

limits informed debate about the trade-offs

(e.g. which projects, service outcomes,

prioritisation, funding, and so on) that are

implicit in infrastructure planning. Stakeholder

engagement through publication of strategic

plans and project business cases (or at least

their key findings and assumptions) will

improve the public’s ability to understand

these projects. Further it will provide an

environment which is conducive to an open

debate about investment priorities and

increase the public’s understanding of the

need to pay for the infrastructure used.

Going forward

We need to better utilise our existing

infrastructure assets where possible, rather

than relying on construction of additional

infrastructure to meet demand. Increasing

the utilisation of our existing infrastructure

relies on one of two things occurring:

1. We increase the usage of the assets

by smarter management, by balancing

‘directional’ demands and by managing

peak periods.

2. We increase the density and the land

use of our city blocks to improve the

utilisation of existing infrastructureassets.

There are considerable additional benefits to

be had from this second approach, as without

densification of our cities heterogeneity may

be lost, with older and wealthier inhabitants

living in the inner circle of suburbs, while

younger and economically disadvantaged

citizens are restricted to the outer suburbs.

Some of our children may be denied the

opportunity of living in the communities

where they grew up and may be forced out

to the boundaries of our cities.

Infrastructure investment and

intergenerational equity

Infrastructure investment decisions need to

consider the needs of our community both

today and tomorrow. We should invest to

achieve outcomes in the future – the assetshould meet the needs of current and future

generations. We can consider such assets

as vehicles for intergenerational wealth

transfer, as our current day investments in

infrastructure appropriately facilitate use

by future generations to achieve a higher

standard of living.

In taking a longer term view of infrastructure

investment we must be vigilant that our

investments facilitate lasting and positive

legacies for future generations. There is

therefore a need for patient capital to be

invested in assets that may be border line

today but whose returns in the future aresignificant and enable greater prosperity. In

an environment of scare capital, consultation

with stakeholders is vital as there is an

appreciation that as they pay for the

infrastructure so they will wish to ensure

that are getting the infrastructure that they

want. At the same time this will require

robust cost benefits models and even more

robust business models to protect any capital

allocated to what on the surface may appear

a risky asset.

Doing more with less, investing in smarter

infrastructure and designing our cities

as systems rather than focusing on the

development of specific projects is vital toleaving behind infrastructure that enables

future generations to continue to increase

their standard of living.

David Singleton

Global Planning Leader

Arup

Mark Vassarotti

Regional Leader, Economics Group

Arup

Features