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Top executives say current infrastructure investment won’t support business growth, says KPMG study

United Arab Emirates: Thursday, January 29 - 2009 @ 12:56

Only 14% 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% of business executives, respectively, expressing concern, the study reported a high level of concern as well in mature markets with 74% and 64% 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:

- Senior executives believe infrastructure will be rising in importance over the next five years;
- The availability and quality of infrastructure will directly affect where these executives locate and expand business operations;
- The business leaders believe governments should partner with the private sector to finance and administer major infrastructure projects;
- Roads and power generation are the most urgent infrastructure needs, say the majority of business leaders surveyed globally.

The Importance of Infrastructure is growing

The vast majority of respondents – 80% – 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% 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% of respondents seeing infrastructure being more important in five years. In Western Europe, that number is 63%.

Infrastructure Drives Where Businesses Locate

An overwhelming majority (90%) of the executives surveyed said that the availability and quality of infrastructure affects where they locate their business operations.

“As governments grapple with the current economic crisis, they must recognize that infrastructure investments are still desperately needed to support critical business activities,”

said Munther Dajani, partner and head of KPMG in the UAE’s Infrastructure Line of Business.

He adds, “Not only does improved infrastructure attract businesses and employment as, of which the UAE is a very good example, but it’s recognized that infrastructure work can be an economic stimulus if managed correctly.”

Partnering with the Private Sector

With depleted coffers at the federal and local government levels in many countries, 80% 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 crossroads, and governments have an incredible opportunity to make decisions that will impact many future generations,” Munther noted. 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%) 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%) identify roads as an urgent need and almost 40% in Western Europe, while approximately one-third of respondents in both regions identify power generation and schools as critical infrastructure needs.

Inferring from the survey, Munther adds, “Many businesses in developed countries may not be feeling the impact of aging infrastructure in their pocketbook yet, 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.”

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Thursday, January 29- 2009 @ 12:56 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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