Shifting mindsets: Evolution & trends in infrastructure we need to create Presented to CAF Conference: Infrastructure for the Development of Latin America Banco De Desarrollo De America, Latina Buenos Aires, Argentina 2 April 2018 Garry Bowditch Executive Director Better Infrastructure Initiative The University of Sydney Page 1
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Darwin Australia s top 10 goods and services exports Iron ore Natural gas Coal Aluminium Brisbane Personal travel services Perth Adelaide Canberra Sydney Education travel services Wheat Melbourne Beef Hobart Gold Professional services The University of Sydney Page 3
Closing the gap 1.6 Total in-land transport infrastructure investment, % of GDP, 2014 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Portugal Ireland Iceland Belgium Italy Mexico Austria Germany Netherlands New Zealand USA Switzerland Czech Republic Spain UK Isreal Poland Sweden Hungary Luxembourg Denmark Finland Canada France Japan S. Korea Turkey Slovakia Norway Slovenia Estonia Greece Latvia Australia Source: OECD 2014 The University of Sydney Page 4
The IMF, G20 and OECD: 'nations must invest in infrastructure to drive up productivity, growth and jobs' But this requires governments to select the right projects, which they find is very difficult to do. Poor infrastructure decisions have a high opportunity cost and can be a long-term drag on the economy s productivity. Gary Banks (2012) Chairman, Productivity Commission The University of Sydney Page
Scope for improvement is enormous All nations experience hit & miss with their infrastructure. There is an unusually wide set of experiences in infrastructure. When a project misses its basic objective of improving economic output, waste and inefficiency prevails. Straub (2008) estimates about 30% infrastructure spending has no impact on economic output in developed nations, and % for developing nations. There is no reason Australia is immune to these problems, anymore than CAF client nations. The University of Sydney Page 6
Over riding theme Customers & Stakeholders Customers matter and are the key to better governance, better yields and lower risk. what customers care about is not the infrastructure itself but the services which are delivered to them using that infrastructure The University of Sydney Page 7
Transforming infrastructure projects into businesses Airports, Australia s success story post-privatisation. 21years privatisation experience Operational efficiency Profitability Investment levels Traffic diversity Resilience The University of Sydney Page 8
Do customers think they matter? BIG SCALE infrastructure rates poorly for customer satisfaction* PPP perform OK, privatised entities perform much better Change in customer focus of operators Uber Private hospitals Airports Trains Public hospitals Taxis Gas distribution companies Electricity distribution companies Tolled motorways They are becoming a lot more customer focused They are not changing their level of customer focus They are becoming a lot less customer focused 12 13 13 11 9 13 13 10 7 6 7 4 29 22 22 40 36 36 38 38 33 32 29 30 2 23 22 21 18 18 * Newgate Australia was commissioned by John Grill Centre, University of Sydney in August 2016 to undertake a The University of Sydney national survey on community perceptions to customer service in Australia. Further details available upon request. Page 9 38 38 % 43 48 49 9 9 7 60 9 6 38 42 37 3944 41 47 31 34 22 3 2 7 11 6 6 3 6 3 8 8 6 9 10 9 9 8 10 9 11 7 They are becoming a little more customer focused They are becoming a little less customer focused 43 34 2 44 6
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Creating trust Relationships Infrastructure cycle of trust Participation first Reciprocity Helping to ensuring infrastructure is timely, scaled and feasible The University of Sydney Page 11
Customer Stewardship Maturity Model [coming soon] Enhance asset (investment) performance Instils & champions customer stewardship mindset Measure & differentiate actors [Customer stewardship rating] Create incentives & sanctions - Less regulation - More discretion with customers - Win more investment mandates Strengthen social licence Call out unhelpful ownership, regulatory, contractual practices The University of Sydney Page 12
In conclusion Between the idea, and the reality Falls the Shadow T.S. Eliot, Hollow Men The University of Sydney Page 13
Thank you For more information sydney.edu.au/john-grill-centre johngrillcentre@sydney.edu.au The University of Sydney Page 14
Better Infrastructure Initiative publications Paper 1: http://bit.ly/2hxbqzu Paper 2: http://bit.ly/2cwczfz Paper 3: http://bit.ly/2c9chk9 Paper 4: http://bit.ly/2zki3dm The University of Sydney Page 1