How Cities Can Create and Deliver Infrastructure Value
Last month, Siemens, PwC and Berwin Leighton Paisner launched the Investor Ready Cities study, looking into the present-day state of infrastructure investment in cities and exploring what private investors need to participate in city infrastructure financing projects, the basic principles of land use and investment, and how cities can capture the benefits associated with development.
Our three global businesses came together to write this report because we all witness the same issues in our work in cities around the world. As such, we all believe that there is an overwhelming need for major infrastructure common to all, and that if cities are to transform themselves at the rate needed to tackle some of the most pressing issues brought about by urbanisation, a swift pace of development is crucial.
However, cities need to be empowered to make the right decisions. They often need to be guided through a process which starts with creating a vision for the city and developing a plan for its future, and the infrastructure needed for its operation. They also need to understand the complexities of infrastructure implementation to identify the right solution.
But to deliver this infrastructure, cities must consider the broader context in which infrastructure investments occur. Nearly all cities have limited access to funds or ways of financing projects and as such are becoming more reliant on the private sector to help them access financing, and to leverage more sophisticated financing mechanisms.
A key aim of the study is to illustrate how cities can work with more sophisticated forms of financing to deliver their infrastructure, and what they need to do to create confidence in the private sector.
Cities must be prepared to innovate with the private sector, they must be prepared to consider international financing options or use methods which capture the value of the infrastructure being delivered.
We realise that if cities are to successfully deliver infrastructure in today’s environment, they first need to put in place the necessary foundations. The purpose of the Investor Ready Cities study is to set out some of these fundamental building blocks to allow cities to participate in the marketplace and compete for those investment funds. Those building blocks include:
- The need for good governance and the rule of law
- Institutional stability
- The necessary legal frameworks, operated with transparency, allowing for evidence based decision making
All of these create confidence for the private investor community, and with these foundations in place, cities can then leverage financial mechanisms to their advantage.
Included in the report are seven global case studies which illustrate the principles of the report – each of which demonstrates the significant and often catalytic role of infrastructure in an urban environment. They demonstrate the need for leadership, visioning and plan making, and the importance of governance in harnessing financing. Five of those case studies are presented in the infographic below.
Cities that are not underpinned by robust legal and governance frameworks will have limited ability to attract much-needed investment as well as the potential funding sources available to them. As the case studies demonstrate, it is through the effective utilisation of this capacity that integrated urban strategies yield potentially spectacular results.
A city’s ability to deliver infrastructure for sustainable and effective growth is intrinsically linked to its ability to attract and retain capital – both human and financial capital. At a time when competition for resources is intense, the ability to attract that capital will define a city’s success.
This is an evolving area that we will continue to work on. I welcome your comments on the study and our work in this area.
Click infographic to view in full.