Infrastructure Magazine | Issue No

Home , European super grid, Parag Khanna, The Mars Project

INSIGHT

The global infrastructure magazine | Issue No. 11 | 2018

Connectivity of Connected Interplanetary the future: economies: connectivity A new lens on The dark web Building a infrastructure challenges a life — and The most ‘new dawn’ for infrastructure — connected infrastructure on Mars. powers, and New pressures Page 32 people, will win. on infrastructure Page 6 stakeholders. Page 10

#InfraConnect Connect to compete About this issue

Richard Threlfall Stephen Beatty Julian Vella Global Head of Infrastructure Chairman (Non-Executive), Head of Asia Pacific KPMG International Global Infrastructure Infrastructure Practice E: [email protected] KPMG International KPMG International @rthrelfall_kpmg E: [email protected] E: [email protected] @stephencbeatty @jp_vella

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. n today’s world, those with the greatest is massive trade deals like the Trans-Pacific developers and operators to continuously connectivity reap the greatest rewards. Partnership, collaborative investment innovate and adopt new technologies. It IIt is true for people, cities, countries vehicles like the Asia Infrastructure requires investors to rethink the value and infrastructure. Investment Bank or even bilateral tie-ups equation when assessing their return like those currently blooming in ASPAC, it on investment. But, first, it will require a People are simply begging for more is clear that most countries are seeking deeper understanding of what connectivity connectivity. The evidence is everywhere: more global connectivity, not less. really means to people, cities, countries it is in the continued adoption of social and infrastructure. media; the recent boom in air travel; and the Infrastructure — arguably the foundation uptake of 4G networks and technologies. It of all previous connectivity — is also That is why, for this edition of Insight is palpable — from the throngs that crowd becoming much more connected and Magazine, we have approached the concept the small internet shops in the shanty towns much more focused on connectivity. At of ‘connectivity’ from multiple angles. We of Rio and Lagos through to the mobile the asset level, we are seeing massive explore the challenges of delivering regional smartphone addicts on the main streets efforts to create more ‘connected connectivity projects; the efforts to connect of Hong Kong and New York, everyone is enterprises’ that are able to leverage NGOs and multilateral institutions to trying to connect to something. data and automation to drive significant infrastructure investment needs; protecting performance enhancements. At the system cities and interconnected infrastructure Cities, too, are desperate to improve their level, we are seeing continued moves to assets from cybercriminals on the dark connectivity. They are building massive new integrate assets and services — whether web; Asia’s massive regional initiatives; airports, encouraging greater competition that is encouraging multiple forms of we even offer a futuristic view of what it in the ICT sectors and participating in electricity generation, creating multimodal might take to connect to a Mars colony. regional rail and energy schemes. transport or preparing for the introduction They are building ‘smarter’ versions of Those seeking a better understanding of of automated vehicles. themselves by connecting their internal the bigger picture of how connectivity and systems, technologies and data to drive Indeed, the value of infrastructure is no infrastructure align will want to read our massive efficiency at city-scale. And they longer counted in the revenues it generates, interview with Parag Khanna on page 6. are promoting these advancements to but rather in the connectivity that it enables. Indeed, Parag sums up the current situation investors and potential employees around The challenge for the infrastructure sector nicely when he notes, “Beneath the chaos the world. is that delivering connectivity is not the of a world that appears to be falling apart same as delivering assets. is a new foundation pulling it together. While recent media coverage may suggest And that is our collective connectivity.” that some countries are now starting to Delivering connectivity requires ‘disconnect’ in response to protectionist infrastructure planners and owners to This edition of Insight Magazine helps and populist pressures, the reality is that take a step back from their roles to view to explain why. the vast majority of national governments the bigger picture and to understand are working very hard to improve their how their participation leads to greater connectivity with other countries. Whether it connectivity. It requires designers,

Connectivity of the future 06 A new lens on infrastructure Connectivity is destiny — and the most connected powers, and people, will win

Connected economies 10 The dark web challenges a ‘new dawn’ for infrastructure An underworld of anonymity is placing new pressures on infrastructure stakeholders

Connected energy 14 06 Super grids: making the right connections for a sustainable future An attractive investment model for governments and private entities

Connecting for good 20 At the confluence of development, investment and infrastructure The future of partnerships to bridge the gap in developing worlds

Connecting markets 24 Asia and 21st-century opportunities Catapulting into the future but not without challenges

Connecting citizens 28 Digital makeovers envision ‘smart’ urban centers Redefining how we interact with the city services we rely on

Interplanetary connectivity 32 Building a life — and infrastructure — on Mars What does it take to physically build a colony on the red planet?

Cooperation and compromise 36 Building regional connectivity Reinforcing a commitment to improve electricity and transport connectivity 28

Creating urban connectivity 40 Urban planning and inter-government partnerships Building ‘30-minute cities’ within Greater Sydney 32

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Parag Khanna Managing Partner, FutureMap and Leading Global Strategist, World Traveler and Best-Selling Author @paragkhanna

arag Khanna believes that mankind has a new maxim — Connectivity is destiny — and the most connected powers, and people, will win. PHis vision of ‘connectography’ unlocks some of the great challenges of connectivity and provides a hopeful vision for the future. We sat down with Parag Khanna, leading global strategist, best-selling author and one of the World Economic Forum’s Young Global Leaders, to learn more about his vision and its influence on infrastructure. Connectivity of the future: A new lens on infrastructure Connectivity is destiny — and the most connected powers, and people, will win

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Ed: In your opinion, why is connectivity Ed: The debate about the benefits of Then there are places that have been so important today? globalization continues. Is greater without even basic infrastructure and, connectivity good for society? in many cases, digital connectivity can Parag Khanna (PK): I believe there are two help them solve that. Platform solutions, main megatrends shaping the world we PK: Absolutely. And, frankly, it’s an energy-saving utilities, mobile broadband, live in today: urbanization and connectivity. unstoppable force that has been around telemedicine — these are all ways that And, together, they dictate human behavior since the dawn of time. Cobblestones governments can leverage connectivity every bit as much as — maybe even more in Roman roads were the first building to reduce the cost of their infrastructure than — any other force or factor we’ve blocks of connectivity, and we have while still delivering basic government seen previously. been increasing our global connectivity services. And these would be the most ever since. Connectivity really comes down to obvious winners. the enablement of supply chains, both physical and digital, which are now the But I would argue that — particularly conduits of our economies. What we have in today’s political environment — there seen is that — in a very uncoordinated, is far too much talk about who gains and unsynchronized yet simultaneous Connectivity really who loses from connectivity. All evidence decision-making process — billions of comes down to the suggests that, when properly managed, people are gravitating toward infrastructure everyone gains. and the supply chains they enable. enablement of supply That’s why functional geography, what chains, both physical Ed: Are we seeing the rise of a new I call ‘connectography’, has become so and digital, which are world order led by those with the best critical today. connectivity? now the conduits of PK: I think we are seeing the rise of Ed: So is functional geography now our economies. regions rather than nations. I always use more important than physical or political the Trans-Pacific Partnership (TPP) and the geography? Asian Infrastructure Investment Bank (AIIB) The problem isn’t greater connectivity. PK: Not at all. They are all layers through as two examples of regional connectivity. It’s the way governments are responding which we interact with the world around us. These initiatives involve dozens of countries to the changes that connectivity brings. There is no more fundamental a layer than working together to improve physical and At some point, we have to be clear about our natural or environmental geography. social connectivity, to enhance supply where the responsibility for helping society And, until now, our political geography chain integration, and to create trade and cope with these universal phenomena has dictated geopolitics, economics and investment opportunities. like globalization and connectivity lies. competitiveness. Today, we are entering a And that is with government. new era dictated by functional geography There are two ways you can look at these types of initiatives. On the one hand, and its impact is influencing our decisions There are governments that have done you can take the functional perspective at a pace we have never seen before. a great job at helping their societies which would argue that more cross-border adjust and compensate for the rise in But if you want to truly appreciate the infrastructure and initiatives promotes globalization and connectivity and there complexities we are facing today, you really national development and the fulfillment are governments that have not. If you need to take all of these layers into account of competitive advantage, and this, in ask me what the greatest risk facing our at the same time. If your goal is to build turn, makes the world a better and more society is today, it’s that governments will a resilient society, for example, you need secure place. On the other hand, you take a laissez-faire approach to managing to consider the ecological uncertainties, could take the national perspective and connectivity. the political realities and the functional argue that these agreements weaken geography that is available to that society existing institutions and national borders when they need to cope with the various Ed: Does that mean that connectivity and therefore pose a threat to society. environmental scenarios they may face. is creating winners and losers? Looking at the political geography alone Yet I would suggest that organizations PK: There is certainly a perception that it is. certainly won’t tell you whether this society like the AIIB wouldn’t exist today if our Connectivity is what allowed manufacturing will survive environmental disruption. existing institutions hadn’t dropped the jobs to be offshored to the Asian Tigers in ball on infrastructure investment and We really need to be able to appreciate the 1990s and that has led to the hollowing financing in the 1960s. Over 60 years of all of these different layers if we want to out of the manufacturing sector in some management by our existing institutions peel back the challenges we face and countries. Where governments have done has led us to massive multi-decade market understand the complexities we need to a poor job managing that evolution, there failures in infrastructure finance. overcome in solving them. have certainly been some losers.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. So I don’t know if I’d classify it as a new Ed: What should developers, contractors Ed: You seem very optimistic about world order. But I would argue that any and suppliers be doing to respond to connectivity and connectography. What initiatives that promote regional integration the shift toward connectography? is your vision for the future? are inherently good. PK: They are the real agents of PK: As I say in my book, I see connectography connectivity. So they have no reason as a hopeful vision for the future. I see Ed: Can you measure the value that to rethink their value proposition in this a world where new energy discoveries connectivity adds to an economy or city? equation. Particularly in this golden age and innovations have eliminated the need of infrastructure. for resource wars, global financial assets PK: At a project or program level, it’s are being deployed to build productive often possible to calculate the return There are certainly things that the infrastructure that can reduce inequality, on investment for a specific piece of industry could be doing to improve the and frail regions such as Africa and the infrastructure and the value it creates for value of connectivity. They could be thinking Middle East are unscrambling their fraught society and the economy. But at a macro more about the longevity and adaptability colonial borders through ambitious new level, it is almost impossible. of their assets and then creating bundles transportation corridors and power grids. of assets that are as cost-effective as The reality is that our cities and our possible. But, overall, I think the industry — Beneath the chaos of a world that national economies are already so particularly the bigger global players — is appears to be falling apart is a new interconnected through trade, investment, at the center of connectivity today. foundation pulling it together. And that supply chains and technology transfers is our collective connectivity. that you simply can’t separate what is endogenous economic value and what is a result of connectivity. You can’t strip out all of the inputs and outputs, all of the movement of people, ideas and resources, all of the value of the physical and digital flows in and out of a city or a country. You’d be better off studying quantum physics than economics if you want to try to untangle the intangible and pervasive role that connectivity plays in our world today.

Ed: So how can infrastructure decision- makers improve their chances of becoming winners in a connected world? PK: I think infrastructure planners and owners need to be doing two things. Beneath the chaos First and foremost, they need to continue of a world that looking after the basics. They need to be investing, encouraging PPPs and appears to be falling maintaining their assets. Part of that is apart is a new making sure that infrastructure assets are properly accounted for and that foundation pulling it sufficient investment is being made into their renewal. together. And that They also need to be thinking about is our collective their active strategy — what they want to connectivity. achieve, what assets they need and how they plan to pay for them. But the goal shouldn’t simply be to improve connectivity. You need to think carefully about how much connectivity you need, where you need it and what value it delivers.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Connected economies: The dark web challenges a ‘new dawn’ for infrastructure An underworld of anonymous platforms and cryptocurrency dealing is placing new pressures on infrastructure stakeholders

Professor Talis Putnins Kate Allman David Ferbrache Professor of Finance Multimedia Journalist, Chief Technology Officer, and Co-Author Law Society of New South Wales KPMG in the UK E: [email protected]

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. n exciting new dawn may be rising as well is their reliance on sophisticated, cyber-mercenaries in business is Bitcoin for global infrastructure, with often remote, control-system architectures and countless other virtual currencies in Agovernments sharpening their focus designed to manage infrastructure circulation — each anonymously held and on infrastructure investment as a path to via networked computers and data exchanged for illegal services rendered. economic growth and new technologies communications. Sounds complex? It is. Ransomware attacks illustrate just how forging innovative ways to accelerate well cryptocurrency serves as the ideal Simply put, yesterday’s individual development and control costs. But as tool for dark web cybercrime to flourish, targets are morphing into a far-reaching the horizon brightens, there’s little time protecting perpetrators under a cover attack surface — an interconnected to lose in confronting the unprecedented of complete anonymity as they demand digital web controlling everything from infrastructure threats emerging from these currencies from victims and then transportation, telecommunications and beneath the cover of the dark web. cash in the proceeds undetected. power utilities to healthcare, financial The alarming reality is that, as the systems and the internet itself. And a “The ability of cybercriminals to trade infrastructure world continues to embrace sordid array of anonymous hackers-for- information, collaborate on projects or opportunities for remarkable 21st-century hire, cybercrime syndicates and organized pay for attacks is much greater than it approaches and capabilities, the dark crime networks — operating far ‘below the used to be as a result of the dark web web is providing a covert, decentralized, radar’ of authorities — are busy trading and the unregulated environment and unregulated ‘black cybermarket’ that’s information and attack methods aimed at anonymous transactions it provides catapulting cybercrime — and the risk to exploiting any infrastructure vulnerability today,” says Talis Putnins, a professor global infrastructure — forward as well. they can find. of finance and co-author ofSex, Drugs and Bitcoin: How much illegal activity is Today’s infrastructure systems are The dark web’s threat to critical financed through cryptocurrencies? “The becoming digitally interconnected and infrastructure is real and rising. And exchange of information on how to engage automated as never before. On the rise the currency of choice that’s keeping

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. in illegal activity is greater than ever and The closure of the so-called Silk Road The good news for authorities, and an allowing many kinds of illegal behavior is a classic example. The online black increasing area of focus, is the simple fact and transactions to become a little more market serving as a platform for illegal cybercrime players always need to move mainstream. It takes the threat beyond a drug sales was shut down by the FBI in back and forth between anonymous digital handful of highly specialized, well-trained October 2013. And by early November 2013, currency and real-world cash. So authorities computer scientists to include many more Silk Road 2.0 came online, run by former are narrowing in on the points at which players, dramatically broadening the pool administrators of Silk Road. It’ too, was criminals are making those conversions of people engaged in cybercrime.” shut down, but that murky ecosystem’s between cryptocurrencies and real money — remarkably quick re-emergence illustrates the so-called on-ramps and off-ramps to Putnins’ team’s findings suggest the challenges facing law enforcement the dark web, where the virtual and the cryptocurrencies are transforming the and authorities today — not to mention physical intersect. way black markets operate by enabling critical infrastructure owners, operators ‘black e-commerce’. The paper estimates It’s at these key points, which are and stakeholders. that about half of all Bitcoin transactions are coming under increasing surveillance associated with illegal activity — or about While a trend toward investment to by authorities such as the FBI, where US$72 billion per year. The total market improve cybersecurity and combat criminals monitoring and tracing of activity can capitalization of Bitcoin alone exceeds targeting infrastructure is underway, accelerate the prosecution of the players US$250 billion as of January 2018, with a efforts to illuminate new solutions are involved. Scrutinizing computer hardware — further US$400 billion in over 1,000 other typically impeded by the fact that most laptops, mobile phones, tablets — and cryptocurrencies. infrastructure operators and owners involve software gateways into and out of the dark private enterprises possessing many web will throw a new spotlight on hackers. decades worth of major legacy systems. Authorities are scrambling to respond Meanwhile, the World Economic Forum These are not easy to retrofit with modern as threats advance has proposed global cryptocurrency cybersecurity requirements, and that’s strategies that include: enforceable new Should we view last year’s WannaCry proving to be a major challenge in the face international rules; virtual currency providers ransomware cyberattack — crippling of increasing threats and risks. verifying who their customers are; creation hospitals, banks and businesses around We’ve moved quickly from yesterday’s of an international e-forfeiture fund to the globe — as a harbinger of what’s ‘IT issues’ — involving servers, networking combat money laundering; and modernizing to come for infrastructure? Perhaps so gear, local IT infrastructure, PCs, laptops, existing authorities like the Financial Action when you consider, as just one example, tablets and smartphones — to today’s Task Force (FATF). the emerging potential for dark web digitally interconnected infrastructure cybercriminals to access today’s rapidly The FATF is a global policy-making body ecosystems featuring new platforms such advancing transportation infrastructure and whose stated objective is to set standards as autonomous vehicles, for example. turn autonomous vehicles into remote- and promote implementation of legal, And the risk of catastrophic disruption controlled weapons. Authorities have regulatory and operational measures for is multiplied when you consider how already warned of this possibility. Or combating money laundering, terrorist increasingly dependent societies and consider a scenario in which a major financing and related threats to the integrity economies are becoming on the critical urban center — including emergency- of the international financial system. infrastructure web that surrounds us today. response vehicles — is paralyzed by President Santiago Otamendi says hackers disabling an entire network of that among the FATF’s network of traffic signals. Shining a bright new light on virtual 204 countries and jurisdictions, all are currencies and the dark web The possibilities are alarming, real committed “at the highest political level” and perhaps endless as the threat to Regulators are driving hard to make to implementing FATF recommendations. interconnected infrastructure systems progress, playing catch-up with intense He adds that financial innovation in the widens and advances. Witness recent focus amid the confusion that has reigned form of cryptocurrencies carries new terrorist attacks on so-called ‘soft targets’ in over the explosion of digital currencies in risks that must be mitigated to ensure places like Canada, the UK, Spain, Sweden, circulation globally and across the dark web. they are not abused. Germany and France, forcing authorities “Regulators and governments have so “The cross-border nature of this new to rethink how they secure today’s mass far been bamboozled by digital currencies, industry requires a global response,” transit, public spaces and heavily traveled unsure whether to treat them as personal he says. “So far, there has been a wide pedestrian thoroughfares. assets, derivatives, shares or investment range of government responses. This Unfortunately, no sooner do law schemes,” says Kate Allman, a multimedia has resulted in a patchwork of regulatory enforcement and authorities marshal journalist at the Law Society of New South approaches, which is increasing the risk of enough resources to train some light onto Wales who authored an article titled The money laundering and terrorist financing. In the dark web’s cybercrime marketplace, Dark Side of Bitcoin. “But there is definitely the coming months, with the support of the organized cybercriminals are already a sense of urgency to exert a greater level of G20, the FATF will review its guidance on pursuing sophisticated new methods control, and authorities and law enforcement virtual currencies — or crypto assets — and and platforms. The problem becomes a are closing the gap, thanks to the focus consider if changes to its recommendations rapidly moving target that authorities have they are placing on digital currencies and are necessary.” struggled to keep up with so far. their illegal uses on the dark web.”

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. In Europe, the NISD — Network and Every infrastructure sector needs to take a more aggressive and strategic Information Security Directive — is just stance today to ensure that increasingly complex and interconnected coming into law across the continent, infrastructure systems are adequately safeguarded. This includes: placing new cybersecurity obligations and best practices on critical national Greater cooperation and collaboration among infrastructure infrastructure providers. It essentially owners, operators and investors with law enforcement introduces testing and breach-reporting and government to collectively tackle the growing threat to obligations and includes requirements 01 infrastructure in a strategic manner. for emergency-response processes to manage a breach or major disruption. Better understanding of the growing threat from the perspective The caveat on managing illegal use of today’s ruthless, rational, organized and increasingly of digital currencies is to avoid a ‘knee- sophisticated cybercrime entrepreneurs. Know what is of value jerk’ response that cramps or crushes 02 to attackers and take measures to fully protect those assets. legitimate, productive, innovative uses for virtual currencies. While some nations are actively adopting cryptocurrencies Taking ownership of the issue by being proactive rather than and encouraging uptake as a stimulus to reactive to emerging threats and growing risk. economies, others remain far more skeptical. But cryptocurrencies are here to stay and 03 authorities are catching up in earnest to better monitor and manage their illegal use. Striking a strategic balance between centralized versus decentralized infrastructure services and capabilities in order It’s time for infrastructure stakeholders to mitigate risk. to raise their game 04 While regulators and law enforcement are zeroing in on organized cybercriminals Preparing for disaster scenarios via a comprehensive and working to shrink their dark web response-and-recovery program. playing field, it’s time for infrastructure owners, operators and stakeholders to 05 step up their game as well. Unfortunately, we still see an alarming gap Raising awareness across the organization — from the C-level on between the risk perception of regulators down — encouraging organizational leaders to act as change agents versus that of infrastructure players, many dedicated to enhancing capabilities for infrastructure security. of whom seem unable to acknowledge the 06 severity of today’s threats from organized cybercriminals and nation states. In KPMG International’s 2018 CEO Outlook,1 we saw only 14 percent of 79 CEOs say that cybersecurity poses a threat to their organizations. That’s a serious disconnect that has authorities in many cases worried about the potential for catastrophic — and life- threatening — disruption of sprawling infrastructure systems. There’s no more time to lose for infrastructure owners, operators, stakeholders and future investors to become better informed and more closely aligned, in order to respond strategically to today’s and tomorrow’s risk realities. A new way of thinking is needed now. A wait-and-see stance will only court disaster that puts public safety and lives at risk. If we are to see infrastructure’s full emergence into a bright new era of progress and advancement, an informed and strategic approach to security should be at the top of the agenda for everyone involved.

1 https://home.kpmg.com/xx/en/home/insights/2018/05/ ceo-outlook.html #InfraConnect | INSIGHT | 13

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Eddie O’Connor Teruyuki Ono Michael Hayes Chairman, Executive Director, Global Head of Renewables, Mainstream Renewable Power Renewable Energy Institute KPMG in Ireland E: [email protected]

Connected energy: Super grids: making the right connections for a sustainable future An attractive investment model for governments and private entities

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. magine a home in Sweden using low-cost electricity generated in part from solar panels in Spain. Or massive wind turbines in Mongolia helping Ito power a factory in Japan. Super grids could make these and other dreams a reality in the near future, providing ready access to affordable, reliable and sustainable energy for consumers around the world.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. The idea of global decarbonization and consumed. This has led to the modern will route power through a series of other the move away from fossil fuels toward incarnation of the super grid and the idea is super nodes to where it is most needed. renewable power generation will only starting to gain real traction. For example, It can best be compared to a router in IT become a reality through rapid acceleration Greenpeace has released a report claiming systems. Super nodes will allow Europe, of innovative technologies coupled with that a European super grid could allow the for example, to become one, interlinked some visionary thinking. This is what European Union (EU) to reach a 45 percent network which will route power to where makes the super grid idea so exciting. renewable energy share by 2030.1 it is needed.

A super grid is not just a “network of A key challenge for renewable energy A super grid could support multi-directional networks.” Put simply, a super grid is a large generation is the ability to move that power flows from multiple energy sources 2 scale transmission network that makes it power across long distances. Existing across very large regions. As a result, super possible to trade high volumes of electricity regional grids use interconnectors that grids could improve energy reliability, permit across great distances. Fossil fuel power support the transmission of alternating the pooling of resources, and support greater 3 plants are typically located in areas close current (AC) from power generation plants economies of scale. Super grids could to population centers, which makes it easy to local consumers. These grids require also be connected with other super grids. to distribute electricity. The same proximity a significant amount of energy to move Other benefits of super grids could include between generation and consumption is power long distances.Even for short greater competition in energy markets, lower often not the case for renewables. Yes, distances, the movement of renewable prices, and stronger energy security. Also, there is a treasure trove of offshore wind in power can overwhelm existing AC grids. the Super grid can be a trading tool which Europe located in the North Sea and solar The super grid, on the other hand, uses will enhance the security of supply of all the 4 is in abundance around the Mediterranean high voltage direct current (HVDC) that countries of the EU. Basin, but both are located away from high significantly reduces the loss of energy If Europe and the world are to meet the population centers. during transmission and helps to deal with climate change targets set in the Paris The main issue is therefore trying to the variability of renewable power. A key Agreement, visionary concepts such as move that power from where it can be enabler is the super node. A super node super grids can be a part of the ultimate made cost effectively to where it can be is a piece of technology, or software, that solution.

Super grid concepts: Across Europe

Source: An engineering vision for a New Europe, Mainstream Renewable Power, http://mainstreamrp.com/an-engineering-vision-for-a-new-europe/

1 Do we need to build a European supergrid to secure our energy supply?, The Guardian, 19 June 2014, 2 Developing the Super-Grid, Energy Ireland, http://www.energyireland.ie/developing-the-super-grid/ 3 Technical Aspects of Grid Interconnection, UN, https://www.un.org/esa/sustdev/publications/energy/chapter2.pdf 4 Friends of the Supergrid

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Russia

Mongolia

S. Korea China

Japan

India

Source: Renewable Energy Institute, https://www.renewable-ei.org/en/asg/about/

Critical challenges remain context of the Paris Climate Agreement and How much renewable energy will Europe the European Union (EU) 2020 Strategy. need in the future? As with any large, complex infrastructure project, implementing a super grid will In the same way, different regulatory and Quite a lot. Super grids will support our involve finding ways to address a number tax regimes involving multiple countries access to renewable energy, and that will of critical challenges. would have to be reconciled and possibly be great because we are going to need adjusted. Questions of ownership involving Funding will invariably be a significant higher levels of renewable energy in the utilities, Governments and investors might obstacle. Estimates for super grid future. One of the big movements in the also become an issue. Onshore battery development range well into the trillions European energy industry today is in the storage will also be a key component in of dollars, principally for the construction of increased use of electric vehicles. It’s safe delivering this solution. In addition, the the grid.5 Given the scale of this cost, private to say that virtually all ground transport growing use of electric vehicles around the capital will be essential in making the super will be electrified by 2050. That means world could create a spike in demand for grid happen.It also follows that creating the that you’re going to have probably in the electricity that might change the location right regulatory and policy environment will order of 1,000 terawatts hours a year of and scale of development. be crucial in attracting private capital, and electricity just for ground transport. this brings its own challenges. However, So what does that mean in terms of lessons have already been learned from What the experts say about renewable additional demand? If we’re going to the private development of wind and solar energy and super grids replace the 50 percent of fossil fuels energy. The goal will be to replicate this Dr. Eddie O’Connor, Chairman of that we now use in Europe for electric model on a much bigger scale.6 Mainstream Renewable Power generation, then look no further than Geopolitical issues could also be a wind and solar. In round numbers, we concern in different parts of the world, Founded in 2008 by Dr. Eddie O’Connor, will need about 360,000 megawatts especially since super grids would almost Mainstream Renewable Power is an of wind energy to be built, and we invariably cross national boundaries. In independent global developer that delivers will need about 360,000 megawatts of terms of a European super grid, a coalition large-scale wind and solar power plants solar energy. among governments in Europe will be to the world’s emerging economies. required to make this a reality, although Dr. O’Connor is the inventor of the the momentum is already there in the European super grid concept.

5 Let’s Build a Global Power Grid, IEEE Spectrum, 28 July 2015, https://spectrum.ieee.org/energy/the-smarter-grid/lets-build-a-global-power-grid 6 Feasibility Study: Synchronous Interconnection of the IPS/UPS, UCTE Study Group, 7 December 2008

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Where do you see the greatest source What kind of future infrastructure plans Teruyuki Ono, Executive Director of renewable energy? will be necessary in order to ensure the of Renewable Energy Institute success of the Asia Super Grid concept? Very clearly, in the North Sea. It’s the energy treasure trove for Europe. It has Since its foundation in 2011, REI has worked The infrastructure necessary to realize the phenomenal wind speeds — 10 meters to establish Asia Super Grid, a major Asia Super Grid is several international grids a second — and it’s a huge area. We’re initiative aimed at interconnecting electric and several transformer substations. These getting a 55 percent capacity factor in the power systems of Asian countries to enable are normally constructed in Europe and the North Sea at the moment with current mutual benefits by exchanging abundant United States, so no special infrastructure technology, which provides about eight natural renewable energy resources, such is required. The technical and business 7 megawatts. The North Sea is also quite as wind, solar and hydropower. Before know-how already exists. The only thing shallow, so it’s actually very cheap to build joining REI, Mr. Ono served as a senior we need is the will to make it a reality. offshore wind farms. The other advantage official of Tokyo Metropolitan Government, is that relatively few people live in the responsible for environmental policy. What is required of infrastructure area, so local objections to development planners, owners and operators for What are your thoughts about an Asia are minimal. the Asia Super Grid to succeed? Super Grid based on your experiences as What political regime is needed to a leader in environmental policy and in Existing energy companies that own the allow the super grid to exist? dealing with environmental problems? domestic power grid in Japan might take the proposal of an international grid as a EU policy on energy is designed to ensure The Japanese electric power industry threat to their vested interests. However, the functioning of the energy market; has been reluctant to expand the use of when power production is separated from ensure security of supply; promote energy renewable energy for a long time, and distribution in Japan in 2020, I believe efficiency and energy saving and the one of the excuses is — “Since Japan is a that transmission companies will see the development of new and renewable forms country of islands and has no international construction of an international grid as a of energy; and promote the interconnection electricity transmission network like new frontier for their business. I would of energy networks. in Europe, we cannot introduce large like them to have a vision for investing in

volume of variable renewable energy. the future of the transmission business. Given that all electricity systems are “The realization of the Asia Super Grid national entities, individual nations would connecting Japan and South Korea, Conclusion have to agree to a super grid proposal. China, and Japan and Russia with subsea For many of them this agreement would transmission lines will make such excuses The future has arrived for super grids. The take into account the fact that much of impossible, enabling us to dramatically concept is technically sound, the investment a nation’s generation would take place expand the use of renewable energy model is feasible, and the imperative to beyond its boundaries. in Japan. develop and connect super grids into existing infrastructure for sustainability is Security of the transmission system In your opinion, what is the biggest now undeniable. A European super grid would be an important consideration for challenge for developing the Asia Super would play a key role in cutting carbon nations. The current situation has almost Grid? emissions and making the most efficient all generation located within national use of valuable renewable energy resources. boundaries, so security is not such a large The biggest challenge is the lack of political The key challenges around ownership, issue. The concept of interdependency and consensus among the governments of the regulation and cost are not insurmountable, trust, which originally drove the formation concerned countries toward the realization particularly in an environment where the of the EU, would need to be re-affirmed of the Asia Super Grid, but all the countries levels of interconnection are already in the case of electricity. other than Japan are positive. I think that increasing and the movement toward full the stance of the Japanese government decarbonization is gathering pace. Clearly, would change as political tensions ease the infrastructure industry will be a major in East Asia. player in this arena.

8 About Asia Super Grid (ASG), Renewable Energy, https://www.renewable-ei.org/en/asg/about/

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. If we’re going to replace the 50 percent of fossil fuels that we now use in Europe for electric generation, then look no further than wind and solar.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Connecting for good: At the confluence of development, investment and infrastructure The future of partnerships to bridge the gap in developing worlds

o help bridge the developing world infrastructure gap, the development sector wants to build better connections between the private sector and developing world projects. TTo find out how they are doing this — and what more needs to be done — we sat down with three experts representing three different viewpoints: Mahmoud Mohieldin is the World Bank Group Senior Vice President for the 2030 Development Agenda, UN Relations and Partnerships; Jan Kellet is the Special Advisor for External Engagement on climate, disaster and energy with UNDP; Elizabeth Hausler is the Founder and CEO of Build Change, an NGO focused on improving resilience in disaster-prone regions.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Why are development agencies, is on helping governments make sure they multilateral institutions and NGOs so have the right technical support to properly focused on catalyzing infrastructure engage with the private sector. Even some investment? Challenges these of the most advanced economies we deal with currently lack the kind of in-house Mahmoud Mohieldin (MM): I think markets face are a technical capabilities required to capture infrastructure has always been at the the attention of the private sector and very heart of development. But I think result of the quality then reach a good deal. there is an increasing recognition that, in and design of the more ways than one, infrastructure gives JK: A lack of capabilities is absolutely a people hope and stability; it serves more infrastructure they challenge to attracting private investors. than just its function. If you consider water, either have or It also comes down to creating the basic sewer network facilities, access to right enabling environment — basic electricity and, increasingly, access to don’t have. security, good governance, rule of law, communication — these are all key to representative legislation, transparency, driving the development agenda today. good tax management and so on. I think one of the key roles for the UN Elizabeth Hausler (EH): For us, it comes remain weak. You look at those numbers organization is to help countries move to a down to the realities on the ground in and quickly realize that there is a massive more stable development and investment these markets. We often say it’s not the need for private investment if we want to environment which, in turn, will help earthquake that kills a person, it’s the achieve our goals. them attract more private in-flows to collapse of a poorly built building. And in infrastructure projects. many cases, the challenges these markets MM: I agree that the amount of funding face are a result of the quality and design that countries can put in from public EH: As a non-profit social enterprise, we of the infrastructure they either have or sources is very limited. So governments spend a lot of time trying to mobilize don’t have. Infrastructure is the key to and development agencies really need private sector investment, both directly building a more resilient society. to be pragmatic. They need to find ways into our projects and into wider initiatives. to involve the private sector in those For example, we have been working Jan Kellet (JK): I absolutely agree. And, projects that are commercially feasible with some of the large reinsurers and obviously, as the UN’s Development while keeping their public money for the financial institutions to think about how Agency, we’re guided by the UN’s areas that are unable to secure funding we can develop a financial instrument for Sustainable Development Goals, and from the private sector. It’s what we refer governments that can be used to encourage infrastructure plays a major role in the vast to as ‘maximizing finance for development’. or directly fund investments into housing majority of those. The problem is that, for stock retrofits in disaster-prone zones. I think many of these countries, the targets are EH: If we’re talking about the wider part of the challenge is just helping private ambitious and require quite a lot of inward private sector, it’s also important to sector organizations and governments to investment. And we tend to work in very note the value of using development think differently about the solution. vulnerable places where finding investment funding to catalyze local private sector for infrastructure is very challenging. The growth. We predominantly work with conditions, or as we call it, the enabling small, local builders and construction What types of projects are you hoping environment for inward investment, are materials companies with the intention of to help drive forward? not always in place. encouraging skills transfer and inspiring MM: The World Bank Group participates local builders to practice more resilient in a wide range of projects — from very construction techniques. It’s not just about Why are partnerships with the private large ones in the energy and renewables spreading out the money. It’s also about sector so important today? sectors to small road and sewage networks spreading around the knowledge. in rural and remote areas of low-income JK: A large part of it is financial. The communities. We’re involved in projects reality is that, between now and 2030, How do you help connect developing in more than 120 countries, so there is no developing countries are going to need world projects with private sector end of opportunities at the project level. somewhere around US$2 trillion per year players? At the strategic level, however, our work of annual investment to meet demand is focused on helping client governments for infrastructure. At their best, global MM: Besides the funding support the World maximize their finance for development. development assistance budgets amount Bank Group provides through our various to less than US$150 billion combined. And funding arms — including the International JK: One initiative that I’m particularly only a fraction of that is earmarked for Finance Corporation, the International keen on is a resilient infrastructure catalyzing infrastructure investment. Tax Development Association or the Multilateral investment mechanism targeted toward revenues in many developing countries still Investment Guarantee Agency — our focus insurance investors. Working with KPMG,

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. BlackRock and others, we are really at development banks, policy makers and inclusiveness, sustainability, culture, and an advanced stage of development; private sector participants. social requirements. We can no longer if it all comes together, we will have continue to fix one part of the problem something significant to offer developing and neglect the rest of it, assuming it Why is collaboration so important to countries but still plenty of work to do. will be resolved automatically. We need achieving your goals? As Elizabeth said, we need to be thinking integrated approaches that put people first about different ways to use our capital EH: I think we need to start looking in the sustainable development agenda. to tackle the big problems. And these at development from a much more JK: That is certainly an increasingly types of partnerships with the private holistic standpoint. It’s about more than important theme in development circles. sector are one way to do that. just bricks and funding. It’s also about We can’t continue to just look at issues in technology and people. We need to silos — infrastructure in one silo, healthcare EH: I absolutely agree, Jan. Our focus is overcome barriers to development that in another, conflicts in another. We need very much on the development of resilient are financial, technical, social and cultural. to help countries look at this holistically housing and schools in disaster-prone And if you just look at infrastructure in and help them find ways to wisely utilize areas, so we’re focused at both the tactical terms of developing a building without investments so they can create the right level — working on projects in places like looking at it in the wider context, you’re conditions for investment. And that takes Mexico, the Philippines, Indonesia, China, probably not creating much value. Haiti, Nepal, Guatemala and Colombia — great collaboration. and at the strategic level advocating for MM: I agree we need to move forward greater emphasis on social housing from with an integrated approach that prioritizes

We need to be thinking about different ways to use our capital to tackle the big problems.

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New infrastructure will catapult the region into the future, but challenges on funding and private investment demand solutions

Julian Vella Head of Asia Pacific Infrastructure Practice KPMG International E: [email protected] @jp_vella

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. iving standards are rising, a new according to the Organisation for Economic attract investment for its US$45 billion middle class with disposable income Co-operation and Development (OECD). Thai Eastern Economic Corridor — a Lis emerging, consumerism is growing plan to transform three provinces into and demand for enhanced lifestyles, A colossal paradigm shift on infrastructure an economic zone of futuristic ‘smart’ modern technology and digital capabilities is development has begun over the last few cities, technological manufacturing soaring. Asia’s time has come for dramatic years, with several countries undertaking or and transportation links to its ASEAN infrastructure investment, planning and announcing projects to increase land-, air- and neighbors. Another US$5 billion initiative long-term commitment that will catapult sea-based connectivity within and between calls for Thailand to build a 1,200-kilometer economic and social development into borders. The entire region, as well as China, high-speed rail network connecting it the 21st century and beyond. has launched unprecedented national and to China. transnational initiatives and megaprojects Almost 650 million people live in the to develop hundreds upon hundreds of new The 4,500-kilometer Kunming–Singapore Association of Southeast Asian Nations highways, airports, railways, ports, utilities high-speed railway will erect three new rail (ASEAN) region alone, making it one of and telecommunications capabilities. routes from China to Singapore, Thailand, the largest markets on the globe, while Vietnam and Cambodia. the 45 nations of ‘developing Asia’ have Thailand, Southeast Asia’s second-largest a combined population of 1.7 billion, economy, recently approved legislation to

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Airport projects are equally massive and social development, trade and investment. These investors, unfortunately, have many are abandoning the traditional airport When complete, some observers say it little choice but to view most emerging model in favor of modern aerotropolis will transform the face of global trade. markets and their grand plans as high- concepts — destination cities featuring risk due to regulatory uncertainty, weak The BRI plan envisions countless retail, entertainment and business centers institutional capacity, lack of procurement new highways, airports, railways, ports, catering to travelers and non-travelers alike. transparency and inadequate project telecommunications capabilities and more. China has invested about US$12 billion prioritization and preparation. Some Launched in 2013, the BRI is a 21st-century toward its five-year plan to build 66 airports. countries — like the Philippines and version of the iconic Silk Road trading Japan, in anticipation of Tokyo’s 2020 Thailand — possess the economic profile routes, a trade and infrastructure web Olympics and future tourism numbering to attract at least some private financing across Asia and into Western Europe and 60 million visitors annually by 2030, is for future infrastructure. But overall, the Middle East. The initiative comes with racing ahead with massive transportation the challenge of getting projects off the an estimated cost of up to US$8 trillion. infrastructure projects including a recent ground — and sustained for the long US$18 billion privatization and development China is not alone as a major international term — remains a major issue. initiative for two Osaka airports. investor in Asian infrastructure. For now, certainly, a number of big China’s Pearl River Delta region — Significant investment to support the projects are proceeding rapidly enough as ‘the factory of the world’ with almost transformation projects in ASEAN, for the various governments place their bets. 70 million people and combined 2016 example, has already been made and But still unanswered are looming questions GDP of US$1.38 trillion — is the center of continues to come from Japan and South concerning the risk profile and structuring the Greater Bay Area initiative to forge a Korea, as well as other nations, plus of projects, the capacity of countries to gigantic economic zone among Hong Kong, multilateral development agencies and continually fund their projects, compliance Macau and Guangdong province cities. The policy banks. issues, sustainability and more. development envisions an interconnected But the capacity of governments, private Will foreign governments eventually technology and innovation ‘megacity’ banking and multilateral banks will only go take up some of the slack? Infrastructure generating GDP of US$4.6 trillion by 2030 so far, leaving enormous and inevitable investment company InfraCo Asia, and serving as a gateway to the world funding gaps to fill. Worth noting is the Asian for example, is backed by a group of for Chinese companies seeking global Development Bank’s (ADB) estimate that governments — including the UK, expansion. the developing Asia region — representing Australia, the Netherlands, Switzerland As KPMG’s 2018 report A lens on the ADB’s 45 member nations — will need and Sweden — and funds pre-financial the Greater Bay Area notes: ”The GBA to invest up to US$26 trillion between 2016 close, early-stage, high-risk infrastructure has the potential to become the most- and 2030 or about US$1.7 trillion annually projects. Taking an equity stake in diversified city cluster in the world by just to maintain its growth momentum. infrastructure projects that contribute to leveraging its wide range of industries The ADB notes in its 2017 Meeting Asia’s economic growth, social development and and strengths across its cities, such Infrastructure Needs report that, despite poverty reduction, InfraCo Asia steps in as financial and professional services, dramatic growth in recent decades, about where the private sector is initially unable high-tech manufacturing, and technology 400 million people still lack electricity and 300 or unwilling to invest. By mitigating early- and innovation. This unique combination million lack access to safe drinking water. stage development risks, it facilitates provides significant opportunities for private-sector participation. companies that are looking to enter or Private investment will require improved build on their existing presence in China.” structuring of projects Five fundamentals for enticing private funding The availability of future financing, however, Governments do the heavy lifting on is not the primary challenge for Asia’s For now, Asia’s governments will continue funding — for now infrastructure transformation. Huge sums to do the heavy lifting on financing. But emerging-market governments will clearly The Greater Bay Area and other projects of private capital seeking infrastructure need to sharpen their focus on five key underway or planned in Asia and beyond projects are poised on the global sidelines. fundamentals if there’s hope of enticing are, in many cases, components of The bigger issue is that few of these private investment that’s critical to bringing China’s staggering vision for transnational futuristic infrastructure projects or pipelines their grand infrastructure visions to life: infrastructure known as the Belt and are structured to attract private capital Road Initiative (BRI). A project of historic from international investors, who expect 1. Create institutional capacity proportions, it will eventually interconnect and require prioritized and financially by improving regulatory systems, more than 70 countries in Asia, the Middle feasible projects, institutional stability, forging equitable dispute-resolution East and Europe to forge immense new and confidence in the rule of law and mechanisms and developing transparent global opportunities for economic and contract certainty. procurement processes.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 2. Prioritize projects and selection 4. Mobilize private capital by MDBs Asia is poised at the threshold of an based on economic and social priorities, and other public financing institutions exciting and truly historic new golden era allowing investors to focus on projects developing mechanisms to support the of economic and social development. But delivering the most in benefits. provision of private finance to projects. it will be up to the regional governments of its emerging markets to kick open the 3. Improve project preparation at 5. Promote international cooperation door to the vast benefits of globalization national, local and agency levels by partnering with global institutions that await. to optimize their structure prior to and companies, emerging-market procurement, including assessment governments and infrastructure investors. of financial feasibility and risk.

Multilaterals to the rescue? Asia’s dramatic flurry of infrastructure planning and development comes with a remarkably hefty price tag. China’s Belt and Road Initiative is estimated to cost US$8 trillion. Beyond that, the Asian Development Bank estimates that the developing Asia and Pacific region will need to invest up to US$26 trillion between 2016 and 2030 — or about US$1.7 trillion annually — just to maintain its growth momentum, compared to annual current investment in infrastructure estimated at US$881 billion. Multilateral banks will have a significant role to play if Asia hopes to bring its infrastructure visions to life within any given time frame. But how effectively can the world’s multilateral banks — as they currently pursue strategies to change their own ways — position themselves to perform and capitalize on Asia’s historic initiatives? The reality is that Asia’s infrastructure transformation comes at a time when traditional multilateral models are failing, prompting most to pursue dramatic reforms and new approaches. Amid significantly weaker returns in the low-interest environment — and an inability to keep up with demand as global infrastructure projects proliferate in number and soar in size — many of the world’s multilaterals are pursuing a new role, one that’s more about mobilizing and facilitating private capital versus lending stakeholder capital. They are exploring opportunities to ‘open up’ markets for private investment and looking for new ways to move deals out of the pipeline. So far, however, most are responding slowly to today’s rapidly evolving global environment amid the challenges they face. These include the required change in culture toward mobilizing money instead of lending it; a lack of skills to sustain a new model; the need to provide innovative new products that offer simplicity rather than complexity; and the lingering preference among stakeholders for straight loans with clear structures. These are significant challenges in a world where megaprojects, the new normal in developed and developing markets, are creating unprecedented demand for massive amounts of funding. It remains to be seen if multilaterals can innovate capabilities and offerings in time to capitalize on Asia’s ambitious journey into the future.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Sharad Somani Stephen Beatty Partner and Head of Chairman (Non-Executive), Infrastructure Advisory, Global Infrastructure ASPAC Head for Power & Utilities, KPMG International KPMG in Singapore E: [email protected] E: [email protected] @stephencbeatty @sharadsomani

Connecting citizens: Digital makeovers envision ‘smart’ urban centers Redefining how we interact with the city services we rely on

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. overnments training a sharp lens on agencies and Alphabet Inc.-owned Sidewalk the future are harnessing the power Labs, which will invest US$50 million in Gand potential of digital infrastructure the planning process for Quayside, its first to create ‘smart’ urban centers that promise such urban project. Sidewalk Toronto’s Digital infrastructure unprecedented connectivity between vision includes: people and the physical worlds of business is blurring traditional —— Streets served by autonomous and government services. vehicles, including ‘taxi-bots’ controlled boundaries and borders The future-oriented Sidewalk Toronto plan by app-based services such as Lyft, that have long divided in Canada’s largest city, and Singapore’s plus self-driving buses; Digital Economy framework for action, are or ‘siloed’ physical two current examples of how governments —— Freight-moving robots and trash- businesses, sectors today, in partnership with private enterprise, collecting robots that traverse a are taking a new approach to developing network of underground tunnels; and the marketplaces digital infrastructure capabilities that will —— Areas featuring narrow streets they serve. redefine how we access and use services designed on a ‘human scale’ and in every sector. catering to pedestrians over vehicles; Toronto’s forward-looking transformation —— Intelligent signals to manage traffic plan aims to combine modern urban design To ensure the public’s readiness for self- plus digital tools to track, analyze and with the latest in digital technology and driving vehicles, robotics in healthcare, optimize the movement of people, infrastructure, creating what Toronto calls telehealth for the elderly, a cashless vehicles and goods; ‘people-centered neighborhoods’ that are society, transportation-on-demand, designed to provide unprecedented levels —— What Sidewalk Labs calls a ‘radical’ smart homes, government e-services, of sustainability, affordability, mobility and mix of office, retail, residential and artificial intelligence and more, the plan 1 economic opportunity. startup spaces, featuring modular includes a ‘digital readiness blueprint.’ It Sidewalk Toronto will feature the office, retail and residential buildings is designed to empower the public by creation of a futuristic downtown lakefront that are manufactured locally and promoting: digital access and the means neighborhood called Quayside, future designed for quick assembly; to transact digitally; digital literacy and home to an estimated 5,000 people and skills; digital participation; and the ability —— A centralized energy system designed an array of businesses. to make use of technology to improve to monitor and sustain the efficient daily life. Singapore, meanwhile, has launched transfer and use of energy by homes its own digital makeover and that journey and businesses. Singapore’s move into a digital economy begins with plans to bring the historic highlights four key ‘frontier technology’ Kampong Glam shopping district into Toronto’s plan ultimately envisions the areas targeted for investment and rapid the 21st century. The government is city becoming the global hub for a new development: data analytics and artificial collaborating with an array of businesses ‘urban innovation’ industry that’s focused intelligence; the Internet of Things (IoT); and organizations to transform Kampong on improving the quality, efficiency and cybersecurity; and immersive media. affordability of city life. Sidewalk Toronto Glam into the first retail neighborhood in A new International Data Corporation hopes to ultimately serve as a model for Singapore that’s digitally enabled. Hundreds study commissioned by Microsoft notes other neighborhoods in the city and indeed of merchants are adopting digital solutions that 98 percent of organizations in for other cities around the world. to collectively transform their businesses Singapore are already in the midst of and customer experiences via capabilities digital transformation. that include cashless and contactless Robotics in healthcare, a cashless The study estimates that the digital payment systems for everything from society, smart homes and vehicles products to parking fees and bus tickets; economy — including mobile and cloud Like Toronto’s long-term vision to keep real-time inventory tracking; product- technology, the Internet of Things (IoT) and its bold smart-city journey expanding delivery management; and automated artificial intelligence — could contribute beyond the initial Quayside neighborhood, 2 invoicing and financial accounting. US$10 billion to Singapore’s GDP by 2021 Singapore’s Kampong Glam retail-area and account for about 60 percent of GDP project is part of the much larger digital by then — compared with 10 percent Taxi-bots, intelligent traffic signals, economy plan — a vision to create a in 2017. Survey respondents said they automated energy management competitive, interconnected global region expect 93 percent of Singapore’s jobs to Toronto’s initiative features an innovative whose businesses, workforce and citizens be transformed in the next 3 years alone collaboration between various government are ready for the digital age. by digital innovation.

1 https://sidewalktoronto.ca/ https://www.theglobeandmail.com/news/toronto/google-sidewalk-toronto-waterfront/article36612387/ 2 https://news.microsoft.com/en-sg/2018/02/21/digital-transformation-contribute-us10-billion-singapore-gdp-2021/ https://www.opengovasia.com/articles/singapores-abc-approach-to-grow-its-digital-economy-and-enhance-digital-readiness

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Government partnerships with private “Digital infrastructure is blurring traditional recently announced a joint venture with enterprise play a key role boundaries and borders that have long Japan’s Credit Saison to form Grab Financial Like Toronto, private-enterprise collaboration divided or ‘siloed’ physical businesses, Services, as well as a new partnership aimed at bringing futuristic visions to life sectors and the marketplaces they with insurance giant Chubb for app-based 3 are playing a key role in Singapore as serve,” says Philip Heah, Senior Director, insurance solutions. Technology & Infrastructure, IMDA, which well. While Toronto has partnered with Meanwhile, on-demand services platform is driving Singapore’s leap toward a digital Alphabet Inc.-owned Sidewalk Labs, the Go-Jek recently announced a US$500 million economy. “We see a growing trend with Infocomm Media Development Authority plan to introduce to Singapore and other companies in one industry —whether (IMDA) in Singapore has joined forces with Southeast Asian countries its super-app transportation, communications, healthcare, many industry partners such as Microsoft offering a remarkable array of services — you name it — now calling themselves on several fronts to support its journey everything from rides and meal delivery digital enterprises as they transform toward a digital economy. That includes to massage and home-cleaning services.4 close collaboration on a program to help and reinvent themselves through digital local tech companies scale up and build infrastructure.” The ongoing emergence of smart cities holds the promise of unprecedented new digital capabilities and applications. Singapore-based Grab — Southeast opportunities for the public, their urban Singapore’s government is also bringing Asia’s popular ride-sharing firm — is one lifestyles and the businesses that serve together start-up accelerators, venture example of how a company delivering them. It will be up to forward-looking capitalists, industry mentors, SMEs and transportation and logistics services can governments to stay focused on driving ‘technopreneurs’ across the entire range of more accurately be considered a digital innovative initiatives that generate new industries to create new bridges between company that’s changing traditional sector economic benefits and positive social and innovation, enterprise, government and and infrastructure boundaries using the environmental advancements that ensure the public. power of digital infrastructure. Grab a better future for everyone.

3 https://www.cnbc.com/2018/04/02/grab-co-founder-and-ceo-anthony-tan-on-uber-deal-fintech-indonesia.html 4 https://www.channelnewsasia.com/news/commentary/commentary-when-go-jek-enters-singapore-what-to-expect-10395436 http://www.scmp.com/tech/article/2149640/singapore-preview-how-grab-and-go-jek-will-likely-face-across-southeast-asia

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Interplanetary connectivity: Building a life — and infrastructure — on Mars What does it take to physically build a colony on the red planet?

Richard Threlfall Global Head of Infrastructure KPMG International E: [email protected] @rthrelfall_kpmg

f visionaries like Elon Musk have their way, interplanetary connectivity will soon become an important topic for the human race. So, for this Iarticle, KPMG International’s Richard Threlfall takes a trip into the future and off the planet to try to see what a Mars colony might mean for people, companies and infrastructure providers in an interplanetary society.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. A dream realized Mars colony. Prioritization was driven by What eventually evolved was a hybrid establishing the long-run, whole-life value between a Special Economic Zone (initially I won’t say there wasn’t great surprise for money of alternative investments, funded by government grants, investors when the four BFR Space X rockets which may have cost a bit more at first, and ‘founding’ corporate tenants) and made a near-perfect landing on Mars in but ultimately delivered services to Mars a consumption tax-funded system. 2022. Yes, the cargo — a rudimentary residents at a fraction of the cost they Corporations pay for the operation and kit designed with no real knowledge of were on Earth. maintenance of their own infrastructure — Mars’ atmosphere — was fairly useless. though costs are extremely low due to easy But a rapid succession of other landings The Climate, Energy and Water working access to distributed solar and thermal over the next two years resulted in a groups, for example, spearheaded the energy, extraordinarily high levels of small, yet habitable, series of ‘pods’ development of a massive organic ‘climate automation, and new self-contained water spread across a small area of the planet. envelope’ that would keep temperatures and waste treatment and management It was a real foothold. And it was ready within optimal levels for human and plant systems. Consumption taxes are used for human habitation. life, generate energy from geothermal to pay for ‘shared infrastructure’ such as sources and deliver sustainable fresh water For the first two years, those ‘living’ the Space Port and the climate envelope. through the development of a mini ‘water on Mars were entirely dependent on cycle’, similar to that on Earth. The profit question was a bit more dispatches from Earth. Everything — from sensitive. Given their mandate for water and oxygen through to building The Infrastructure and the New Resources equitable growth on Mars, the MDC was materials and technologies — was shipped Development working groups collaborated keen to ensure that all of the benefits — in increasingly massive rockets. But that to identify elements on Mars that could financial, social and economic — would meant that the potential for any real be adapted for use in 3-D printers. The flow to the human population on both growth was severely limited. stronger-than-steel compounds can last planets. Deep social concerns that Mars up to 500 years without decaying but The issue of governance also came to would become an ‘elitist’ society sparked can also be dissolved and reused when a boil in those first two years. After finally a number of protests on Earth; tensions no longer required, giving infrastructure building consensus around the need for ran high. Ultimately, a quasi-’sovereign on Mars the flexibility it always lacked on the colony to be ‘non-aligned’ politically wealth fund’ structure was developed to earth. Buildings, technologies, appliances or nationally, world leaders (both political invest a certain proportion of the surplus and consumer goods are now all fabricated and business) agreed on the formation on Mars back into infrastructure and using locally sourced materials and power. of an independent body — the Mars development projects on Earth. And, Development Corp or MDC — that would The Transportation working group and for now, the agreement has helped hold responsibility for making the key the Aviation working group agreed that reduce tensions. infrastructure investment decisions for solar-charged drones (of various sizes the new colony. depending on their role) would be used to Meanwhile, back on Earth… transport everything on Mars. “I traveled Made up of some of the most brilliant What about Earth? It, too, has found ways in a rocket ship for 55 million kilometers minds on Earth — and representing nearly to leverage the Mars project to improve to get here; I’m not about to go back every region of the world — the MDC’s its own sustainability and prosperity. New to driving a car,” noted the head of one mandate was to develop and then execute technologies — many of which were by- of the working groups. With no need a viable, practical and yet, importantly, products of the Mars Innovation Initiative — for roads, rails or other hard transport equitable development plan for the new have been developed and implemented infrastructure, the two working groups planet. While the MDC was structured into to better manage a range of pernicious eventually combined. distinct ‘working groups’, each member earthly challenges: climate change, energy was required to sit on two working group security, resource management and natural teams to ensure maximum interoperability New planet, same problems disasters, to name but a few. and collaboration between teams. In retrospect, those were some of the easy Like other space programs before it, the problems facing the MDC at the time. The Mars project catalyzed a massive surge in Finding new approaches bigger challenge (no surprise here) was how innovation and innovative thinking across all of this development was going to be Earth. Entirely new service areas and Recognizing that our infrastructure challenges funded and who was going to ‘profit’ from it. revenue streams were created almost on Earth were largely a result of overnight. The benefits of automation — incrementalism and a piecemeal approach In the early days, a wide variety of used so efficiently on Mars — were warmly to planning, great emphasis was placed traditional financing and funding options welcomed by humans who quickly lost on developing the Mars Infrastructure were suggested and then rejected: their rather archaic fear of machines. Plan (MIP). All new ideas were welcomed government-/taxpayer-funded (too political); and encouraged. And this led to amazing user pays (too unaffordable); investor-led Interestingly, connectivity between the innovations and models that — ultimately — (too many risks and little guarantee of ‘blue marble’ (i.e. Earth) and the red planet unlocked the growth potential of the new returns); developer-led (too unequitable). has become less of an issue. Both planets

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Great story, Richard, but what’s the point? The point is that we are now living in an era of massive disruption. And while most of these disruptive forces will be incremental and somewhat predictable, there will also be disruptions that — from today’s educated viewpoint — seem wholly unlikely or implausible. But what if they are not? What if just a small portion of the above story came true? How would that impact your current business models, your forecasts and your long-term vision as a company? How would it influence your planning and investment into new technologies? And, more importantly, how can you start planning for the shifts that you can currently see disrupting your markets? While he should never be counted out, Mr. Musk’s vision of landing humans on Mars by 2024 seems far- fetched. But what if it isn’t? What’s your plan for the interplanetary era?

are now (relatively) self-sustaining; any again reappear, most likely once most of No doubt there will be other challenges. commerce or interaction between the the major corporations have relocated But, given the massive steps we took and two planets is largely digital. Dozens of to Mars and human jobs on Earth are the difficult challenges we overcame in low-cost and luxury ‘spaceliners’ ply the ‘hollowed out’. the first few years of the project, I have route between Mars and Earth, bringing no doubt that we will solve them with Demand for Colonization Permits (largely millions of tourists, business people and collaboration, innovation and human from retirees seeking a new adventure new colonists to the planet every year. ingenuity. rather than young families) will soon require the MDC to develop a new spatial As the Secretary General of the UN said Not yet Utopia planning strategy for the planet — one when he opened the new terminal at the that will guide development for the next Mars Space Port, “We set out to Mars Things may be going very well on Mars, 1,000 years or more. New technologies to escape the problems of Earth. But, in but there are still a number of difficult will also need to be developed and the end, it was our journey to Mars that challenges looming on the horizon for commercialized to deal with a human helped us solve them.” humankind. You can almost guarantee that population at a larger scale. the Mars — Earth Equity debate will once

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Abdul Razib Megat Khairulazhar QingLin Fang COO, Energy Chief Strategy and Global Infrastructure Commission Transformation Officer Sector Executive Malaysia Prasarana Malaysia Berhad KPMG in Malaysia E: [email protected] Cooperation and compromise: Building regional connectivity Reinforcing a commitment to regional connectivity

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. hile some markets around the world may be Last July — as talk of walls and tariff wars filled the international news cycles — the ramping up the protectionist and isolationist ten states that make up the Association rhetoric, countries in Asia Pacific are reinforcing of Southeast Asian Nations (ASEAN) W community were meeting to work towards their commitment to regional connectivity. But — even a remarkably different outcome: regional when geo-political visions align — the reality is that connectivity. Sitting down together in Manila building infrastructure across borders is a daunting task. to discuss the Master Plan on ASEAN Connectivity (MPAC) 2025, delegates from In this article, KPMG in Malaysia’s QingLin Fang zooms each country worked in cooperation to find in on Malaysia to find out how this booming South East and explore mutually beneficial outcomes. Asian market is overcoming obstacles to improve its What the ASEAN member states recognize is that regional connectivity is electricity and transport connectivity. key to delivering on their policy objectives. Better transport connectivity between nations leads to improved economic growth and trade. Improved regional ICT infrastructure unlocks innovation, new competition and huge social benefits. Greater energy connectivity allows for better resource planning, energy pooling and fuel source diversification. However, unlike the European Union, the ASEAN community has no ‘Central Commission’ with authority to bind governments together around an investment plan. There is no ‘Junker Plan’ option for the ASEAN community. And that means that each new connection must be negotiated — often on a case-by-case basis — between the countries involved. Progress is often slow. As a Founding Member of the ASEAN community, Malaysia has long been focused on improving connectivity between its neighbors and within the region. Air connectivity is already very strong — in fact, the Kuala Lumpur to Singapore route recently became the world’s busiest, the Kuala Lumpur to Jakarta route is the world’s fifth busiest. The country has also enjoyed significant success improving regional (largely bilateral) connectivity in other sectors, particularly energy. So what have Malaysia’s infrastructure leaders learned about creating, designing and executing cross border integration projects? I recently sat down with Abdul Razib Bin Dawood, COO of Energy Commission Malaysia and Megat Khairulazhar Khairodin, Chief Strategy and Transformation Officer of Prasarana Malaysia Berhad to talk about their experiences. Here are the five lessons I took from our conversations: 1. Shared Vision: “Aspiring to, sharing and working towards a common objective are essentially integral components

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. to establishing a strong foundation 3. Have a strong business case: “Even thinking about and planning for those for mutually beneficial cooperation if the project is majority or fully funded benefits. That may mean spending a between two or more nations,” noted by government, it is vital and imperative bit more today to allow for anticipated Megat Khairulazhar. “Ideally, the social, to embark on a strong business case. improvements in the future. Or it infrastructural and economic returns We have the responsibility to make sure may mean working with other groups are equally beneficial to participating the project is financially, socially and and commercial interests to identify nations that it merits expediting the economically viable, that it is warranted new ways to generate value from implementation of such projects.” at that particular time, that we are the project. The first step, however, able to keep costs competitive and is identifying the wider benefits that Governments need to recognize in check, and that we are optimizing could be achieved. that infrastructure development is not the procurement process — doing a winner-take-all process; sometimes 5. Expect some political reconsideration: everything we can to anticipate and governments find themselves holding The current situation in Malaysia address any commercial risks that may little more risk than they would like in illustrates this point perfectly. When surface over the entire lifecycle of the order to make sure the project gets I sat down with Mr. Abdul Razib and project,” added Megat Khairulazhar. delivered but this is a decision that is Mr. Megat Khairulazhar, Malaysia had often precipitated by the benefits and Far too often, cross-border connectivity just voted in parliamentary elections. positive impact the project is expected projects are evaluated with a heavy By the time of writing a few weeks to have on their respective citizens weighting on symbolism. In some later, several of Malaysia’s existing and economies. cases, projects may not have been international projects had already been thoroughly thought out, vetted or revisited by the new government. While 2. Get governments talking: “You really opportunities for additional revenue this move is understandable given the need a strong commitment from each of generation could have been overlooked. new governments’ priority to balance the governments involved to overcome In other cases, project plans are the books (and therefore desire to sort some of the big harmonization adapted or changed in order to serve out debt issues as quickly as possible), challenges that must be faced when some higher political purpose, thereby we expect that this government, like building and operating infrastructure risking driving up costs and reducing those before, will return to an agenda across jurisdictions. There are different the overall value of the project. Long of greater regional connectivity. regulatory regimes, different laws and term business cases and plans must commissions, different sovereign debt The challenges ASEAN needs to steer be evidently clear on the commercial ratings and different procurement clear of however, are those born out of and economic value that could be practices. It takes strong government- the move towards increased protectionism generated by the project. to-government initiative to achieve and territorialism. As we have seen in that,” noted Abdul Razib. 4. Understand the wider benefits: a number of developed and emerging “It’s often the case that you only see markets, the recent shift towards these Megat Khairulazhar added that the real benefits once the project is more populist agendas has led to the stakeholders also need to consider complete. When Thailand experienced undoing of a number of planned cross- differences in culture, as well as reward electricity shortages a few years border projects. and compensation packages between ago, we were able to quickly supply the different countries. This, unfortunately, can become a cyclical emergency exchange. It’s also changed phenomenon. Protectionism generally Most cross-border projects start our planning assumptions — due to leads to reduced economic trade which, with a political announcement from time-zone differences, we experience in turn, undermines the value of cross- governments. But, shortly after the peak electricity usage at different times border connectivity projects. The more media walk away, the project gets than our neighbors – better integration uncertainty politicians create around the handed off to the bureaucrats to will allow us to balance those peaks changing world order, the more difficult manage. The problem is that many in a much better way which, in turn, these types of projects will become. And of the big challenges that need to be impacts our investment requirements,” the less valuable they will seem to citizens overcome when developing cross- noted Abdul Razib. and politicians alike. border connectivity projects are political As many of the articles in this edition in nature. Solving them will require The good news is that, even with the of Insight Magazine illustrate, improved leadership at the highest levels. recent reconsideration of some projects, connectivity can drive a wide range both Abdul Razib and Megat Khairulazhar Experience also suggests that of social, economic and commercial are optimists. “In principle, all member governments need to be talking not benefits that are not always quantifiable countries have envisioned what is to only to other governments but also for the purposes of a business case. become an integrated ASEAN community to their citizens about the benefits A certain amount of value must be by 2025 and I am convinced that all and impacts of their cross-border assumed on faith. member states and parties recognize connectivity projects. Without sufficient But that does not mean that the exponential benefits that will bring to transparency these projects have a infrastructure planners and cross- the entire region as an emerging world tendency to become highly politicized. border project owners should not be economy,” argued Abdul Razib.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Geoff Roberts Clare Gardiner-Barnes Paul Low Deputy Chief Commissioner, Deputy Secretary Freight, Partner, Head of Infrastructure, Economics Commissioner and Strategy and Planning, Government and Healthcare Chief Coordinator Transport for New South Wales KPMG Australia Western Sydney City Deal, E: [email protected] Greater Sydney Commission

o help Greater Sydney prepare for population growth over the next 40 years, the New South Wales (NSW) government is applying innovative Tnew models of urban planning and partnerships to create connected ‘30-minute cities’ within the sprawling metropolis. To learn how they developed this vision, Paul Low, Head of the Infrastructure, Government and Healthcare practice at KPMG Australia, talked with members of the leadership team behind the Greater Sydney regional and district plans and the Future Transport 2056 strategy.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Making Greater Sydney a ‘metropolis of three cities’ Can you describe the Greater Sydney Region Plan and how it will shape the In March 2018, Australia’s New South Wales (NSW) government finalized bold, future for residents? integrated plans for Greater Sydney’s future growth over the next 20–40 years: the Greater Sydney Region Plan, the Future Transport 2056, and the State Geoff Roberts (GR): It’s as a vision with Infrastructure Strategy. a practical set of policies that lays out These plans will help NSW prepare for future population growth and economic, an innovative process for investing in technology and lifestyle trends that will impact the people who live, work and infrastructure over the next 40 years. visit Greater Sydney. With the metropolis forecasted to grow to 8 million people Greater Sydney is one of the world’s by 2056 — and almost half of that population expected to reside in outlying, fastest growing cities and we needed western areas — the NSW government plans aim to spread the benefits equally to give residents a clear narrative about and equitably across Greater Sydney. what the city was becoming. We’ve laid out a plan for a metropolis composed of The planning for Greater Sydney reflects an emerging national agenda of more three, ‘30-minute cities’ in which most connected urban policy to drive the global competitiveness of Australian cities and residents can live within 30 minutes of their capacity to attract and retain talented human capital. their jobs, education, health, services and The three plans, prepared concurrently for the first time, align land use, transport great places. Right away, ‘Sydney-siders’ and infrastructure planning to reshape Greater Sydney as three distinct but connected began to connect with the idea since it cities: the Eastern Harbour City, the Central River City and the Western Parkland City. inherently makes sense. Implementation of the plans is underway, notably in the Western Parkland City, Clare Gardiner-Barnes (CG-B): Yes, we where the federal and NSW governments and eight local councils recently signed now have a strategic framework for our the Western Sydney City Deal, a 20-year agreement to transform this community future direction that responds to all the around the Commonwealth government’s $5.3 billion investment in a new Western changes going on around us. For example, Sydney Airport. within the Transport realm we see new The plans are the result of collaborative partnerships across the NSW government. technologies impacting freight movement Together, The Greater Sydney Commission (GSC), Infrastructure NSW and Transport around cities, connected and automated for NSW, which established co-located teams and adopted common planning cars and trains, and new requirements for assumptions and agile ways of working. The result of this partnership has changed roads and rail systems — smarter systems the way that government works and will deliver better outcomes for customers, and infrastructure that address changes in visitors and residents. This represents a comprehensive shift in the culture and as customer expectations and behaviours. To Jim Betts, CEO of Infrastructure NSW, describes it, “I’ve never seen collaboration plan for these disruptive forces, we really on this scale between government agencies.” had to push ourselves into that visionary space and not approach planning the same way we did in the past. Ultimately, we were Metropolitan city centre Western Central Eastern able to create a vision that engages the Parkland City River City Harbour City Metropolitan city cluster community and is shared across the NSW Waterways government and supported at the local and federal levels. Our new approach means Transport connectivity that we will be able to plan future services City to city transport and cities in a flexible, but integrated way, corridor which is what the community expects. We CBD Focus mass transit have also been proactive with changing Greater Protected natural the legislative and regulatory frameworks Penrith Area Greater in NSW, to ensure that we don’t inhibit Harbour Parramatta Western CBD Metropolitan rural change as it arrives. Sydney Area Liverpool Airport — Urban Area Badgerys What does ‘urban connectivity’ mean Creek Aerotropolis to you in relation to this plan?

Campbelltown GR: On the most basic level, we are -Macarthur creating three highly connected 30-minute cities, but I also look at urban connectivity in terms of access to jobs and the economy of the city. We’ve seen how most cities are becoming less equitable and, for me, there is no such thing as urban connectivity if people have to travel two hours each way to get to work. That’s urban ‘dis-connectivity’. Source: Our Greater Sydney 2056, A metropolis of three cities — connecting people by, Greater Sydney Commission So, our three cities logic is about creating equitable access to jobs wherever you live.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. In our case, we have magnificent fortune Chief Commissioner of the GSC, and Tim at Transport we have shifted to a culture that the federal government committed to Reardon, Secretary of Transport at that that accepts that we don’t have all the constructing the Western Sydney Airport, time and now Secretary of the Premier’s answers, so we partner with industry, which will be an economic driver and Department. They set the tone for the ‘one academia and private sector experts. confidence builder for our western city. team’ approach, gave us the rights we needed to develop the plan in a new way CG-B: There are many different layers to How will you ensure the continuity of and helped us break through the siloed- connectivity including how the three cities the vision in the years ahead? approaches that can exist. Today, there and 30-minute city concept creates a vision is much emphasis in the planning space CG-B: I think it’s important that we’ve for all of us to embrace alongside our on technology, data and data-assisted embedded flexibility into Future Transport partners in other agencies, local councils decision-making — and technology was 2056 so that we can continue to engage and Commonwealth government. Under a big part of what we have just done — with the community and iterate the plans as the guidance of the GSC, we’ve come but you never achieve culture change customer needs and technologies change. together to carefully plan and implement through data, you can only achieve it by This is not a 40-year vision that sits on a projects in a staged way that they leadership. You definitely need technology shelf, but rather it is an evolving guide complement one another. We’ve also and automation of what we are doing that will respond to change and ensure enhanced connectivity between individual but, in that process, the need for human we’re on the front-foot with our planning projects and the communities, and this leadership becomes more important. and project prioritization. In addition, the translates into a very different approach partnerships we have formed across levels to planning. In the past, transport planning of government will help keep the big was driven by isolated projects that were What other factors contributed to the picture plan on track. The Commonwealth not always connected to the people they plan’s success? government is an absolute partner in were intended to serve. Often, the dots this and it is essential that all layers of were not joined between transport, land GR: One of the reasons we’ve ended up government are on board. With all levels of use planning and even essential services with the great outcome we have today is government and the community engaged like schools and healthcare. Now, we are the structure of the legislation that created in this, even as governments change, ensuring that planning is about connecting the GSC. The NSW government established everyone will recognize that we can’t with the local community. That’s a very a very pluralistic body through its enabling afford to throw this vision away and start different approach to how priorities are set legislation, by which the Secretaries of again. We have future-proofed them for and how budgets are allocated. It’s not all Transport, Treasury, Planning, and others good reason — to ensure the best possible going to happen overnight, but this more are on the GSC Board, along with various outcomes across NSW for generations connected approach will have much better ministerial-appointees. This really forced a to come. outcomes for the broader community. high level of collaboration and it has also resulted in a planning-oriented, versus GR: The key lies in continuing the collaborative development-focused, organization, to model that has been created but also making Does this departure from traditional deliver the best outcomes for the city. planning processes require a culture adjustments and adding the necessary change? CG-B: I’d add the importance of the supports and structures to keep the plans human element in bringing the suite of moving forward. For example, the NSW CG-B: Yes, it requires a culture change plans to life. We’ve collaborated across government recently announced it was setting starting at the top from leaders who expect our organizations and we will continue up a Western Sydney Development Authority a new culture and reinforce it along the to engage everyone in the process — with the Commonwealth Government to way. For example, we were fortunate community, government and industry. In work jointly on the delivery of utilities and that Government empowered the public doing so, we are giving them plans that other infrastructure. Implementation will sector with the space and freedom to do they can feel they have contributed to and be driven by the Western Sydney City Deal what we needed to do. Then, at the senior can own. In the case of Transport for NSW, Implementation Board, and the Western public service and planning levels, we we have some 27,000 employees, and our Sydney City Deal Coordination Committee. embraced a very different way of working view is that everyone should understand We’ve come so far with this integrated and together between agencies so that we the impact their job has on the delivery collaborative one team approach and it doesn’t didn’t let existing boundaries or blockages of Future Transport 2056, whether they get any better than that in my experience. prevent us from moving ahead. We were are a line marker on a regional road or a determined to focus on good outcomes, financial analyst. Typically, people work in robust engagement and cooperation at all The final message? their own silo but this is about everyone levels. We shared consultation materials, taking responsibility, joining the dots, What we’re seeing coming out of the we co-located our team in one office, and and thinking about the greater planning Greater Sydney experience, is that we really enforced a culture of transparency, outcomes we are trying to achieve. It’s not connected urban strategy and policy collegiality and co-design so that we all infrastructure for the sake of infrastructure, only comes from connected leaders, saw this as a shared project from day one. but rather it’s thinking about the community collaborative cultures and a truly integrated GR: This culture change was definitely and emerging technologies first, and focus on visionary outcomes that are enabled by our senior leadership, including that’s a very different mindset to where connected to the community and industry Sarah Hill, CEO of the GSC, Lucy Turnbull, we’ve been. I’d also like to highlight that through a clear, common narrative.

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. To access the publications listed, visit: kpmg.com/infrastructure Bookshelf: or email us at: [email protected]

Insight — The global infrastructure magazine Insight is a semi-annual magazine that provides a broad scope of local, regional and global perspectives on many of the key issues facing today’s infrastructure industry.

Issue No. 10 — Globalization Issue No. 9 — Globalization INSIGHT This edition considers the impacts This edition offers our perspective The global infrastructure magazine | Issue No. 10 | 2017 and opportunities of technology on on the impact of globalization on the #InfraTech is here

The future of Planning in the era A look at the city infrastructure where data is king of the future the infrastructure sector. infrastructure sector. A roundtable with A discussion with A roundtable Darran Anderson, Andreas Zachariah, with Peter Auhl, Dr. Jim Hall, Ben Foulser and Seok Tae Kim and Dr. Rick Geddes, Mark Britnell Stephen Beatty and Shashi Verma. Page 18 Page 26 Page 12

#InfraTech

Infrastructure econsidering the egulation in an asset recycling A drie to deoliticize era of change A enaissance an infrastructure roundtable with ee ee energy regulators e o age Issue No. 8 — Infrastructure age age Issue No. 7 — Who controls our IIT Morality The global infrastructure magazine Issue No. 7 201 infrastructure? ho controls our infrastructure he global infrastructure magazine | Issue No. 8 | 2016 This edition focuses on hard issues This edition explores some of the big nfrastructure orality With a special feature on

elivering on the Brazil emerges atalyzing ’s s from the ar ash development The global An interview with An interview with An interview with such as migration, corruption, social challenges and trends influencing the Amir Dossal Artur Coutinho Syed Uddin Page 12 Page 14 Page 16 rail sector equality and affordability — and asks debate around infrastructure control. the difficult questions of infrastructure It also includes a special report on rail, leaders at the forefront of the morality a sector often at the epicenter of the

inframorality debate. It also includes a special report debate around control. on asset delivery.

Foresight: A global infrastructure perspective Foresight is a series of articles that feature our take on the most recent topics, trends and issues facing our firms’ clients.

Trump’s infrastructure plan — broad Brazil’s latest privatization drive Foresight but facing challenges on funding Foresight should prove attractive to investors Trump’s infrastructure plan — broad Brazil’s latest privatization drive but facing challenges on funding and should prove attractive to investors implementation th 62nd edition — February 2018 59 edition — September 2017 and implementation Brazil’s latest privatization drive should prove attractive Brazil’s government has announced a Trump’s infrastructure plan — broad but facing to investors challenges on funding and implementation By: Mauricio Endo and Fernando Faria, KPMG in Brazil

By Andrew Garbutt, US Lead Principal, Infrastructure, KPMG in the US Brazil’s government has announced a sweeping privatization drive that includes everything from the country’s mint to its state lottery and the country’s largest power generation US President Donald Trump’s broad infrastructure financing and policy blueprint includes utility and potential investors will no doubt be turning their attention to this comprehensive sweeping privatization drive that potential a US$200 billion program that aims to incentivize a larger US$1.5 trillion investment. Infrastructure financing and policy blueprint package of assets before being tendered in the fourth quarter of 2017 and in 2018.

Proposed to streamline the stifling bureaucracy, The US infrastructure program at a glance Brazilian President Michel Temer’s goal is to raise critically — concession of 15 port terminals accelerate cumbersome permitting processes and — Incentive Program — US$100 billion is dedicated needed revenue and boost infrastructure investment at a — concession of one brownfield hydro power plant expedite real-world results, the Legislative Outline to encouraging increased state, local and private time when Latin America’s largest economy is struggling to for Rebuilding Infrastructure in America has finally — concession of 11 greenfield power transmission lines investments by awarding incentives to project sponsors escape a deep recession. As a result, Brazil has announced been released. who demonstrate innovative funding strategies. to put on the auction block an array of 57 federal holdings — public-private partnership of the air force’s Integrated Key to its successful implementation and sustainability, The Administration hopes this will assure long-term through the government’s Investment Partnership Program Communications Network investors will no doubt be turning their however, will be just how realistically individual states performance while modernizing infrastructure project includes a US$200-billion program that (PPI). The goal is to raise a total of 44 billion Brazilian real — four rounds of auction for offshore and onshore oil and municipalities can respond, knowing that the federal technology, delivery, efficiency and accountability. (BRL) or about 13.9 billion US dollars (USD) in fees and exploration areas. government is contributing just US$200 billion1 to this future infrastructure investments. — Rural Infrastructure Program — US$50 billion 10-year program. To achieve the goal of US$1.5 trillion is earmarked for rural infrastructure needs and The package of major Brazilian assets, which should provide Eletrobras and Lotex among assets on block in infrastructure investments over the next decade, the challenges, primarily offering states a block grant interesting opportunities for the right investors, includes: bulk of funding to rebuild roads, bridges, waterways, Key assets among the privatization initiative also include the formula to spend as they see fit. States can petition energy projects, rural infrastructure, public lands and — divestment of six state owned assets: Brazilian mint Casa da Moeda, the state-owned electronic for additional funds based on performance criteria. other projects would need to come from state and — Eletrobras — the national power generation, lottery Lotex, São Paulo’s domestic airport Congonhas — local governments or the private sector. — Transformative Projects Program — US$20 billion transmission and distribution company the second-largest airport in Brazil — and a controlling stake attention to. would be dedicated to funding ambitious, exploratory aims to incentivize a larger US$1.5-trillion in Eletrobras, the largest power generator in Latin America. The new game-plan would significantly alter if not or groundbreaking projects proposed among key — Casa da Moeda — national mint company reverse the long-standing federal public policy of The proposed move to privatize Eletrobras involves divesting areas such as transportation, drinking water, energy, — Lotex — national electronic lottery Washington contributing most of the funding needed the government’s controlling stake to modernize the state- commercial space and broadband sectors. for national infrastructure priorities, instead requiring — CODESA — Espirito Santo State’s port area owned utility and increase its efficiency and competitiveness. — Financing Programs — US$20 billion would go states, municipalities and private investment to — CEASAMINAS — Minas Gerais State’s agricultural The privatization of the utility is also expected to benefit toward expanding existing financing programs such as ante up as never before. Here are highlights of the products distribution center the industry overall by attracting long-term investment and infrastructure proposal. TIFIA, RRIF, WIFIA and USDA Rural Utilities Service. enhancing transparency. The government currently is the The goal is to increase the capacity of federal credit — CASEMG — Minas Gerais State silo and warehouse majority shareholder in Eletrobras with a stake of 51 percent. investment. — concession of two highways Brazil expects to raise BRL20 billion or USD6.3 billion by — concession of 14 airports offloading its holding and hopes that the privatization will be completed by the end of the first half of 2018. 1 All dollar figures sourced from Legislative Outline for Rebuilding Infrastructure in America.

Foresight/February 2018

Foresight/September 2017 Energy2Go: the new battleground Smart devices, smarter airports Foresight for energy customers Foresight Energy2Go Mobile technologies are creating valuable Smart devices, smarter airports

55th edition — February 2017 58th edition — August 2017 Smart devices, smarter airports opportunities for the airport sector. But A combination of deregulation and By Teddy Minch, Advisory, Infrastructure, KPMG in the US Energy2Go: the new battleground for energy customers Mobile technologies are creating valuable opportunities for the airport sector. But By Mirosław Proppé, KPMG in Poland it will take more than slick new apps and devices to unlock the benefits of new A combination of deregulation and technology is breaking down borders and could soon technology. Are airports ready? enable consumers to buy energy from a single provider — anywhere in the world. But will Passengers flying through Miami International Airport (MIA) (IATA) is working with Eurocontrol and others to roll out the traditional energy companies or new players dominate this new market? are traveling smarter and enjoying an innovative, personalized Airport Collaborative Decision Making (A-CDM) system, which passenger experience that MIA has created by integrating airport leverages mobile technologies to help improve operational it will take more than slick new apps and technology is breaking down borders 4 services, concessions, and mobile technology. efficiency at airports. The EU-led PASSME consortium is using Today’s travelers are becoming accustomed to ever are breaking into new countries. And organizations like mobile data to identify critical airport bottlenecks and intends to greater ubiquity of service — wherever they go. One supermarkets and banks are extending their brands The MIA Airport Official mobile app (developed by SITA, a create a mobile app to improve communication between airport credit card covers all their payments. Mobile roaming into energy. Switching supplier has never been easier, global air transport IT company) provides visitors with much of authorities and passengers.5 means that all their smartphone use is billed on one and the emergence of renewable sources has even the functionality that consumers now expect from their mobile statement. Mobility companies like Uber and MyTaxi heralded the era of the ‘prosumer’ who buys and sells devices. Updates on gates, flight times, baggage carousel Major airports are also busy implementing mobile solutions enable them to move around cities through a global app. energy from and to the grid. numbers, and personalized recommendations about nearby to improve operational efficiency. London Gatwick Airport, restaurants and shops are all available on the app. The next for example, uses the ‘Airport Community’ app to seamlessly And when they’re hungry, platforms like Bookatable and The next step is surely not far away. With Energy2Go, iteration of the app will also include turn-by-turn directions, integrate staff, ground handlers, and airlines with airport data devices to unlock the benefits of new Deliveroo let them dine out or at home with a couple customers would sign an agreement with a supplier for and could soon enable consumers to buy 1 6 estimated walk times, and a ‘near me’ feature. sources. Configurable alerts ensure that key staff are aware of swipes. all their energy needs, and receive one bill that includes of delays, incidents, and changing weather patterns. The app Could energy be next? Will it soon be possible to pay a usage away from home. When booking a hotel, they MIA is but one of many players in the sector implementing also provides real-time data on passenger queues and aircraft single provider for energy in hotels, in second homes or won’t just be asked whether they want breakfast; mobile technologies (such as widely distributed bluetooth turnaround performance by both airlines and ground handlers — for recharging electric vehicles? And will multinational they’ll also have the option to have the room with or beacons) to gather data that can drive efficiency and customer essential information to keep the world’s second-busiest single companies be able to power their worldwide offices, without electricity. The fact that the energy is physically satisfaction in airports. HMS Host, one of the world’s largest runway airport running smoothly. factories, warehouses and vehicle fleets via one, provided by a number of different grids would be airport restaurant operators, offers travelers a free mobile app global account? invisible to the user — in the same way that their mobile that helps locate the nearest restaurant, displays menus, and It’s not just the established hubs in Europe and North America allows passengers to preorder and pay for meals.2 The system that are working to integrate technology breakthroughs into technology. I believe that the unbundling of energy markets can networks can vary according to location. energy from a single provider, anywhere in is already in use in at eight major US airports. Other large airport their operations and business models. So, too, are the new open up a new world of ‘Energy2Go’ that mirrors Smart grids should link users to the most cost-effective service providers are not far behind, nor are major technology airports now being built and opened in the developing world. developments in the telecommunications sector — in source of energy, which will come from an increasing providers. Google Maps has partnered with several airports to India’s new greenfield airports — including Navi Mumbai the process revolutionizing the business model for range of sources. For example, in Germany alone, there provide indoor maps of terminals to aid passengers in navigating International Airport and the new Goa International Airport energy companies. are more than 900 grid operators, many of them local, airport facilities, making flight connections, and helping airports (Mopa) — are making ample use of mobile to improve efficiency In many markets around the world, energy deregulation renewable organizations. And think of the potential better publicize terminal offerings.3 and customer satisfaction, from slot allocation to contactless has introduced competition and brought a host of new volume discounts that a large, international business payment solutions for concessions and services. China’s plans players — increasingly from outside the sector. Gas could negotiate, if its operations in several countries — Driving operational improvements to build dozens of new airports enabled with in-terminal beacon and its traveling employees — all received energy from firms sell electricity and vice versa. Foreign companies the world. Mobile technologies are also rapidly being adopted on the technology should catalyze further adoption of mobile across the one provider. operations side. The International Air Transport Association world’s airports.

1 http://www.sita.aero/pressroom/news-releases/getting-personal-sita-app-takes-miami-international-airport-to-new-heights 2 https://www.hmshost.com/news/details/hmshost-launches-host2coast-app 3 http://www.airport-world.com/news/general-news/6161-sydney-airport-introduces-indoor-google-maps-to-aid-passenger-navigation.html 4 http://www.eurocontrol.int/articles/airport-collaborative-decision-making-cdm 5 http://www.passme.eu/ 6 http://www.computerweekly.com/news/4500269843/Gatwicks-Airport-Community-App-using-technology-to-make-life-simpler

Foresight/February 2017 Foresight/August 2017 Not all equity is the same: When Unlocking urban transit with Land Foresight contractors become equity investors Value Capture ontractor equity risk

54th edition — February 2017 ot all equity is the same hen contractors become As public–private partnerships get larger As demand for new urban transit rises, equity investors By Eric Wolfe, KPMG in Canada s publicprivate partnerships s get larger and capital costs continue to rise new equity investors and equity structures are starting to play a larger role in infrastructure delivery. But while these new sources of capital are clearly welcome they also create potential risks down the road not only for procurement authorities but also for other members of the consortium. and capital costs continue to rise, new cities are drawing on future land value hankfully there are a number of ways to help safeguard the alignment of risk and reward for owners and stakeholders.

ew investors welcome transportation sector where construction companies Around the world, the fight for private capital is often play a role in the operation and maintenance of becoming fierce. Infrastructure pipelines are bursting and the asset and can have a vested interest throughout the governments are working hard to attract capital to their entire term of the project. It has been less common in projects. At the same time, projects are getting larger. In social infrastructure sectors where contractors tend to play a much smaller role post-construction. equity investors and equity structures expectations to fund development today. North America alone, the average capital cost of a PPP project is nearing US$500 million. Most expect the size In the more mature PPP markets, however, this has of projects to expand quickly as more transportation started to change. In Canada, for example, contractors projects move into development. now contribute significant equity to social infrastructure While project sizes increase, the amount of private projects. In fact, every social infrastructure project that financing required has not necessarily increased closed in Canada in 2015 included at least one equity proportionately as public sector authorities look for provider that was also a key team member in the innovative payment structures to reduce the cost of private construction of the project. In each case, their equity investment ranged from 20 percent to 50 percent of the are starting to play a larger role in And it’s working. financing on a project and drive value for money. This has created a competitive environment for private financing on total equity contribution. these projects; from an equity perspective, some investors While this may be great news for governments, owners may look to lower their return on investment in order to and consortiums delivering social infrastructure projects, reduce financing costs over the term of the project. the addition of this type of capital does come with a Perhaps not surprisingly, it is the contractor industry number of risks. And unless they are appropriately that has responded with the greatest enthusiasm. managed, they could lead to a misalignment of risk and Many contractors now operate fairly sophisticated reward, diluted returns and, potentially, even project failure. infrastructure delivery. investment arms, focused solely on investing equity into nderstanding the risks longer-term PPP projects. The benefits for contractors are There are two main reasons why contractors may have clear. By taking a financial stake in the project, contractors misaligned incentives as equity partners. The first is can protect their business interests while also ensuring that contractors are often able to build profits into the a steady stream of work for their construction arms. construction cost of the project. In doing so, a contractor This has been a particularly popular approach in the

Foresight/February 2017

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Make it, or break it The 2017 Global Construction Survey focuses on reimagining governance, people and technology.

Building a technology advantage The 2016 Global Construction Survey reviews how the industry can harness the potential of technology to improve the performance of major projects.

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