Introduction

Infrastructure

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By definition, infrastructure is the economic and organizational “base” of a region. The latest history shows in an impressive way how strongly the competitiveness of the economy and the prosperity of the respective region measured by the quality of life and work depends on the state of development and the quality of the infrastructure.

Neglect of infrastructure leads to a much more inefficient industry, even in highly developed economies, and consequently to reduced competitiveness and quality of work and life in the regions concerned.

Although the term infrastructure is usually understandable, there is as yet no uniform definition, resulting in inconsistent use of the term. Nevertheless, it is an integral part of economic and political terminology.

In the context of this work, infrastructure is understood in the sense of “Public Works Infrastructure” and is therefore defined as follows:

“Infrastructure refers to both the individual operating modes – such as trunk roads, local roads and bridges; public transport; airports and airways; water supply and resources; sewage and waste disposal; power generation; telecommunications; pollution control – and the overall system that combines these modal elements”.

An understanding of infrastructure includes not only these public works, but also the operating procedures, management practices and development policies that interact with societal demand and the physical world to facilitate the movement of people and goods, water supply, safe waste management, energy supply and the dissemination of information within communities”.

This definition corresponds to the term economic infrastructure from the McKinsey Global Institute – one of the leading consulting firms in the field of infrastructure management. A distinction is made between three types of infrastructure:

Economic infrastructure includes, among others, transport, energy, water and telecommunications;

The broad definition of infrastructure includes, for example, social infrastructure, petrol and gas, and extraction, especially mining;

Real estate, both residential and commercial, is the third type of infrastructure.

This outline contains only the most important areas of the individual types of infrastructure, which are shown again schematically in the picture below.

According to estimates by the McKinsey Global Institute, the capital expenditures (CapEx) for the construction and maintenance of infrastructure worldwide amount to 9.55 trillion dollars annually. The economic infrastructure is worth about 2.5 trillion dollars (see figure below).

The extensive expansion of the infrastructure has now been limited. Analyses show that the need for technical infrastructure to support expected global growth is significantly higher than the actual potential for investment. The acute investment gap is estimated to be about $800 billion per year [1] worldwide and there are many indications that it will grow. Since technical progress in the construction industry has been stagnating for years (see Figure below), the reserves are primarily in management.

The McKinsey Global Institute (MGI) has proven on the basis of extensive research that

• the acceleration of the realization processes,
• a better selection of investment projects, and
• better use of existing infrastructure

savings of up to 40% of annual investment costs are possible (see figure below). [1]

Instead of simply going down extensive ways and demanding higher investment resources, an attempt should therefore be made in the first instance to activate these reserves. However, this requires completely new impulses and approaches in infrastructure management. Modern asset management provides the necessary tools for this purpose.

 

1. McKinsey Global Institute, Bridging Global Infrastructure Gaps, June 2016

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