McKinsey: We see numbers like $20 trillion in investment needed over the next couple of decades to build the infrastructure that the world's growth requires. Any thoughts about the most promising ways forward?
Karan Bhatia: The demand for infrastructure is ever growing. And indeed, you’re seeing already the weakening of infrastructure because of a failure to maintain it. Particularly in developed markets, it’s a constraint on growth. That’s got to be addressed if we’re going to build our way out of the economic malaise we find ourselves in now globally.
The challenge is how to do it. When you're debt constrained, fiscally constrained, the obvious approach that everybody looks at is public-private partnerships. And certainly, we think there is more that can be done there, but there are political challenges, particularly in places like the United States. We think of ourselves as a fairly private sector–oriented country with respect to infrastructure, but we’re really not. Congress and others have played a larger role than they’re going to be able to play in future. And so we need to see what we can do with regard to creating a policy and political environment that is going to allow those sorts of public-private infrastructure regimes to succeed.
McKinsey: What are some of the areas where the process gets stuck?
Karan Bhatia: Sticking points would start with the permitting, whether for a new power plant or a new port. Just look at the challenge we’ve had in the nuclear business alone. It’s a testament to how difficult it is to grow the infrastructure in areas that may make complete sense to economists or policy observers but in which there are political challenges. So it starts there. It continues through to the financing and making sure that the returns on investment are there to be able to sustain progress.
I believe that opening up a global infrastructure market is going to be key. Some of the experts in infrastructure are companies outside of the home market, be it New Zealand companies investing in the United States or Spanish companies investing in Latin America. There needs to be a recognition that having a global perspective on how to resolve some of these key infrastructure problems is going to be an important piece of the puzzle.