Rethinking Infrastructure for the Coming Decade
Across the world, governments have committed trillions of dollars to COVID-19 recovery packages, with infrastructure featuring prominently in plans to transition to greener and more resilient societies.
How can government and the private sector work together to ensure that the projected surge in spending over the next decade delivers results that help to shape the next century?
This is a livestreamed session.
https://www.weforum.org/events/world-economic-forum-annual-meeting-2022/sessions/rethinking-infrastructure-for-the-coming-decade
How can government and the private sector work together to ensure that the projected surge in spending over the next decade delivers results that help to shape the next century?
This is a livestreamed session.
https://www.weforum.org/events/world-economic-forum-annual-meeting-2022/sessions/rethinking-infrastructure-for-the-coming-decade
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TechnologieTranscription
00:00 - Good morning.
00:01 - Good morning.
00:02 - Good morning, everyone.
00:03 And thank you for choosing to join us.
00:06 I'm Lauren Sorkin-Yo from Resilient Cities Network, a network of 97 cities in 40 countries
00:12 around the world working to build holistic resilience together.
00:17 And I'm really looking forward to guiding us through the discussion over the next 45
00:20 minutes on rethinking infrastructure for the coming decade.
00:24 I also want to say as we get started that I'm very glad that this is a public session
00:28 because the discussion of infrastructure needs to be a very inclusive discussion.
00:32 So I hope that those of you who are joining us remotely today will continue to engage
00:36 with the forum on this topic and with those of us on the panel as well.
00:41 Today you're going to be hearing from five very dynamic panelists.
00:45 We have with us Lord Nicholas Stern, who is from the Grantham Research Institute on Climate
00:49 Change and the Environment.
00:51 We have the Honorable Governor Larry Hogan from the great state of Maryland in the United
00:55 States.
00:56 We have Arjun Dhawan, Vice Chairman of Hindustan Construction Company.
01:00 Jonathan Rettford, Chief Executive Officer of Habitat for Humanity.
01:04 And Florence Verzelin, Executive Vice President of Dessault Systems.
01:09 Now I'd like to start us today by grounding this conversation before we turn it to our
01:15 panelists.
01:16 Across the world, governments are contributing trillions of dollars in infrastructure stimulus.
01:22 And the recovery packages dwarf the Marshall Plan.
01:26 G20 economies are contributing about $11 trillion in stimulus spending, three times more than
01:33 they did at the end of the financial crisis in 2009.
01:37 However, that's the G20.
01:40 We know that for our emerging cities, notably in Africa and in Asia, 50% of the infrastructure
01:46 that we need for the coming decades hasn't been built.
01:50 And that natural disasters are causing $18 billion a year to low and middle income country
01:56 infrastructure from climate change disasters alone.
01:59 And 98 of the most vulnerable cities to climate change out of 100 are in Asia and the Pacific.
02:08 The Coalition for Climate Resilient Infrastructure has estimated that by 2030, we're going to
02:13 need about $300 billion in infrastructure investment every single year for adaptation.
02:20 And that dwarfs the $80 billion that was spent in 2019 on both adaptation and mitigation.
02:27 Moreover, about half of humanity lacks access to safe sanitation.
02:32 And one in four people lacks the infrastructure to get safe, reliable drinking water.
02:37 So while some of us are talking about building back better, some of us are just talking about
02:42 building.
02:44 So our business as usual models for infrastructure cannot continue.
02:47 We have to find a way to prioritize safe and equitable infrastructure.
02:51 And at the same time, we have to decarbonize.
02:54 So while from just months into the COVID-19 pandemic, we were all talking about our once
03:00 in a lifetime opportunity to do it right.
03:02 Quite frankly, the pace of change is slow and siloed.
03:05 So today on this panel, I'm going to ask the speakers to give you their very honest opinions
03:12 on the principles and the practices that we need to build the right kinds of infrastructure
03:17 for the coming decade.
03:19 And they are going to tell us about the planning, the design, the investment, and the construction
03:23 of that infrastructure that's going to deliver for us in an increasingly uncertain future.
03:29 So panelists, let's get the conversation going on how these stimulus packages can help deliver
03:36 sustainable, inclusive, and resilient infrastructure.
03:39 I want to open with you, Lord Stern, and ask you, what's the scale of the investment that's
03:44 necessary today?
03:46 And how can this be financed?
03:48 What tools can we use to prioritize and focus the investment that we need for maximum impact?
03:55 We probably have to invest as a world something like 3%, 4% extra of national income if we're
04:05 to recover and build the kinds of economies which are resistant to climate change, which
04:12 do not-- to the effects of climate change, which do not cause climate change.
04:17 And of course, which much more than that, they deliver all the things that you've described,
04:22 which are summarized in the sustainable development goals.
04:26 So that is an extra amount of investment, which is quite feasible in historical terms.
04:33 It's quite feasible in terms of the world macro, where planned savings is an excess
04:39 of planned investment.
04:40 The right thing to do is push up planned investment.
04:42 It boosts demand.
04:44 But the scale is very big.
04:46 But we shouldn't be daunted.
04:47 It's totally feasible.
04:49 And we're absolutely in a hurry.
04:51 The world's infrastructure will probably double in the next 15 or 20 years.
04:56 If it looks anything like the existing infrastructure, then say goodbye to 3 degrees, let alone
05:03 well below 2 degrees or 1.5, which will be absolutely devastating, particularly for poorer
05:10 communities.
05:12 So as we look at the scale, we must recognize and act in that way.
05:17 But we must see it's absolutely feasible.
05:20 If we get it wrong, we're in deep trouble.
05:22 If we get it right, we've got the growth story of the 21st century, cities where you can
05:27 move and breathe and be productive, ecosystems which are robust and fruitful, much higher
05:33 resource efficiency, therefore productivity.
05:36 So we really are at a crossroads.
05:38 So we've got to invest a lot more, but we shouldn't be daunted by that task.
05:42 I want to turn the next question to Governor Hogan, where we're seeing some increased investment.
05:46 The U.S. has passed a trillion-dollar bipartisan infrastructure bill.
05:50 Can you tell us how the U.S. is now going to take steps to make sure that that investment
05:54 is more sustainable and resilient?
05:56 Sure.
05:57 Well, first of all, it's an honor to be included among such a distinguished panel here.
06:01 And thank you for convening on this topic, which I think is critically important.
06:05 Look, I'll take you back to how this thing came about and then how we're going to implement
06:11 it.
06:12 You know, America had crumbling infrastructure, and we hadn't addressed it for literally decades.
06:17 And Republicans and Democrats both talked about getting it done, but never really were
06:21 able to accomplish anything.
06:23 And so this is a big achievement.
06:24 I was chairman of the National Governors Association in 2019 and 2020.
06:30 I started an initiative on rebuilding America's infrastructure, and we held summits around
06:36 the country and around the world and got the best input from academia, from the private
06:40 sector, from federal, state, and local governments, and came up with a set of recommendations
06:46 that all 50 governors agreed to, and which became the basis of the bipartisan deal, which
06:51 was finally implemented.
06:55 After we met with President Biden in the Oval Office, met with Secretary Buttigieg, I then
07:00 convened kind of an unprecedented conference in Annapolis, our state capital, 30 miles
07:06 from D.C.
07:08 We had both Democratic and Republican governors, senators, and congressmen from all across
07:13 the country, and they were miles apart on what they thought should be included in this
07:18 infrastructure bill.
07:19 But we came away with an agreement that became this infrastructure bill.
07:24 It included every single one of the recommendations of the governors, and it's a big deal for
07:30 America to get to that point where we finally got Republicans and Democrats at least working
07:34 together on something.
07:35 This is a step in the right direction.
07:38 The Republicans started out at about $500 billion and only wanted to talk about roads
07:44 and bridges.
07:45 The Democrats started at $4 trillion and wanted it to include a lot of social programs that
07:51 we were having a hard time figuring out how that was exactly related to infrastructure.
07:56 And we ended up with sort of a compromise at $1.2 trillion that included not only roads
08:01 and bridges and tunnels and ports and highways, but also clean water systems and sewer treatment
08:07 systems and green energy and resilience and things like cyber and broadband.
08:15 And so it became a bigger, more inclusive infrastructure package.
08:19 It was difficult to get it through, but we got it through the House and the Senate.
08:22 And six months ago, it was signed into law.
08:26 And now we're trying to figure out -- it's not quite finalized because the federal government
08:31 is still producing about exactly how we're going to spend the money, but the states are
08:35 ready to move.
08:37 And the states are the ones that implement all of the infrastructure in America.
08:41 And we already have pretty good plans.
08:44 All of our state agencies are together trying to figure out how we're going to utilize this
08:48 money.
08:49 It really is not just a giant pot of money.
08:52 It's basically a 20 percent increase over five years.
08:55 And it's going to be very prescriptive about what we can and can't spend it on.
08:59 But it is going to help us take things to the next level.
09:02 And I think we'll also be able to leverage that money to tap into private sector investment
09:07 to really do much more of the things that we need to accomplish.
09:11 It's a great point that you make about the process and what it takes to even create the
09:16 enabling environment and get to the point where you pass that infrastructure bill, and
09:20 then what needs to happen for implementation, which I know we're going to talk more about,
09:24 and the role of the private sector and the public sector working together being so critical.
09:28 It's really a great segue to you, Arjun.
09:32 We've also seen that we're going to have $1.4 trillion in investment in infrastructure in
09:39 India.
09:40 That's what's been promised.
09:41 And when you think about the scale of what's required, what do you think that the government
09:46 needs to do to create that enabling environment for more sustainable and resilient infrastructure
09:51 in India?
09:52 Thank you, Lauren.
09:53 So India finally has an infrastructure program that it deserves.
09:59 And $1.5 trillion will be invested over the next five years.
10:05 And for India to be part of the comedy of nations, it needs to do this admirably.
10:12 Track record so far has actually been very good.
10:16 For example, we have the second largest road network in the world.
10:19 And on that very large base, we're executing about 50 kilometers of national highways daily.
10:24 That translates to about 18,000 kilometers annually, which on an annual basis is the
10:28 size of many national highway networks in most other countries.
10:36 On the renewable front and to actually also bolster energy security, we have about 18,000
10:40 megawatts of renewable power come online every year.
10:43 And I could go on.
10:44 Now, India is the sixth largest economy in the world, third on a purchasing power parity
10:50 perspective.
10:51 And the Indian economy has actually been built by Indians and Indian businesses.
10:57 Now, as an emerging market, there are certainly huge challenges.
11:02 And at the same time, there are huge opportunities, not just for Indian businesses, but for the
11:08 entire world.
11:10 Now, I can appreciate that entry into the Indian market does have its challenges.
11:19 And a number of issues come to mind, but I'll name two in the context of the current conversation.
11:24 First, adequate and appropriate risk sharing between government and private sector.
11:30 The second is contract enforcement and swift dispute resolution.
11:37 And I think our government and especially our prime minister is especially aware of
11:42 some of these issues, and there's an ongoing dialogue to actually make some of these things
11:47 better.
11:48 And, by the way, the WEF is wonderfully placed to actually assist in some of this dialogue
11:53 as well.
11:54 So I'll conclude by saying that the preparatory work that goes into creating and planning
12:03 and executing this $1.5 trillion of infrastructure -- we have to get it right -- is something
12:09 that's so fundamentally important that requires India to engage with all its partners and
12:15 the globe for the purpose of best practices so that we're able to execute infrastructure
12:21 that is productive and sustainable.
12:23 >>Thank you, Arjun.
12:25 And I do want to come back later to some of the other actions we need to do to get it
12:29 right.
12:30 But before we do that, I want to turn it over to you, Jonathan.
12:33 The U.S. has been all over the news about the housing market, and not always for the
12:38 best reasons.
12:40 Rising house prices have been news all across the globe.
12:45 What can the U.S. government do to leverage the stimulus package to make housing more
12:50 affordable and safe for our families?
12:53 >>Thanks, Lauren.
12:54 And we actually unsuccessfully in the U.S. argued that housing is infrastructure.
12:58 We still would make the case that you really can't solve the issues we're trying to solve
13:02 if we don't plan and build in needs for housing.
13:07 As you rightly said, I think COVID, to many people's surprise, deeply exacerbated an existing
13:12 housing crisis.
13:13 So we've seen in the global north is the fastest growth in housing costs in modern times.
13:19 And what we've seen in the global south is an existing crisis getting far worse because
13:24 incomes went down.
13:26 And so we have a billion people living in affordable settlements.
13:29 In the U.S., on average across the country, housing prices went up 20%.
13:34 So even before COVID, you had one in four families paying already cost burdened and
13:38 one in seven paying over half their incomes on rent.
13:41 That has gotten far worse.
13:43 And I think the opportunity here is to think about both sustainable and inclusive.
13:48 And if we don't actually create cities where people can live close to where they work,
13:53 so if you think about transit-oriented mixed income, mixed use that include all of society,
13:59 we really won't achieve the goals.
14:01 And so in some ways, I think that vision of a 15-minute city is fantastic.
14:06 But most of the cities that are doing that have left out a whole economic tier of their
14:10 cities.
14:11 So we've got to do it in a way that creates enough mixed income housing so that everyone
14:15 can participate.
14:16 And that's a huge challenge.
14:18 And I think the government's role is really to create the infrastructure in many ways
14:22 and then the private sector can build.
14:23 But right now, the math is broken.
14:25 I think developers across the North cannot build something that families below the median
14:31 income can afford to rent or buy.
14:33 >>Thanks, Jonathan.
14:34 Now, we've been talking about how we have to do things differently.
14:38 And Florence, the company you work for has a lot of technologies that help to disrupt
14:42 old ways of planning and bring in new ways.
14:45 So can you talk about how we can leverage technologies like digital twins and others
14:51 to really do things differently when we're planning infrastructure?
14:54 >>Thank you very much for the question.
14:55 And I'm delighted to be with this panel.
14:56 As Lord Stern said, I mean, we are going to have $300 of investment in the next few years,
15:04 in the next decade.
15:05 And whether we do it right or wrong is going either a disaster or a win story.
15:10 And what I think is that digital tools, virtual twin, but also Internet of Things are really
15:16 powerful tools when it comes to make it right this time.
15:19 Why?
15:20 Because basically, if you do the virtual twin of your building or your infrastructure before
15:26 doing it, you can eco-design it.
15:28 You can optimize everything for sustainability and resilience before deciding to construct.
15:35 And it has a massive impact when it comes to do it more sustainably.
15:40 Last year, we released a study with Accenture that proved that if we would use virtual twin
15:45 just to eco-design construction, then we would save between now and 2030, 7 gigaton of CO2
15:51 emission.
15:52 And this is the equivalent of one year of world transportation.
15:56 And this is just one use case of virtual twin.
15:59 If you would have the virtual twin, you could also do the life cycle.
16:01 So you can continue to optimize all along the life of the asset.
16:06 Right now, we are doing that with reconstruction, for example, and it allows them to save up
16:11 to 60% of the energy consumption of their buildings.
16:15 So it's really massive when it comes to impact, but it's also really massive when it comes
16:21 to build for resilience as well.
16:24 Why?
16:25 Because if you have the virtual twin of your building or your city, what you can do is
16:29 do the worst for your building and your city.
16:32 I mean, for example, we've done the virtual twin of the city of Singapore.
16:36 Well, we've done the worst virtual tsunami in the city of Singapore to see what happened
16:42 to the city.
16:43 So the city can build or prepare for resilience.
16:47 And of course, we all hope the worst is not going to happen.
16:50 But just in case, well, we can prepare for that in the virtual.
16:55 So I think it's really powerful, both for sustainability and for resilience.
17:00 Thank you, Florence.
17:01 And I do want to give the audience a heads up that I have one more round of questions,
17:05 and then I want to open it up to all of you.
17:07 So I hope that you're starting to think about those now, because we want this to be really
17:10 an inclusive conversation.
17:11 Lertzner, I wanted to come back to you to get really specific about climate change.
17:17 We talked in general about the kinds of investment that we need to get the infrastructure that's
17:21 going to be safer and more resilient.
17:23 But what specifically can we do?
17:25 What kind of collaboration do we need between public sector, private sector, and academia
17:31 to really prepare infrastructure for climate change?
17:34 Thank you.
17:37 We have to, if we're thinking about the relationship with infrastructure and climate change, we
17:40 have to start by understanding that, depending how you do the numbers, something like 50
17:45 to 70% of emissions are associated with infrastructure or its use.
17:50 So it's absolutely center stage.
17:54 Secondly, that if you're thinking about the impact of infrastructure investment on climate,
18:03 energy and transportation are absolutely key.
18:08 And essentially, we have to, in rich countries, probably double our electricity capacity as
18:18 we move to electricity driving so many things in the economy, including transportation.
18:26 So the rich countries probably have to double their electricity capacity.
18:30 Probably India, maybe a factor of four or five by mid-century.
18:35 So recognize infrastructure is actually at the absolute core, the majority in many ways,
18:42 of the emissions.
18:43 And recognize that energy, transportation, heating are the biggest parts of that investment.
18:52 And so that goes right through what we've just been hearing.
18:55 It goes right through cities and housing and the road building and so on.
18:58 And the numbers for India illustrated the kinds of percentages that I was talking about
19:04 a bit earlier.
19:05 So we really have to do invest a lot.
19:09 But we can see how to do it now.
19:12 Looking around the world, about 80% or more of investment is private sector.
19:18 And the fractions in infrastructure are a bit less, but still, the big bulk of the investment
19:25 will be in private sector.
19:29 So private sector investment, well, you follow Von Hayek or Keynes.
19:34 I hope you read both.
19:36 It's about expectations.
19:38 Even if you don't, common sense tells you it's about expectations.
19:43 Expectations particularly important in infrastructure because you're talking about long periods.
19:48 And you're talking lots of people being involved, all sorts of sources of uncertainty.
19:53 So the challenge is to construct policy and institutions, finance, so that you keep down--
20:01 you don't eliminate uncertainty.
20:03 That's not on offer.
20:04 But you really bring down uncertainty.
20:06 And that should be the key criterion, bringing down uncertainty together with revenue flows
20:13 and a management of costs.
20:15 So you have to have organizational structures that are going to be capable of delivering
20:20 that.
20:21 And the key is to assess, reduce, share, manage the risk.
20:28 If you do, then those investment opportunities can turn into real investment programs.
20:35 And particularly important, if you manage your risk in that way, a cost of capital that
20:41 is acceptable.
20:42 You cannot build infrastructure on a real cost of capital, 8%, 9%, 10% on scale.
20:48 You'll find some, but you won't get to the scale.
20:51 So you need policies to manage the uncertainties, to give confidence in the revenues, confidence
20:57 as in dispute resolution, as we said earlier.
21:01 Give confidence on the revenue and cost side, and then get the finance, the right place,
21:05 right scale, right time, which reduces, manages, and shares risk.
21:09 Then the cost of capital could be, for the private sector, at a level low enough to really
21:17 manage the scale that we're talking about.
21:19 I think that's a really helpful framework in terms of setting the expectations that
21:23 assess, share, reduce, and manage in terms of the infrastructure responsibilities.
21:27 And also being clear about that expectation of the cost of doing this, and the kinds of
21:33 returns that can be expected, and where government needs to take risk, and then create an enabling
21:38 environment for the private sector as well.
21:40 So in a specific case, in the great state of Maryland, Governor Hogan, how are you planning
21:46 to work with civil society, with the private sector, in order to really shape infrastructure
21:52 for the next century?
21:53 What does that conversation look like?
21:55 What do the actions look like?
21:56 Well, I mentioned earlier that through the National Governors Association, we convened
22:02 all those different stakeholders to provide input into the plan that eventually became
22:07 this bipartisan infrastructure deal at the federal level.
22:11 But we've been doing those same kinds of things, and we'll continue to do that at the state
22:14 level to bring all of the various stakeholders to the table to get all of the input.
22:19 We're going to utilize this new infrastructure investment to really help expedite some of
22:25 the projects we've already been planning, and already have gotten all that input on
22:28 from the various people from the private sector, from academia, from our communities, to make
22:33 sure that we're spending those dollars wisely, and leveraging those dollars, leveraging the
22:39 private sector opportunities.
22:42 We're building currently, we're putting money into just about every aspect of what we've
22:48 been talking about.
22:49 We put $8 billion into cleaning up the Chesapeake Bay, which is our greatest natural asset.
22:55 It's now cleaner than it's been in recorded history, and we're rebuilding and redoing
22:59 sewage treatment plants and water systems.
23:02 But we're making huge strides at the Port of Baltimore, where we're in an environmentally
23:06 sensitive way, dredged the harbor to accommodate some of the larger ships in the world.
23:12 We're breaking records month after month, year after year.
23:15 We're the number one port in the U.S. for roll-on, roll-off.
23:20 We got private sector, we have P3 partnerships on the Port of Baltimore to accomplish that.
23:25 We're doing it at the BWI Airport in Baltimore, Washington International.
23:29 It's the number one airport in the Washington region, public-private partnerships.
23:34 We're building the largest P3 transit system in North America, the Purple Line.
23:40 We just did a deal with Hitachi Rail to have electric new rail cars for the Washington
23:46 Metro system.
23:47 They're building them in our state, so it's private sector investment.
23:51 We're building the largest P3 highway and bridge project in the world with private sector
23:56 investment, with an Australian company, Transurban, that's going to do managed lanes.
24:02 We're going to connect Maryland and Virginia with a new American Legion bridge.
24:06 While there's still gridlock inside the Capitol Beltway in Washington, we're trying to fix
24:11 the gridlock on the Capitol Beltway to keep cars moving faster.
24:15 It's all about balance for us and making sure that we look at it from every aspect.
24:22 We're taking steps.
24:23 Maryland has cleaner air standards than 48 other states and twice as strong as the Paris
24:28 Accord.
24:29 So some of the things that we're trying to do with those dollars, we're transforming
24:34 our entire fleet and turning to electric buses and utilizing those opportunities, both in
24:40 the state government but also tapping into the private sector and doing things that are
24:44 really helping our economy.
24:46 With the huge increases in production at our Port of Baltimore, it's responsible for about
24:49 150,000 jobs.
24:52 We have a Howard Street tunnel in Baltimore that we're going to allow for double-stack
24:59 lanes, which is going to enable us to dramatically increase production at the port.
25:02 But it's also just something that hadn't been done for 146 years.
25:07 So combining the need to update infrastructure with a really strong vision and inviting the
25:11 private sector in as a partner for that has been really critical to getting the job done.
25:15 You summed that up much better than I did.
25:17 You've got to use that.
25:18 There were so many examples in the real world.
25:23 Driving that train literally is clearly more than a 24-hour job.
25:30 I'm not sure how you do it in a day.
25:34 When we come to what's happening in India, we talked actually before this session about
25:39 what's happening nationally.
25:40 I thought it was very interesting when Governor Hogan was talking about what's happening
25:45 in the state to provide the state with resources for that infrastructure transformation.
25:49 Can you talk a little bit about some of the models that are being used in India?
25:54 And what are you most hopeful about in terms of those examples for new models of infrastructure?
26:00 Sure.
26:01 So a few comments on urban infrastructure planning.
26:04 This is so fundamental as India urbanizes.
26:08 We do it a little differently from the way it's done in the West.
26:11 And it's not optimal.
26:13 You have state agencies do central planning and take responsibility for execution.
26:19 And local authorities and city authorities and municipal authorities are given less autonomy.
26:25 And this creates a problem.
26:27 Take the example of Mumbai.
26:29 The mayor of the city is -- it's a ceremonial post.
26:34 And so I think as we start to plan infrastructure for smart cities, as we've been discussing,
26:42 not for five years or ten, but for the next 50, I think that you have to first actually
26:48 involve as many stakeholders as you can locally, give them the authority, local autonomy in
26:54 planning infrastructure that's more sustainable, that's more productive.
26:58 Second, I think we have to as an industry continue to innovate.
27:02 HCC, for example, we use fly ash in the production of our concrete to reduce the amount of cement
27:08 that we use.
27:10 The planning needs to take into account water conservation.
27:15 We don't talk about water enough.
27:16 So our projects are net water positive over the life cycle of the project.
27:21 And then technology has made a huge difference in this last number of years.
27:26 So your projects are planned better.
27:28 There's less wastage.
27:29 Procurement is more efficient.
27:31 And then you have, most importantly, our structures end up being much lighter.
27:37 Now, I think that there's younger politicians in our country who appreciate what we're talking
27:43 about.
27:45 And certainly I think that we've -- on the subject of public/private partnership, it
27:51 is so fundamentally important as part of any infrastructure development that takes place
27:56 around the world.
27:57 On one hand, you actually have the best practices that PPP brings in design, in operations and
28:03 maintenance for the life cycle of the project.
28:06 But there's also the all-important question of financing.
28:10 And as soon as you start to de-bottleneck a lot of what we talked about, the cost of
28:15 infrastructure, as we've talked about, ends up becoming less expensive.
28:21 The premiums that you end up -- on project finance and equity allow for then more infrastructure
28:26 to get built with less capital.
28:29 >>Thank you for that.
28:31 There's so much to dig into there in terms of some of the initiatives of the Indian government,
28:34 whether it's the Smart Seeds Initiative or Swatch, where they've created a lot of special
28:37 purpose vehicles for investment with city level and with state level.
28:42 And it probably deserves its own session.
28:44 But I want to pose an open question to both Jonathan and Florence about the models of
28:51 infrastructure that you're seeing as really examples of this kind of inclusive and resilient
28:57 and sustainable infrastructure that you think can be scaled.
29:01 >>Thank you.
29:02 It's -- you know, I think -- and I'm going to do it in two parts, because the global
29:06 north is very different than the global south in terms of what's needed and what's worked.
29:10 The truth is, everywhere there's a huge undersupply, though in rare cases there's housing, but
29:15 it's in poor condition.
29:16 So there's qualitative and quantitative needs.
29:19 And there's an opportunity in both scenarios, I think, to make it much more green and sustainable.
29:24 But we've got to figure out a way to do that in a way that still makes it affordable.
29:26 And that's a huge challenge.
29:28 And so I think Singapore is the unicorn.
29:30 One principle I think that's important is, as transit gets built out, that cities look
29:35 further ahead and allocate land in advance.
29:38 And that's usually where it goes wrong.
29:40 Rapid urbanization is unstoppable, largely.
29:42 But it's cities that haven't planned in advance.
29:44 And if they allocate the land early, you can then reap the benefits later, and the private
29:49 sector can then build.
29:50 And I think Seoul is a relatively good example, where when I lived in Seoul, I think there
29:54 were 7 million people.
29:55 Now there's well over 20, depending how you count.
29:57 And they grew, but one of the things they did, oversimplified, is, as the trains moved
30:02 south, they -- instead of the farmers getting all of the triple value of the land around
30:07 the trains, a third of it went to housing.
30:09 So Seoul grew as a megacity with relatively few slums compared to other megacities.
30:15 I think another principle is not making it too hard to build, because that's a tax on
30:19 building.
30:20 Lord Stern was really talking about that.
30:21 So how do we have both the carrots and sticks for developers, which is higher requirements
30:25 for inclusion and mixed income, higher requirements for sustainability, but with that, whether
30:30 that is density bonuses or tax credits or other models that actually can lower the cost
30:35 so that, again, the math can work.
30:37 And I think a good U.S. example that we're pushing very hard with bipartisan support
30:42 is a tax credit for developers to preserve housing that is distressed.
30:48 Most cities are seeing spikes, but there's a part of many cities and some entire cities
30:52 that are undervalued, and it will cost more to upgrade the housing and bring it up to
30:56 code than it will appraise for after you do that.
31:00 So this would be a tax credit like the rental tax credit that would actually cover the gap
31:04 to make it economically viable to preserve a lot of existing housing stock.
31:08 And that's a way to quickly get a lot more people into decent and energy-efficient housing.
31:13 Yeah, I totally agree with Jonathan.
31:18 Planning is so bookie.
31:19 And Singapore is a unicorn, but I do believe we are going to see a lot of unicorns everywhere.
31:24 Why?
31:25 Because, for example, in Asia, Guangzhou -- we are working with Chongqing, but also
31:30 with Guangzhou -- Guangzhou is using virtual twin to plan for the next district, to plan
31:35 for the construction of the next district of Guangzhou to make it the most sustainable
31:39 and kind of doing this 15-minute district in Guangzhou.
31:43 And what is happening is Guangzhou is happening in a lot of India cities as well.
31:47 We have the chance to work with the city of Jaipur, and Jaipur is working on the virtual
31:53 twin of the city for project planning exactly, to plan for a more sustainable city and to
31:58 plan for construction that is done in the most efficient way.
32:03 And I think this is really going to be a trend in the years to come.
32:07 But what I'm a bit worried about is the skills that we need.
32:12 Construction and infrastructure have been kind of slow in digitalization.
32:16 Now they're basically leapfrogging, and they're soon going to be at the same level as aerospace
32:21 and defense or transportation and mobility when it comes to productization, virtual twin,
32:26 IoT.
32:27 But if they really want to make the best use of that, they need the people with the digital
32:32 skills.
32:33 And here, everywhere around the world, in Europe, but also in Asia and in the U.S.,
32:37 we are seeing a lot of lack of digital skills.
32:41 If I take the example of Europe, basically only 42% of Europeans have basic digital skills,
32:48 and we need important skills to do the leapfrog of construction industry.
32:54 So the ability of the private sectors to partner with government and schools and universities
33:00 to create the jobs of tomorrow in construction and infrastructure is going to be key.
33:04 At Dassault Systèmes, we are partnering with some construction schools like ESTP in France.
33:08 We are discussing with Lithuania.
33:10 We are discussing with some universities in India.
33:13 And our ability to do that as soon as possible and with as many stakeholders as possible
33:19 will be very important for the construction of the next infrastructure.
33:24 Thank you, Jonathan.
33:25 Thank you, Laurence.
33:26 Such important points about really creating the right incentives and also about capacity
33:30 building.
33:31 I do want to open it up now to the audience.
33:34 So if you do have a question, we have some roving mics.
33:36 I see two here in the front.
33:39 Maybe because we are a little bit short on time, if there's anyone else who has a question,
33:42 do raise your hand.
33:43 We can take all the questions and then filter them.
33:46 Okay.
33:47 So I see three questions.
33:48 Mauricio, Maimuna, and the gentleman in front.
33:50 I'll take all the questions and then we'll filter and then answer them by the panel.
33:55 Peter Davis from University of Auckland, New Zealand.
33:58 I'm not a person vested in this area.
34:01 I've just observed it.
34:02 And I'd just like some things clarified.
34:04 Infrastructure, how broad is that?
34:07 Because basically when our politicians talk about infrastructure, they basically mean
34:10 roads and sewage systems and so on.
34:14 And we don't hear much about digital or whatever.
34:17 Secondly, how do we stop pork barrelling?
34:20 Our politicians talk about infrastructure because it's something that the public wants
34:24 to hear and they think this is going to be a lot of money flowing and where is it flowing
34:28 and how much is it and is it well disciplined?
34:32 And finally, public-private partnerships.
34:35 I've just heard so many bad stories about how these things actually end up costing the
34:40 taxpayer very much more than they should.
34:43 And I'd like to know what we can do about it in order to prevent that happening.
34:46 Okay.
34:47 So embedded in there, what is infrastructure and then how do we make sure that the money
34:50 is going to be well spent?
34:52 The next question.
34:54 Thank you very much.
34:55 I have one observation and one question, if possible.
35:00 My observation is that I believe – I'm Maimunah Mohamad Sharif, I'm the Executive Director
35:05 of UN Habitat and Urban Planner and I was a mayor for seven years in the city of Penang,
35:10 Malaysia.
35:11 From my experience, I think we need plan-led development.
35:15 I think it's very, very important to make our cities right because to go into the infrastructure,
35:22 green infrastructure, we have to have our city planning.
35:26 I totally agree with Rafa saying that plan-led development is important.
35:32 Otherwise it will be very expensive for you to make land acquisitions and all that.
35:37 I think that is one, because we have well-planned and well-managed cities, we hopefully can
35:42 reduce the impact of climate change.
35:44 That is my observation.
35:45 A second observation is that the decentralisation, Mr. Darwin, that you mentioned about Mumbai,
35:51 I think we need to decentralise the decision-making at the local level.
35:56 From my experience, even to locate the bus stop in my city at one time, the decision
36:06 came from Kuala Lumpur.
36:07 Why is that?
36:08 Kuala Lumpur knows about where are the people moving in Penang.
36:11 So now we change the system because we have to give the authority to the mayors at the
36:17 local government because they know better at the local level.
36:21 And my question is that, as you said, 75% of the infrastructure is not built yet.
36:30 And most of this will be in Africa, in Asia.
36:33 So what is your advice to the UN agencies and to me, for example, as the CEO of UNHCR,
36:40 dealing with human settlement to handle this green infrastructure?
36:45 At the same time, what is it needed to attract green infrastructure in most in Africa, in
36:52 Asia, more than one billion people are still living in slums?
36:57 How can we transform this?
36:59 Thank you so much.
37:00 Thank you, Maimouna.
37:01 And we have one last question.
37:03 It's so nice to see you again.
37:06 I would just like to ask, there's been a tremendous revolution in computer science.
37:09 Florence, you were talking about it.
37:11 To me, going forward, kind of building on these questions here, we have to build intelligent
37:16 infrastructure that is not only about the design of it, I think, as you were talking
37:20 about, but also to actually make sure the operation of a wastewater plant or energy
37:26 systems, both on the demand side and the consumer side, even how we cool our rooms like this,
37:30 can be intelligent at a very low cost.
37:33 And I'm wondering to what extent you feel, are you seeing enough innovations like this?
37:37 Is it enough part of the dialogue when infrastructure programs are being reviewed and considered?
37:42 Are we seeing this happening in the market?
37:43 I find it very challenging supporting the entrepreneurs as a venture capitalist and
37:47 getting them projects.
37:48 So we think the solutions are there, but we're not seeing the demand and we're not seeing
37:51 the dialogue either.
37:52 So I just wanted to get your view about this software as part of the solution.
37:56 Thank you.
37:57 I think we were meant to have one more from Mauricio.
38:02 And then, sorry, Mauricio was on the other side.
38:05 And I'm sorry.
38:06 That's probably all we have time for.
38:08 And then we'll go to the panel and answer those very interesting questions.
38:12 Yes.
38:13 So extreme heat kills more people than all other climate-driven hazards combined.
38:19 We're witnessing extremely high temperatures in India, Pakistan, but we also have seen
38:24 how cities that are not prepared to face extreme heat have suffered from it.
38:29 Like, for example, what happened last year in the West Coast of Canada and in the US.
38:35 And we know that the problem is going to become greater and greater as climate change worsens.
38:40 So my question is, how are you rethinking infrastructure to face the challenge of extreme
38:47 heat in cities?
38:48 We know it is in cities where the problem is more severe.
38:51 So how do you see the future being more -- what kind of actions and innovations do you see
39:00 in the infrastructure sector to deal with this issue?
39:03 Thank you.
39:04 >>Thank you.
39:05 I'm a former mayor of Quito.
39:08 So we have a couple of questions here.
39:09 I would like to direct the question about how we make sure infrastructure dollars are
39:13 well spent to you, Governor Hogan, in terms of how we incentivize green investment to
39:18 come into our city, especially in emerging markets, if I could ask you to respond to
39:21 that, Lord Stern, and maybe also, Arjun, if you would speak to that.
39:26 And then the issue of bringing technology into the O&M, the operations and management
39:30 of this, if you could speak to that, Florence.
39:34 And then in terms of protecting people, Jonathan, if you can speak to what you're seeing in
39:38 terms of heat management and Arjun as well.
39:40 We know it's been over 120 degrees in India in the past couple of weeks, major heat waves
39:45 affecting the people there.
39:46 So let's try to go further.
39:48 If you can try to keep your answers to about a minute, and then I'm going to have to bring
39:51 us to a close.
39:52 >>Well, with respect to how we make decisions about which infrastructure projects move forward,
39:59 you're right.
40:00 That's an issue that has to be dealt with with respect to earmarks and people just trying
40:05 to get projects that are pork for their own particular district.
40:08 But the way we try to do it and the way our system works is we, on all of our -- let's
40:13 say transportation infrastructure is an example.
40:15 We have a long, detailed process that includes public hearings, input from all of our county
40:20 governments.
40:21 We've moved forward on the top priority projects of every single jurisdiction, and they made
40:25 this decision.
40:26 So this federal money that we were talking about now is going to be sent down to the
40:30 states to be spent.
40:32 And I don't know that every state does it exactly the way we do, but it's all based
40:36 on merit and the ones that make the most sense and where the investment dollars go.
40:40 >>Thank you.
40:41 >>Just on the definition point, I mean, you should think of infrastructure as some forms
40:47 of capital or facilities that enable other activity.
40:52 In terms of accounting and classification, people normally talk about energy, transport,
40:57 water, and communications with quantitatively the biggest numbers for investment in the
41:04 first two.
41:05 That's a question of definition.
41:08 In terms of incentivizing the right kind of investment on the scale we need, I think that
41:15 when one clear theme that's run all through is clarity of vision.
41:20 Where are you going so that investors can see how their investment -- and these are
41:25 complicated systems -- are going to fit in with the overall sense of travel.
41:30 And that is enormously attractive to people making investments.
41:36 And then, of course, there's lots of detailed stuff about the way you capture the revenues
41:40 in the land and so on.
41:41 But if you're going to keep it short, clear, strong, credible direction of travel and ways
41:49 of solving problems and the right kind of finance in the right place at the right time.
41:55 And there, the scale of what we're talking about here, particularly in Africa and Asia,
41:59 demands that we expand the abilities of the multilateral development banks.
42:05 Janet Yellen has just raised that in a very strong way in her speech to the Atlantic Council.
42:10 She's absolutely right.
42:11 And the shareholders of those banks have to really get behind their expansion.
42:16 >>Arjun?
42:18 >>So on the PPP, I think, where governments tend to discount that last P, which is partnership.
42:27 And certainly India has had a very, very successful run at PPP.
42:32 We've had our hiccups initially.
42:34 We've created those constitutions and those framework agreements that now govern concessions.
42:39 And the program has really scaled in the last seven years.
42:43 But not enough can be said about swift dispute resolution, and Lord Stern said this, planning
42:49 is fundamental.
42:50 The quality of project reports and bringing infrastructure projects that are well-planned
42:56 to market is just fundamental.
42:58 To the point on incentives for green, I think that health, safety, environment need to become
43:03 a part, a unit part of work.
43:06 And I think that if governments, financial institutions actually create the incentives
43:10 for requiring that to actually happen in some small way, I think that will actually go create
43:14 a habit for people and industry to start thinking in a positive fashion.
43:20 >>Florence, and then Jonathan.
43:22 >>And thank you very much for the question.
43:24 Yes, indeed.
43:25 I do believe there is a lot that can be done in operation.
43:29 And what we're seeing now is really two things.
43:31 The ones who built from the beginning with the virtual twin are now transmitting the
43:36 virtual twin to the owner.
43:38 So the virtual twin can still be used to improve, to optimize everything during the life of
43:44 the asset.
43:45 And this is super, super powerful if you get the right IoT right during the construction
43:51 of the asset.
43:52 Of course, you absolutely need the IoT.
43:53 And then with the IoT, you do all the data analytics, and the saving can be huge.
43:58 But the other trend we're seeing now, which is super interesting, is that because price
44:02 of energy are skyrocketing right now, especially in Europe, well, what we're seeing is that
44:07 people want to implement the virtual twin of building built decades ago in order to
44:12 optimize them now.
44:14 And this is super interesting because I think in these buildings that were not built at
44:18 all for energy efficiency, we can do massive savings with digital.
44:23 So there is huge, huge opportunities to be taken.
44:27 >>If I can tie that, I think that goes right to Mauricio's question around, and you know,
44:32 far more than I do on this, but it goes to better products, and I think some things that
44:38 are not that complicated.
44:39 One, as we think about reflective roofing and insulation, how do we not absorb as much
44:44 heat into cities as we think about how roads are built, if we can have fewer people actually
44:48 on the roads and people living close to where they work.
44:52 And then trees are hugely important.
44:53 I live in Atlanta, which has lots of things we don't do well, but has the largest tree
44:56 canopy of any city in North America, and that makes a huge difference.
45:01 So I do think there are both low and high tech solutions that can make a difference
45:06 if we can structure it.
45:08 >>I just want to summarize very quickly.
45:10 I think this panel has been amazing in sharing a lot of insight in a very short amount of
45:13 time on a rather massive topic.
45:16 So this is certainly a conversation that will continue.
45:17 But I think we've heard loud and clear that having a vision and having a very clear vision
45:24 with shared expectations of what kind of outcomes we want from future infrastructure is important.
45:29 And I think de-siloing is something that we also heard in terms of health, safety, environment,
45:34 and the importance of a transparent and consistent process for public and private partnerships
45:39 to come together.
45:40 And finally, that we do see a lot of hope in the technologies that can help us to leverage
45:46 and really accelerate the pace of change.
45:48 So again, I want to thank all of you for being here and sharing your time with us this morning.
45:53 And I really want to give a big round of applause and a thank you to these panelists who have
45:56 shared their wisdom with us.
45:57 [ Applause ]
45:57 [APPLAUSE]