“We have to get their attention. We have to think about how we create a return for investors, because that will make us more competitive.”
A good starting place for attracting private capital is to settle a clear infrastructure agenda at a national level. Gunatilaka says we need to protect everyone from the fluctuations caused by political cycles.
This is something she has seen work well overseas: “I was recently on an Infrastructure New Zealand delegation to Dublin in Ireland and Copenhagen in Denmark. I also visited Queensland in Australia. All three are similar in size to New Zealand. All three have an infrastructure vision expressed at a national or state level. In each case the vision is supported by a core economic policy that stretches across decades and across political divides.”
Ireland makes an interesting case study for a similar sized small nation like New Zealand. In 2008, when the global financial crisis struck, Ireland suffered more than many other countries. It had a major economic downturn. Today it is one of the strongest performing economies in the European Union.
Gunatilaka says the Irish Development Authority’s long-term strategy to attract foreign investment was the key to the nation’s revival. The strategy was consistent, pro-business and came with a progressive business tax policy that stayed in place across successive governments.
“The Irish were focused on attracting inbound investment and creating centres of expertise around pharmaceuticals, software and financial services, all sectors that help grow the economy.
“They’re growing their GDP, they’re growing their pool, not just working on the existing pool.”
Denmark ran into problems earlier. In the 1970s, Copenhagen had significant pollution issues, then in 1993 the city faced a shrinking tax base.
Skilled people moved away, people did not want to live there, business chose to locate elsewhere.
“The city leaders set a vision to revitalise Copenhagen, centred around the river and harbour. They turned the city around to face the water: they called it a blue urban space.
“They worked with the Danish government to create the Orestad Development Corporation. This was empowered to borrow and tasked with rejuvenating the Orestad area. They built a metro line, they developed the surrounding land and they lifted their investor confidence.”
This kick-started a cycle of development. The first metro line opened in 2002; today it is four lines and 39 stations. The Government’s commitment to a clear vision for the city gave birth to an economic recovery that was supported by industry and commerce. As with the Dublin development programme, the Orestad Development Corporation became a boost for the national economy which saw a rise in GDP.
A more recent example is closer to home. Gunatilaka worked recently in Brisbane where Arup is a delivery partner for the city’s Metro, a bus rapid transit project.
“In Brisbane I saw the intention to stay on track and deliver for the 2032 Olympics because how the city shows up on the world stage at that event is important.”
A common theme when discussing New Zealand’s infrastructure vision and pipeline is the disruption caused by our political cycles.
Gunatilaka says Denmark is a useful comparison because it has a similar proportional representation political system. Denmark has 16 representative political parties, so a single party never has a majority mandate and political parties are forced to find ways of working together.
“In Denmark, the transport representatives of the political parties meet weekly. They sit down and discuss Denmark’s long term transport plans. There has always been an unofficial bipartisan agreement driven by collaboration.
“As a result, transport infrastructure issues rarely feature in elections, because in the background, the infrastructure plans are agreed and long term planning and execution is enabled and efficient that keeps moving. “They keep it out of their political debate because it’s too important for the nation.”
Gunatilaka says New Zealand’s infrastructure deficit and overall economic performance means we face the kind of turning point that Dublin and Cophenhagen reached.
“We have a wake-up call telling us that we need to align on what is best for the nation. Then we need to work on building a pipeline of infrastructure projects to get us there. I don’t think we have a choice about this anymore, we are at a critical point.”
The cost of fixing New Zealand’s infrastructure deficit is high and there’s not necessarily a public appetite to pay for everything.
Gunatilaka says private investment has an important role to play but we should consider other options: “We need to explore revenue streams such as road tolling and value capture to create different forms of income and make these opportunities attractive for infrastructure investors.
“Alongside this, we have to be open to considering unsolicited bids and allow investors to innovate in the ways they deliver infrastructure.
“This requires a clear set of guidelines so investors can bring ideas here without the risk of losing intellectual property to competitors.
“If we focus on these, we should definitely see an improvement in how we can compete on the world stage.”
● Arup is an advertising sponsor of the Herald’s Infrastructure report.
