Introduction class on Services Marketing for Infrastructure Utilities
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Definition & Overview on Infrastructure Role of MBA’s in IM Intro to Marketing Few Examples on Infrastructure Projects from Marketing point of view Project Movie Clip On Infrastructure Project
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Introduction class on Services Marketing for Infrastructure Utilities
- 1. Introduction to Infrastructure Marketing Introduction to Infrastructure Marketing Farook A Azam (MBA-IM,PGD-IM,BE) Infrastructure consultant @ BIG & Faculty @ VTU MBA~ IM – VTU
- 2. Introduction to Infrastructure Marketing Flow of Presentation • Definition & Overview on Infrastructure • Role of MBA’s in IM • Intro to Marketing • Few Examples on Infrastructure Projects from Marketing point of view • Project Movie Clip On Infrastructure Project MBA~ IM – VTU
- 3. Introduction to Infrastructure Marketing What is Infrastructure ? • Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide framework supporting an entire structure of development. It is an important term for judging a country or region's development. • The term typically refers to the technical structures that support a society, such as roads, bridges, water supply, sewers, electrical grids, telecommunications, and so forth, and can be defined as "the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions." • Viewed functionally, infrastructure facilitates the production of goods and services, and also the distribution of finished products to markets, as well as basic social services such as schools and hospitals; for example, roads enable the transport of raw materials to a factory. MBA~ IM – VTU
- 4. Introduction to Infrastructure Marketing History of the term • According to the Online Etymology Dictionary,the word infrastructure has been used in English since at least 1927, originally meaning "The installations that form the basis for any operation or system". • Other sources, such as the Oxford English Dictionary, trace the word's origins to earlier usage, originally applied in a military sense. The word was imported from French, where it means subgrade, the native material underneath a constructed pavement or railway. The word is a combination of the Latin prefix "infra", meaning "below", and "structure". The military use of the term achieved currency in the United States after the formation of NATO in the 1940s, and was then adopted by urban planners in its modern civilian sense by 1970. • The term came to prominence in the United States in the 1980s following the publication of America in Ruins,which initiated a public-policy discussion of the nation’s "infrastructure crisis", purported to be caused by decades of inadequate investment and poor maintenance of public works. This crisis discussion has contributed to the increase in infrastructure asset management and maintenance MBA~ IM – VTU
- 5. Introduction to Infrastructure Marketing History of the term contd.... • That public-policy discussion was hampered by lack of a precise definition for infrastructure. A US National Research Council panel sought to clarify the situation by adopting the term "public works infrastructure", referring to: • "... both specific functional modes – highways, streets, roads, and bridges; mass transit; airports and airways; water supply and water resources; wastewater management; solid-waste treatment and disposal; electric power generation and transmission; telecommunications; and hazardous waste management – and the combined system these modal elements comprise. A comprehension of infrastructure spans not only these public works facilities, but also the operating procedures, management practices, and development policies that interact together with societal demand and the physical world to facilitate the transport of people and goods, provision of water for drinking and a variety of other uses, safe disposal of society's waste products, provision of energy where it is needed, and transmission of information within and between communities MBA~ IM – VTU
- 6. Introduction to Infrastructure Marketing History of Indian Infrastructure • Infrastructure before 1700 consisted mainly of roads and canals. Canals were used for transportation or for irrigation. Sea navigation was aided by ports and lighthouses The Indus Valley Civilization in India and Pakistan from c3300 BCE had a sophisticated canal irrigation system. Roads were build by emperor Ashoka Maurya (ca. 269 BCE to 232) BCEhad planted trees beside roads and constructed shelter for shade for Road users. Emperor Akbar has Build the Road in Kashmir, at present day it is called as Moghul Road (NH1), which his army used it for military purposes as well as for tread and commerce. Down South Hyderali and Tipu sultan built irrigation canals, Roads, facilities for industries and ports especially in costal Malabar and Mangalore to tap the overseas business for MYSORE State. MBA~ IM – VTU
- 7. Introduction to Infrastructure Marketing Types of Infrastructure • Hard Infrastructure "hard" infrastructure refers to the large physical networks necessary for the functioning of a modern industrial nation. • Soft Infrastructure whereas "soft" infrastructure refers to all the institutions which are required to maintain the economic, health, and cultural and social standards of a country, such as the financial system, the education system, the health care system, the system of government, and law enforcement, as well as emergency services. MBA~ IM – VTU
- 8. Introduction to Infrastructure Marketing Assets and facilities Airports Bridges Broadband Canals Critical infrastructure Dams Electricity Energy Hazardous waste Hospitals Levees Lighthouses Mass Transit Parks Ports Public housing State schools Public spaces Rail Roads Sewage Solid waste Telecommunications Utilities Water supply Wastewater MBA~ IM – VTU
- 9. Introduction to Infrastructure Marketing Concepts 1. 2. 3. 4. Asset management Appropriation Lindahl tax Build-OperateTransfer 5. Design-Build 6. Earmark 7. Fixed cost 8. Engineering contracts 9. Externality 10. Government debt 11. Life cycle assessment 12. Maintenance 13. Monopoly 14.Property tax 15. Public-private partnership 16. Public capital 17. Public finance 18. Public good 19. Public sector 20. Renovation 21. Replacement (upgrade) 22. Spill over effect 23. Supply chain 24. Taxation ** These concepts are of Global level , it may change country to country MBA~ IM – VTU
- 10. Introduction to Infrastructure Marketing Issues and ideas Air traffic control Brownfield Carbon footprint Containerization Congestion pricing Ethanol fuel Fuel tax Groundwater High-speed rail Hybrid vehicles Land-use planning Mobile data terminal Pork barrel Rapid bus transit Recycling Renewable Reverse osmosis Smart grid Smart growth Storm water Urban sprawl Traffic congestion Transit-oriented development Vehicle efficiency Waste-to-energy Weatherization Wireless technology , etc.. MBA~ IM – VTU
- 11. Introduction to Infrastructure Marketing Fields of study • Architecture • Civil • Electrical • Mechanical engineering • Public economics • Public policy • Urban planning MBA~ IM – VTU
- 12. Introduction to Infrastructure Marketing Fields of study contd… Most infrastructure is designed by engineers, urbanists or architects. Generally road and rail transport networks, as well as water and waste management infrastructure are designed by civil engineers, electrical power and lighting networks are designed by power engineers and electrical engineers, and telecommunications, computing and monitoring networks are designed by systems engineers. In the case of urban infrastructure, the general layout of roads, sidewalks and public places may sometimes be designed by urbanists or architects, although the detailed design will still be performed by civil engineers. If a building is required, it is designed by an architect, and if an industrial or processing plant is required, it may be designed by industrial engineer or a process engineer. MBA~ IM – VTU
- 13. Introduction to Infrastructure Marketing Economic Analysis Cost-benefit analysis Equivalent annual cost Future Worth Internal rate of return Present Worth Return on investment MBA~ IM – VTU
- 14. Introduction to Infrastructure Marketing Typical attributes Hard infrastructure generally has the following attributes – Capital assets that provide services – Large networks – Historicity and interdependence – Natural monopoly MBA~ IM – VTU
- 15. Introduction to Infrastructure Marketing Economics, management, engineering, and impacts The following concerns mainly hard infrastructure and the specialized facilities used for soft infrastructure. – Ownership and financing – Role of pension funds – Infrastructure as a new asset class for pension funds and SWFs – Infrastructure asset management – Engineering – Impact on economic development – Use as economic stimulus – Environmental impacts MBA~ IM – VTU
- 16. Introduction to Infrastructure Marketing Infrastructure in the developing world According to researchers at the Overseas Development Institute, the lack of infrastructure in many developing countries represents one of the most significant limitations to economic growth and achievement of the Millennium Development Goals (MDGs) • Regional differences The demand for infrastructure, both by consumers and by companies is much higher than the amount invested. There are severe constraints on the supply side of the provision of infrastructure in Asia. The infrastructure financing gap between what is invested in Asia-Pacific (around US$48 billion) and what is needed (US$228 billion) is around US$180 billion every year. MBA~ IM – VTU
- 17. Introduction to Infrastructure Marketing Roles of MBA’s in Infrastructure Mgmt.. Objectives : Generate young, well trained executives for India’s Infrastructure Sector to: Convert the huge project investments into quality infrastructure Upgrade existing infrastructure Sustain high infrastructure service levels by adopting / evolving better management practices MBA~ IM – VTU
- 18. Introduction to Infrastructure Marketing MOVIE CLIP MBA~ IM – VTU
- 19. Introduction to Infrastructure Marketing Introduction to Marketing MBA~ IM – VTU
- 20. Introduction to Infrastructure Marketing What Is Marketing? Simple definition: “Marketing is the management process responsible for identifying, anticipating, and satisfying customer requirements profitably.” (CIM,2001) Goals: 1. Attract new customers by promising superior value. 2. Keep and grow current customers by delivering satisfaction. MBA~ IM – VTU
- 21. Introduction to Infrastructure Marketing Marketing Defined • Marketing is the activity, set of instructions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. OLD view of marketing: Making a sale—“telling and selling” NEW view of marketing: Satisfying customer needs MBA~ IM – VTU
- 22. Introduction to Infrastructure Marketing Why is Marketing Important? Shifting Business Paradigms Buyers’ markets Sellers’ markets MBA~ IM – VTU
- 23. Introduction to Infrastructure Marketing The Marketing Process A simple model of the marketing process: • Understand the marketplace and customer needs and wants. • Design a customer-driven marketing strategy. • Construct an integrated marketing program that delivers superior value. • Build profitable relationships and create customer delight. • Capture value from customers to create profits and customer quality. MBA~ IM – VTU
- 24. Introduction to Infrastructure Marketing Needs, Wants, and Demands Need: State of felt deprivation including physical, social, and individual needs. • Physical needs: Food, clothing, shelter, safety • Social needs: Belonging, affection • Individual needs: Learning, knowledge, self-expression Want: Form that a human need takes, as shaped by culture and individual personality. • Wants + Buying Power = Demand MBA~ IM – VTU
- 25. Introduction to Infrastructure Marketing Need/ Want Fulfillment Needs & wants are fulfilled through a Marketing Offering: • Products: – Persons, places, organizations, information, ideas. • Services: – Activity or benefit offered for sale that is essentially intangible and does not result in ownership. • Experiences: – Consumers live the offering. MBA~ IM – VTU
- 26. Introduction to Infrastructure Marketing Customer Value and Satisfaction Dependent on the product’s perceived performance relative to a buyer’s expectations. Care must be taken when setting expectations: • If performance is lower than expectations, satisfaction is low. • If performance is higher than expectations, satisfaction is high. Customer satisfaction often leads to consumer loyalty. Some firms seek to DELIGHT customers by exceeding expectations. MBA~ IM – VTU
- 27. Introduction to Infrastructure Marketing Marketing Management The art and science of choosing target markets and building profitable relationships with them. • Requires that consumers and the marketplace be fully understood. • Aim is to find, attract, keep, and grow customers by creating, delivering, and communicating superior value. MBA~ IM – VTU
- 28. Introduction to Infrastructure Marketing Marketing Management Marketing managers must consider the following, to ensure a successful marketing strategy: 1. What customers will we serve? — What is our target market? 2. How can we best serve these customers? — What is our value proposition? MBA~ IM – VTU
- 29. Introduction to Infrastructure Marketing Choosing a Value Proposition The set of benefits or values a company promises to deliver to consumers to satisfy their needs. • Value propositions dictate how firms will differentiate and position their brands in the marketplace. MBA~ IM – VTU
- 30. Introduction to Infrastructure Marketing The Marketing Concept The marketing concept: “A marketing management philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors” MBA~ IM – VTU
- 31. Introduction to Infrastructure Marketing Customer Perceived Value Customer perceived value: – “Customer’s evaluation of the difference between all of the benefits and all of the costs of a marketing offer relative to those of competing offers.” (Armstrong & Kotler) – Perceptions may be subjective – Consumers often do not objectively judge values and costs. Customer value = perceived benefits – perceived sacrifice. MBA~ IM – VTU
- 32. Introduction to Infrastructure Marketing The Marketing Mix The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. • Product: Variety, features, brand name, quality, design, packaging, and services. • Price: List price, discounts, allowances, payment period, and credit terms. • Place: Distribution channels, coverage, logistics, locations, transportation, assortments, and inventory. • Promotion: Advertising, sales promotion, public relations, and personal selling. MBA~ IM – VTU
- 33. Introduction to Infrastructure Marketing Infrastructure Projects Marketing Point of View MBA~ IM – VTU
- 34. Introduction to Infrastructure Marketing Few examples of Infrastructure Projects • Airport projects • METRO RAIL projects • Ports • SEZ’s • Roads (High ways, Expressways, corridors) • Urban Services & PURA • Integrated Townships and leisure's • Telecom Projects MBA~ IM – VTU
- 35. Introduction to Infrastructure Marketing SEZ’s : IT Sector Specific • Multi Product SEZ : Mundra port (Gujrat) • IT SEZ: DLF IT Park ~ Pune / ANZ IT SEZ ~ Bangalore • Multi product SEZ (Hassan) MBA~ IM – VTU
- 36. Introduction to Infrastructure Marketing Road Projects • Golden Quadrilateral • NSEW Corridor • Bangalore ~ Chennai Express way • Pune ~ Mumbai Express way • BMIC corridor MBA~ IM – VTU
- 37. Introduction to Infrastructure Marketing Integrated Townships • DLF City ~ Gurgaon • Manhattan ~ NY • BMIC Corridor • Lavasa City ~ LAVASA MBA~ IM – VTU
- 38. Introduction to Infrastructure Marketing Thank You Continue in next class……. MBA~ IM – VTU
Notas do Editor
- Ok now let us understand what is infrastructure?Ask questions from Students make the class interactive (Pick students randomly and ask them to Define Infrastructure )List of What are the Infrastructure Project on BoardAsk them what they are going to offer in these projects to the publicWhat are the products / Services Infrastructure Sector offer to common public and nation at large
- Hard Infrastructure The following list of hard infrastructure is limited to capital assets that serve the function of conveyance or channelling of people, vehicles, fluids, energy, or information, and which take the form either of a network or of a critical node used by vehicles, or used for the transmission of electro-magnetic waves.Infrastructure systems include both the fixed assets, and the control systems and software required to operate, manage and monitor the systems, as well as any accessory buildings, plants, or vehicles that are an essential part of the system. Also included are fleets of vehicles operating according to schedules such as public transit buses and garbage collection, as well as basic energy or communications facilities that are not usually part of a physical network, such as oil refineries, radio, and television broadcasting facilities.Transportation infrastructure Road and highway networks, including structures (bridges, tunnels, culverts, retaining walls), signage and markings, electrical systems (street lighting and traffic lights), edge treatments (curbs, sidewalks, landscaping), and specialized facilities such as road maintenance depots and rest areas Mass transit systems (Commuter rail systems, subways, tramways, trolleys, City Bicycle Sharing system, City Car Sharing system and bus transportation) Railways, including structures, terminal facilities (rail yards, train stations), level crossings, signalling and communications systems Canals and navigable waterways requiring continuous maintenance (dredging, etc.) Seaports and lighthouses Airports, including air navigational systems Bicycle paths and pedestrian walkways, including pedestrian bridges, pedestrian underpasses and other specialized structures for cyclists and pedestrians FerriesFor canals, railroads, highways, airways and pipelines see Grübler (1990),[13] which provides a detailed discussion of the history and importance of these major infrastructures.Energy infrastructure Electrical power network, including generation plants, electrical grid, substations, and local distribution. Natural gas pipelines, storage and distribution terminals, as well as the local distribution network. Some definitions may include the gas wells, as well as the fleets of ships and trucks transporting liquefied gas. Petroleum pipelines, including associated storage and distribution terminals. Some definitions may include the oil wells, refineries, as well as the fleets of tanker ships and trucks. Specialized coal handling facilities for washing, storing, and transporting coal. Some definitions may include Coal mines. Steam or hot water production and distribution networks for district heating systems. Electric vehicle networks for charging electric vehicles.Coal mines, oil wells and natural gas wells may be classified as being part of the mining and industrial sector of the economy, not part of infrastructure.Water management infrastructure Drinking water supply, including the system of pipes, storage reservoirs, pumps, valves, filtration and treatment equipment and meters, including buildings and structures to house the equipment, used for the collection, treatment and distribution of drinking water Sewage collection, and disposal of waste water Drainage systems (storm sewers, ditches, etc.) Major irrigation systems (reservoirs, irrigation canals) Major flood control systems (dikes, levees, major pumping stations and floodgates) Large-scale snow removal, including fleets of salt spreaders, snow plows, snowblowers, dedicated dump trucks, sidewalk plows, the dispatching and routing systems for these fleets, as well as fixed assets such as snow dumps, snow chutes, snow melters Coastal management, including structures such as seawalls, breakwaters, groynes, floodgates, as well as the use of soft engineering techniques such as beach nourishment, sand dune stabilization and the protection of mangrove forests and coastal wetlands. Communications infrastructure Postal service, including sorting facilities Telephone networks (land lines) including telephone exchange systems Mobile phone networks Television and radio transmission stations, including the regulations and standards governing broadcasting Cable television physical networks including receiving stations and cable distribution networks (does not include content providers or "networks" when used in the sense of a specialized channel such as CNN or MTV) The Internet, including the internet backbone, core routers and server farms, local internet service providers as well as the protocols and other basic software required for the system to function (does not include specific websites, although may include some widely-used web-based services, such as social network services and web search engines) Communications satellites Undersea cables Major private, government or dedicated telecommunications networks, such as those used for internal communication and monitoring by major infrastructure companies, by governments, by the military or by emergency services, as well as national research and education networks Pneumatic tube mail distribution networksSolid waste management Municipal garbage and recyclables collection Solid waste landfills Solid waste incinerators and plasma gasification facilities Materials recovery facilities Hazardous waste disposal facilitiesEarth monitoring and measurement networks Meteorological monitoring networks Tidal monitoring networks Stream Gauge or fluviometric monitoring networks Seismometer networks Earth observation satellites Geodetic benchmarks Global Positioning System Spatial Data InfrastructureSoft Infrastructure Soft infrastructure includes both physical assets such as highly specialized buildings and equipment, as well as non-physical assets such as the body of rules and regulations governing the various systems, the financing of these systems, as well as the systems and organizations by which highly skilled and specialized professionals are trained, advance in their careers by acquiring experience, and are disciplined if required by professional associations (professional training, accreditation and discipline).Unlike hard infrastructure, the essence of soft infrastructure is the delivery of specialized services to people. Unlike much of the service sector of the economy, the delivery of those services depend on highly developed systems and large specialised facilities or institutions that share many of the characteristics of hard infrastructure.Governance infrastructure The system of government and law enforcement, including the political, legislative, law enforcement, justice and penal systems, as well as specialized facilities (government offices, courthouses, prisons, etc.), and specialized systems for collecting, storing and disseminating data, laws and regulation Emergency services, such as police, fire protection, and ambulances, including specialized vehicles, buildings, communications and dispatching systems Military infrastructure, including military bases, arms depots, training facilities, command centers, communication facilities, major weapons systems, fortifications, specialised arms manufacturing, strategic reserves Economic infrastructure The financial system, including the banking system, financial institutions, the payment system, exchanges, the money supply, financial regulations, as well as accounting standards and regulations Major business logistics facilities and systems, including warehouses as well as warehousing and shipping management systems Manufacturing infrastructure, including industrial parks and special economic zones, mines and processing plants for basic materials used as inputs in industry, specialized energy, transportation and water infrastructure used by industry, plus the public safety, zoning and environmental laws and regulations that govern and limit industrial activity, and standards organizations Agricultural, forestry and fisheries infrastructure, including specialized food and livestock transportation and storage facilities, major feedlots, agricultural price support systems (including agricultural insurance), agricultural health standards, food inspection, experimental farms and agricultural research centers and schools, the system of licencing and quota management, enforcement systems against poaching, forest wardens, and fire fightingSocial infrastructure The health care system, including hospitals, the financing of health care, including health insurance, the systems for regulation and testing of medications and medical procedures, the system for training, inspection and professional discipline of doctors and other medical professionals, public health monitoring and regulations, as well as coordination of measures taken during public health emergencies such as epidemics The educational and research system, including elementary and secondary schools, universities, specialised colleges, research institutions, the systems for financing and accrediting educational institutions Social welfare systems, including both government support and private charity for the poor, for people in distress or victims of abuseCultural, sports and recreational infrastructure Sports and recreational infrastructure, such as parks, sports facilities, the system of sports leagues and associations Cultural infrastructure, such as concert halls, museums, libraries, theatres, studios, and specialized training facilities Business travel and tourism infrastructure, including both man-made and natural attractions, convention centers, hotels, restaurants and other services that cater mainly to tourists and business travellers, as well as the systems for informing and attracting tourists, and travel insurance
- Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project, decision or government policy (hereafter, "project"). CBA has two purposes: 1.To determine if it is a sound investment/decision (justification/feasibility) 2.To provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.Equivalent Annual CostIn finance the equivalent annual cost (EAC) is the cost per year of owning and operating an asset over its entire lifespan.EAC is often used as a decision making tool in capital budgeting when comparing investment projects of unequal lifespans. For example if project A has an expected lifetime of 7 years, and project B has an expected lifetime of 11 years it would be improper to simply compare the net present values (NPVs) of the two projects, unless neither project could be repeated.EAC is calculated by dividing the NPV of a project by the present value of an annuity factor. Equivalently, the NPV of the project may be multiplied by the loan repayment factor.The use of the EAC method implies that the project will be replaced by an identical project.Future WorthFuture value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. The value does not include corrections for inflation or other factors that affect the true value of money in the future. This is used in time value of money calculations.Internal Rate Of ReturnThe internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR) or the rate of return (ROR).In the context of savings and loans the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors (e.g., the interest rate or inflation).Present WorthPresent value, also known as present discounted value, is the value on a given date of a payment or series of payments made at other times.If the payments are in the future, they are discounted to reflect the time value of money and other factors such as investment risk. If they are in the past, their value is correspondingly enhanced to reflect that those payments have been (or could have been) earning interest in the intervening time. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful "like to like" basis.Return On Investment (ROI)Return on investment (ROI) is one way of considering profits in relation to capital invested. Return on assets (ROA), return on net assets (RONA), return on capital (ROC) and return on invested capital (ROIC) are similar measures with variations on how 'investment' is defined.Marketing not only influences net profits but also can affect investment levels too. New plants and equipment, inventories, and accounts receivable are three of the main categories of investments that can be affected by marketing decisions.In a survey of nearly 200 senior marketing managers, 77 percent responded that they found the "return on investment" metric very useful
- Hard infrastructure generally has the following attributes.Capital assets that provide servicesThese are physical assets that provide services. The people employed in the hard infrastructure sector generally maintain, monitor, and operate the assets, but do not offer services to the clients or users of the infrastructure. Interactions between workers and clients are generally limited to administrative tasks concerning ordering, scheduling, or billing of services.Large networksThese are large networks constructed over generations, and are not often replaced as a whole system. The network provides services to a geographically defined area, and has a long life because its service capacity is maintained by continual refurbishment or replacement of components as they wear out.Historicity and interdependenceThe system or network tends to evolve over time as it is continuously modified, improved, enlarged, and as various components are rebuilt, decommissioned or adapted to other uses. The system components are interdependent and not usually capable of subdivision or separate disposal, and consequently are not readily disposable within the commercial marketplace. The system interdependency may limit a component life to a lesser period than the expected life of the component itself.Natural monopolyThe systems tend to be natural monopolies, insofar that economies of scale means that multiple agencies providing a service are less efficient than would be the case if a single agency provided the service. This is because the assets have a high initial cost and a value that is difficult to determine. Once most of the system is built, the marginal cost of servicing additional clients or users tends to be relatively inexpensive, and may be negligible if there is no need to increase the peak capacity or the geographical extent of the network.In public economics theory, infrastructure assets such as highways and railways tend to be public goods, in that they carry a high degree of non-excludability, where no household can be excluded from using it, and non-rivalry, where no household can reduce another from enjoying it. These properties lead to externality, free ridership, and spill over effects that distort perfect competition and market efficiency. Hence, government becomes the best actor to supply the public goods
- Economics, management, engineering, and impactsThe following concerns mainly hard infrastructure and the specialized facilities used for soft infrastructure.Ownership and financingPublic capitalInfrastructure may be owned and managed by governments or by private companies, such as sole public utility or railway companies. Generally, most roads, major ports and airports, water distribution systems and sewage networks are publicly owned, whereas most energy and telecommunications networks are privately owned. Publicly owned infrastructure may be paid for from taxes, tolls, or metered user fees, whereas private infrastructure is generally paid for by metered user fees. Major investment projects are generally financed by the issuance of long-term bonds.An interesting comparison between privatization versus government-sponsored public works involves high speed rail (HSR) projects in East Asia. In 1998, the Taiwan government awarded the Taiwan High Speed Rail Corporation, a private organization, to construct the 345 km line from Taipei to Kaohsiung in a 35-year concession contract. Conversely, in 2004 the South Korean government charged the Korean High Speed Rail Construction Authority, a public entity, to construct its high speed rail line, 412 km from Seoul to Busan, in two phases. While different implementation strategies, Taiwan successfully delivered the HSR project in terms of project management (time, cost, and quality), whereas South Korea successfully delivered its HSR project in terms of product success (meeting owners' and users' needs, particularly in ridership). Additionally, South Korea successfully created a technology transfer of high speed rail technology from French engineers, essentially creating an industry of HSR manufacturing capable of exporting knowledge, equipment, and parts worldwide.Henceforth, government owned and operated infrastructure may be developed and operated in the private sector or in public-private partnerships, in addition to in the public sector. In the United States, public spending on infrastructure has varied between 2.3% and 3.6% of GDP since 1950. Many financial institutions invest in infrastructure.Role of pension fundsThe average allocation to infrastructure only represents 1% of total assets under management by pensions- excluding indirect investment through ownership of stocks of listed utility and infrastructure companies. But there are wide typology differences across regions with many large, sophisticated, pension funds in jurisdictions such as Ontario, Quebec, California, Holland, and Australia already investing more than 5% of their total assets (and typically more than a third of their “alternative” assets) in infrastructure. In countries such as the US, Mexico, Sweden and Norway, there has been a rapid rise of the allocation to infrastructure since 2010, even among more traditional pension funds.[28]Infrastructure as a new asset class for pension funds and SWFsMost pension funds have long-dated liabilities, with matching long-term investments. These large institutional investors need to protect the long-term value of their investments from inflationary debasement of currency and market fluctuations, and provide recurrent cash flows to pay for retiree benefits in the short-medium term: from that perspective, think-tanks such as the World Pensions Council (WPC) have argued that infrastructure is an ideal asset class that provides tangible advantages such as long duration (facilitating cash flow matching with long-term liabilities), protection against inflation and statistical diversification (low correlation with ‘traditional’ listed assets such as equity and fixed income investments), thus reducing overall portfolio volatility.The various types of pension plans (public and private pensions and superannuation schemes) account for approximately 40% of all investors in the infrastructure asset class, excluding projects directly funded and developed by governments and public authorities.[28] Large pension and SWF investors are particularly active in the field of energy assets such as natural gas and natural gas infrastructure, where they have become majors players in recent years Infrastructure debtInfrastructure debt is a complex investment category reserved for highly sophisticated institutional investors who can gauge jurisdiction-specific risk parameters, assess a project’s long-term viability, understand transaction risks, conduct due diligence, negotiate (multi)creditors’ agreements, make timely decisions on consents and waivers, and analyze loan performance over time.Research conducted by the World Pensions Council (WPC) suggests that most UK and European pensions wishing to gain a degree of exposure to infrastructure debt have done so indirectly, through investments made in infrastructure funds managed by specialized Canadian, US and Australian funds.On November 29, 2011, the British government unveiled an unprecedented plan to encourage large-scale pension investments in new roads, hospitals, airports, etc. across the UK. The plan is aimed at enticing 20 billion pounds ($30.97 billion) of investment in domestic infrastructure projects.Infrastructure asset managementThe method of infrastructure asset management is based upon the definition of a Standard of service (SoS) that describes how an asset will perform in objective and measurable terms. The SoS includes the definition of a minimum condition grade, which is established by considering the consequences of a failure of the infrastructure asset.The key components of infrastructure asset management are: Definition of a standard of service Establishment of measurable specifications of how the asset should perform Establishment of a minimum condition grade Establishment of a whole-life cost approach to managing the asset Elaboration of an Asset Management PlanEngineeringEngineering and Project managementMost infrastructure is designed by engineers, urbanists or architects. Generally road and rail transport networks, as well as water and waste management infrastructure are designed by civil engineers, electrical power and lighting networks are designed by power engineers and electrical engineers, and telecommunications, computing and monitoring networks are designed by systems engineers.In the case of urban infrastructure, the general layout of roads, sidewalks and public places may sometimes be designed by urbanists or architects, although the detailed design will still be performed by civil engineers. If a building is required, it is designed by an architect, and if an industrial or processing plant is required, it may be designed by industrial engineer or a process engineer.In terms of engineering tasks, the design and construction management process usually follows these steps: Preliminary Studies Determine existing and future traffic loads, determine existing capacity, and estimate the existing and future standards of service Conduct a preliminary survey and obtain information from existing air photos, maps, and plans Identify possible conflicts with other assets or topographical features Perform environmental impact studies: Evaluate the impact on the human environment (noise pollution, odors, electromagnetic interference, etc.) Evaluate the impact on the natural environment (disturbance of natural ecosystems) Evaluate the possible presence of contaminated soils; Given various time horizons, standards of service, environmental impacts, and conflicts with existing structures or terrain, propose various preliminary designs Estimate the costs of the various designs, and make recommendationsDetailed Survey Perform a detailed survey of the construction site Obtain "as built" drawings of existing infrastructure Dig exploratory pits where required to survey underground infrastructure Perform a geotechnical survey to determine the bearing capacity of soils and rock Perform soil sampling and testing to estimate nature, degree and extent of soil contaminationDetailed Engineering Prepare detailed plans and technical specifications Prepare a detailed bill of materials Prepare a detailed cost estimate Establish a general work scheduleAuthorization Obtain authorization from environmental and other regulatory agencies Obtain authorization from any owners or operators of assets affected by the work Inform emergency services, and prepare contingency plans in case of emergenciesTendering Prepare administrative clauses and other tendering documents Organize and announce a call for tenders Answer contractor questions and issue addenda during the tendering process Receive and analyse tenders, and make a recommendation to the ownerConstruction Supervision Once the construction contract has been signed between the owner and the general contractor, all authorisations have been obtained, and all pre-construction submittals have been received from the general contractor, the construction supervisor issues an "Order to begin construction" Regularly schedule meetings and obtain contact information for the general contractor (GC) and all interested parties Obtain a detailed work schedule and list of subcontractors from the GC Obtain detailed traffic diversion and emergency plans from the GC Obtain proof of certification, insurance and bonds Examine shop drawings submitted by the GC Receive reports from the materials quality control lab When required, review Change requests from the GC, and issue construction directives and change orders Follow work progress and authorize partial payments When substantially completed, inspect the work and prepare a list of deficiencies Supervise testing and commissioning Verify that all operating and maintenance manuals, as well as warranties, are complete Prepare "as built" drawings Make a final inspection, issue a certificate of final completion, and authorize the final paymentImpact on economic developmentInvestment in infrastructure is part of the capital accumulation required for economic development and may have an impact on socioeconomic measures of welfare. The causality of infrastructure and economic growth has always been in debate. In developing nations, expansions in electric grids, roadways, and railways show marked growth in economic development. However, the relationship does not remain in advanced nations who witness more and more lower rates of return on such infrastructure investments.Nevertheless, infrastructure yields indirect benefits through the supply chain, land values, small business growth, consumer sales, and social benefits of community development and access to opportunity. Environmental impactsWhile infrastructure development may initially be damaging to the natural environment, justifying the need to assess environmental impacts, it may contribute in mitigating the "perfect storm" of environmental and energy sustainability, particularly in the role transportation plays in modern society.Offshore wind power in England and Denmark may cause issues to local ecosystems but are incubators to clean energy technology for the surrounding regions. Ethanol production may overuse available farmland in Brazil but have propelled the country to energy independence. High speed rail may cause noise and wide swathes of rights-of-way through country sides and urban communities but have helped China, Spain, France, Germany, Japan, and other nations deal with concurrent issues of economic competitiveness, climate change, energy use, and built environment sustainability.