The triggering of the current global financial crisis is generally attributed to the sub-prime mortgage crisis in the United States of America. The loss of investor confidence in these securitised mortgages resulted in a credit crunch. Leaders at the G-20 Summit reached a common understanding of the causes of the crisis; “Major underlying factors to the current situation were, among others, inconsistent and insufficiently co-ordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.” In September 2008, stock markets worldwide crashed. This was followed by more than 25 banks around the world failing or being bailed out. The World Bank has lowered its growth forecast for developing country economies to 4.5 per cent for 2009, compared to a previous projection of 6.4 per cent, due to a combination of financial turmoil, slower exports and weaker commodity prices. The International Monetary Fund (IMF) has also readjusted global forecasts. (See Table 1).

President of the World Bank Robert B. Zoellick said “If September and October were about co-ordinated and co-operative monetary policies, then November and December will be increasingly about starting fiscal stimulus.” Mr Zoellick said that such actions must take into account the interests of the poor and most vulnerable in developing countries.

The G-20 Summit brought together the heads of state and government of the G20, the Secretary General of the United Nations, the Director General of the IMF, the President of the World Bank, the President of the European Commission and the President of the Financial Stability Forum. The leaders discussed the causes and implications of the global financial crisis in order to formulate policies to deal with the situation and ensure it does not happen again and adopted a declaration.

The G-20 declaration stated that “We have taken strong and significant actions to date to stimulate our economies, provide liquidity, strengthen the capital of financial institutions, protect savings and deposits, address regulatory deficiencies, unfreeze credit markets, and are working to ensure the international financial institutions can provide critical support for the global economy.”

The declaration pledged to explore ways to restore emerging and developing countries’ access to credit and resume private capital flows which are critical for sustainable growth and development, including ongoing infrastructure investment. Around the globe Trenchless Technology is providing an efficient, non-disruptive, greener and more economical option for governments when initiating infrastructure projects. Global snapshot

Trenchless International spoke with representatives of the ISTT, affiliated societies and industry representatives to learn their perspective on the impact the global economic crisis is likely to have on the trenchless industry.

States are responding to the development of the crisis with differing means, internal structures and spending packages.

Executive Director of the NASTT Mike Willmets reiterated the importance of Trenchless Technology, as the technology is less expensive and more environmentally friendly than traditional methods.

Mr Willmets said that, based upon the observations of industry contacts, North American trenchless contractors, suppliers and engineering firms are currently extremely busy with no large scale slowdown evident. “Nevertheless, it may be fair to say that much of this work was funded by various government levels prior to the so-called ‘cratering’ of the economy,” he said.

The United States Government enacted the Emergency Economic Stabilisation Act of 2008, authorising the Treasury to spend up to $US700 billion to purchase distressed assets in an attempt to support the financial and banking sectors. Mr Willmets said that If North America is uneasy; it is with the continent’s main industrial engine, the United States. The financial uncertainty of the “Big Three” (Ford, GM and Chrysler) has raised fears to a new level.

"Excessive debt is a major obstacle and the controversial $US700 billion bailout of major banks can be viewed as unthinkable that the U.S. government would be required to guarantee inter-institutional loans. This casts suspicions on the free market economic system and indeed, the global economy."

Nevertheless, the U.S. is still an industrial giant with a resilient business community said Mr Willmets. “The entrepreneurial spirit of America should never be underestimated and cynical fatalism has no place on Wall Street.”

When asked if the global credit crisis has affected the outlook for trenchless projects Mr Willmets answered that the true state of Trenchless Technology and the related industries will be revealed in 2009.

“Tell tale signs are already appearing in the municipal Capital Budget planning process whereas, many upcoming infrastructure projects are being curtailed or outright cancelled,” said Mr Willmets. “This being the case, the importance of an economic resurgence and recovery is critical prior to the next budgetary cycle.”

“Thankfully, American decision makers truly understand that Trenchless Technology reaps the well known moniker of ‘doing more with less’ and generally, a trenchless or low-dig approach can be significantly less expensive than traditional methods. Moreover, the ‘green’ label of less impact on the environment will keep trenchless in the tool box of most municipalities regardless of slowdowns.

In Canada, stimulative measures were taken to boost the economy in 2007, including $US17 billion in incremental tax relief. Minister of Finance Jim Flaherty said “We will work together to continue to invest strategically in things like infrastructure that will help leverage this economic advantage through difficult times.”

Mr Willmets said that in Canada, the housing industry is still experiencing growth and mortgage consumers remain relatively positive.

“This is not to say that belt tightening is not occurring or planned but, the highly regulated and conservative Canadian banking system should mean less instability.

“The newly re-elected Canadian government is committed to responsible fiscal management and has announced the creation of a common securities regulator. The Canadian dollar is almost entirely natural resources based and has devalued proportionately with the decline of the world price of oil. A lower Canadian dollar will assist with stabilising the national economy and is a godsend for export driven industries in Canada,” he said.

The recent survey from the North American-based Association of Equipment Manufacturers (AEM) found that construction machinery manufacturers forecast a tough business outlook through to 2009. The survey was conducted in the third quarter 2008 with many of the responses prior to the U.S. financial market collapse.

AEM President Dennis Slater said “We need to get dollars into the construction pipeline. An immediate increase in public works funding will help jumpstart the U.S. economy.

“Construction projects are being deferred and our customers are looking for work. It’s estimated that there are currently 3,000 projects that could begin work within 30 to 90 days of a governmental funding commitment.”

Mr Willmets said “I have just returned from a water and wastewater conference in Mexico. This event was opened by the President of Mexico and an enormous financial commitment to infrastructure projects was announced. The blossoming trenchless industry in Mexico will undoubtedly benefit from this initiative. Hopefully, the announcement is more than just political rhetoric.”

To combat the effects of the global financial situation, the Federal Government of Australia announced a $US6.7 billion Economic Security Strategy. The Government is also accelerating the implementation of projects to be funded through the three Nation Building Funds announced in the Budget to strengthen the economy, with $US8.1 billion towards the Building Australia Fund for transport and communications infrastructure. Infrastructure Australia has also produced an interim report, which will identify investment priorities and policy and regulatory reforms that will be necessary to enable timely and coordinated delivery of national infrastructure investment. In India investment flows into infrastructure have been hit as a result of the global financial crisis. The Planning Commission Deputy Chairman Montek Singh Ahluwalia said “We can see some slowing down of investments in the economy not only because of foreign investors but also because of domestic investors.” He said the Government planned to expand investment in infrastructure and is examining ways of doing it.

The State Council of the People’s Republic of China announced that a stimulus package estimated at $US570 billion will be spent over the next two years to finance programs in ten major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake.

China has implemented a series of stimulus policies including interest rate cuts, lower bank reserve requirement ratios, tax changes, higher credit quotas and the injection of central government funds to infrastructure construction. The package aims to improve environmental protection by enhancing the construction of sewage and rubbish treatment facilities and preventing water pollution in key areas. The Chinese Government also plans to increase rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure the safety of drinking water.

Jordanian Prince El Hassan bin Talal said that the global financial slowdown could be seen as a unique opportunity for Middle Eastern investment and reform, encouraging the states of the region to embark on a trans-border process for co-operation and security. Prince Hassan said that “Middle Eastern nations could expand their regional collaboration in the fields of water, energy and the environment through intra-regional agreements focused on building trust, cooperation and security.”

Chairman of the JSTT Taigo Matsui said that the trenchless market in Japan is shrinking by 3 – 5 per cent every year due to the decreasing of public and private works.

Mr Matsui said that in particular the number of new installations is radically decreasing. However, rehabilitation and renovation works are slightly increasing and are expected to continue growing in the future.

Trenchless International asked Mr Matsui if the global credit crisis has affected the outlook for trenchless projects. Mr Matsui said “It does have an effect. We are hoping that more public works will be ordered as a countermeasure to boost the economy.”

Brazilian President Luiz Inácio Lula da Silva said that the country will not cut budgets allocated for infrastructure programs, despite the current financial crisis. President Lula said that Brazil will stick to its plans to spend hundreds of billions of dollars on infrastructure in the coming years.

President of ABRATT Paulo Dequech said that anecdotally ABRATT believes it will experience a retraction of 30 per cent for contracts in the oil and gas industry. However, the association does not predict a change in the sanitation industry.

Mr Dequech added that although the government is helping local banks to reduce financial costs and increasing official funding for local companies in general with more credit restrictions and high costs for investments the credit crisis is likely to impact private infrastructure programs.

In October, heads of state and government from 27 European Union countries met at an EU Summit to discuss the financial crisis. French President Nicolas Sarkozy said “We all agree in Europe that we are going to need to re-found the international financial system.”

Publisher of magazine Trenchless Engineering Paweł Kośmider said that the condition of the trenchless market in Poland is good. “There are more and more projects where the traditional technologies are replaced by trenchless technologies. It’s connected with all the advantages which are given by using no-dig techniques. We spend continuously growing amounts on industry projects. The growth in our country is connected with the Union funds that we receive from the European Union for development in the industry fields.”

Trenchless International asked Mr Kośmider how the current credit crunch has affected Poland’s trenchless industry. He said “At the beginning of the global crisis the impact of it was barely perceptible. The direct reason of this situation was that there is such a good banking system in our country. Now there appear to be some problems in applying for credits.”

However, Mr Kośmider said that this has not had a direct impact on trenchless projects in Poland. “A lot of those projects are incorporated in a very large industry project which is financed by the funds from the European Union. So the money for many of the projects is guaranteed.” Trenchless projects will also benefit from these funds.

Mr Kośmider said that one of the most significant moments of the year was the sudden realisation of world financial crisis and the consequences that followed. “Not so long ago both Polish politicians and economy experts would claim that the crisis would avoid Poland and its effects would be minimal. Indeed, if compared to some of the countries where economy has been seriously damaged, in Poland there are no severe consequences.

“We cannot, however, assume that Poland is an economic island independent from the global situation. Only now, in the longer run, are we starting to suffer from the repercussions. Some sectors of our economy or industry do still need to wait a while before they are affected.”

He said that the former optimism is slowly subsiding and the views on the subject are being carefully reviewed. Acting from the new prognosis, the government has decided to introduce an amendment into the budget project for 2009 along with revising its assumptions regarding the growth.

“The government’s answer to the slowing down economy is the newly announced plan for stability and developments which is supposed to guarantee a slowdown of only one year. We can also expect some simplifications in regulations for getting bank loans and mortgages, which have become very steep recently. The government is also planning to speed up the realisation of projects financed by the EU.”

The SSTT said that the society does not think that the global credit crisis has had a direct affect on trenchless projects in Norway, Sweden and Denmark. The SSTT said that the crisis could perhaps even have a positive effect on investments as the maintenance of infrastructure will be increased in order to keep up with the rate of employment which again means increasing business for no-dig projects.

The governments of the Scandinavian countries are all very much focused on climate changes and environmental issues in general. The SSTT said that this increased focus can benefit no-dig methods, provided that they are able to inform and market the huge environmental advantages of Trenchless Technology.

Shantayanan Devarajan, Chief Economist of the World Bank’s Africa region, said that Africa’s banking system is not threatened by the current global financial crisis, but the region could see a decrease in private investment flows. Such a decrease would compromise the financing of many infrastructure projects on the continent.

Trenchless International asked Cedric Bessit, of Vela VKE Consulting Engineers in South Africa, his opinion on the state of the trenchless industry. Mr Bessit, considering the number of tender submissions returned on a recent trenchless construction project, said in his opinion that the number of contractors has increased since 2006. “There has definitely been a shift of traditionally conventional construction contractors to also now include trenchless construction.”

When asked if the credit crisis has affected the outlook for trenchless projects Mr Bessit explained that considering that the majority (if not all) trenchless construction materials, machinery and equipment is imported from countries affected by the global financial situation, this is likely to affect the application of trenchless construction projects in South Africa.

The South African Government has made asset management mandatory for local municipalities. “This is very beneficial to the trenchless application of routine CCTV maintenance,” said Mr Bessit.

A dynamic and expanding industry

In a period of tumultuous economic uncertainty, many industries are suffering, but at the same time many governments are choosing to invest in infrastructure to help prop up financial security and domestic prosperity. The trenchless industry stands to benefit from this spending. Even when economic times were good, governments and municipalities could not rehabilitate essential infrastructure fast enough; this need remains, despite the changed conditions. This type of work should also be a key element in fostering employment and helping facilitate the economic recovery.

The trenchless industry serves communities by decreasing the disruptions to traffic and ensuring business can continue; offering technologically innovative and environmentally friendlier solutions to ensure that essential services are maintained and improved.

Ultimately Trenchless Technology is about doing more with less and is therefore a very viable option when belts are being tightened. No industry is immune from global economic shocks, but trenchless looks poised to ride it out better than most.