Countries around the world are projected to invest heavily in new infrastructure, with up to $49 billion in new economic infrastructure investments expected to be made by 2030. According to a new research report, Singapore is globally the most attractive destination for infrastructure investments, followed by Qatar and the UAE. The Nordics and the UK are the top ranked European locations.
In many of the world’s developed economies, tracts of infrastructure are nearing their best-before dates, even without taking into consideration the growing demand as urbanisation continues. In the developing world, rapid urbanisation and modernisation has seen a range of huge infrastructure projects launch across the Middle East and Asia, among others.
In a new report from Arcadis, titled ‘Bridging the Investment Gap’, the firm considers the attractiveness of a range of countries for private investors seeking to generate returns through the infrastructure asset class. The firm ranks 41 countries in terms of five key indicators (containing 24 sub-indicators), including economy (black in below chart), business environment (red), risk environment (green), Infrastructure investment (blue) and Financial conditions (yellow).
According to the analysis, Singapore is the top ranked country for private infrastructure investment, with a strong representation across all indicators. Qatar comes in second, due to a large number of massive infrastructure projects, such as those for the FIFA World Cup, as well as its high GDP. The UAE takes third spot – the country has been heavily investing in infrastructure for years, and, even with changes in oil price, will continue to do so in preparation for the 2020 world expo in Dubai. Canada takes the number four spot, reflecting the government’s efforts to improve the infrastructure in the country through the creation of its 'New Building Canada Plan' which earmarked $53 billion in investment over the next decade for public transit, clean energy and housing. Malaysia rounds off the top five, thanks to its strong economic performance and long term continued investment in infrastructure, for example its capital city’s metro system.
The Asian picture
Singapore remains at the top of the Asian ranking, a position it has held for the past four years. Malaysia managed to increase its standing by two spots since the last report, although its relative dependency on the price of commodities creates a risky short-term situation. Australia has seen its attractiveness fall slightly from 2012 onward, following changes to the commodity market. The country remains relatively well place however, with considerable new infrastructure projects on the cards.
China, which has seen an absurd amount of money invested into the country’s infrastructure, around $8.1 trillion over the past 15 years, finds itself at number 17 among private investors. The country offers a booming economy, even while it is transforming, but is negatively affected by an uncertain business environment and risks. Regional players have seen their currencies depreciate against the dollar, such as Malaysia (down 25%), Thailand (down 10%) and South Korea (down 14%), which continues to put pressure on the infrastructure investment fund side of their competitiveness.
Malcolm Johnston, one of the researchers, says, “Singapore and Malaysia have open long term plans for infrastructure but as you go further down the index it becomes a little more haphazard, less transparent and politically driven by individual politicians. This means that in some cases investors don’t have all the facts and figures to hand to enable them to make rational decisions.”
In Europe, Norway leads the pack, now scoring above Sweden for the country with the highest infrastructure investment attractiveness score. Germany comes in at number 13 in the index on the back of good visibility of long term deal flow, although a mature economy with a highly competitive market means that yields are less attractive to investors.
The UK is, according to the report, seen as a relatively attractive place for investment, at number 9. The government is working on a large number of mega projects, from the HS2 system to improving the connection between the Northern powerhouses. However, the plans are partly contingent on a remain vote. Given the vote to leave the EU and the considerable repercussions the exit is projected to have, the consequences on the UK’s attractiveness for investors remains in the air.
The European region as a whole is aiming to bolster its attractiveness, as well as foster growth, through a programme that supports infrastructure investment in the economy, titled ‘the Juncker Plan’. The €315 billion initiative contains a number of provisions that should make Europe more attractive to investment.
Don Hardy, Global Leader of the Business Advisory Infrastructure, Arcadis, says, “In Europe there is a lot of social and public need, and many project ideas and plans. A substantial amount of private sector money is available but the basic problem is that there aren’t enough investable and bankable projects. There has to be a way of bridging that gap and finding solutions where we can improve investment readiness”.
A few weeks ago Arcadis unveiled a list of the top 50 most sustainable cities for water management.