The top 20 most attractive countries for infrastructure investment

25 July 2016 Consultancy.uk

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).

Top countries for infrastructure investment

Top 20
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.

Top Asian countries for for infrastructure investment

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.”

Top European countries for for infrastructure investment

Europe
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.

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Consumer goods start-ups grow interest from venture capital

23 April 2019 Consultancy.uk

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.