Our recent 2016 Global Built Asset Performance Index found Australia is falling behind developing nations on returns to its economy and performance of built assets. But how are built assets across Asia, Europe, North America and the Middle East performing?
China’s economic growth is powered by its built assets, which sees the country rank number one in terms of absolute returns from built assets. The share of GDP returns accounted for by built assets increased from 39% in 1990 to 52.9% this year. While China’s economy is clearly experiencing a slowdown, GDP is still forecast to grow at around 7%, and expected to continue investing in built assets at an unprecedented level. Whilst South East Asian countries such as Malaysia, Vietnam and Indonesia have rich commodity endowments, they will see the greatest percentage increase in built assets over the next decade as they continue to invest in manufacturing. Indonesia’s returns from built assets are forecasted to significantly increase from US$1.1 trillion in 2016 to $2.1 trillion in 2026 and Malaysia’s returns will nearly double in the next ten years to US$520 billion.
Germany leads in Europe at US$1 trillion returns from its built assets, followed by Turkey at US$807 billion and France at US$794 billion. Most European countries do not generate particularly high returns on a per-capita basis compared to their stocks of assets, which are generally high. The region will have to improve asset productivity as aging infrastructure is depreciating faster than rebuilding. On the contrary in the UK, due to low rates of both public and private investment, returns from built assets fell from 27.2% to 26.3%.
The US and Canada have not seen the same slowdown in GDP expansion that Europe has, although their post-crisis performance has not been strong. In 2016, built assets contributed 30.2% of GDP in the US (compared to 30.6% in 2014) and 29.8% in Canada (compared to 29.2% in 2014). While Europe has been seeing net depreciation for some years now (although this is expected to turn around as growth accelerates), the US has been expanding its built asset stock throughout. The US is also experiencing a decline in the effectiveness of existing assets reducing productivity due to a chronic under investment over decades, pulling negatively against the GDP’s return from assets. The current focus is getting significant public and political attention as cities across the country experience increased urbanization that strain existing systems.
Economies in the GCC have managed to reduce their reliance on commodities in recent years. One aspect of the UAE’s diversification program is to build infrastructure geared towards international aviation and tourism, and today equates to almost 50% of the UAE’s total annual GDP, the sixth highest percentage in the index. Following the same direction, Qatar has overtaken Singapore as the leading country in built asset returns per-capita showing its success in economic diversification away from hydrocarbons and making up 44% of GDP.
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