Emerging markets are winning the race to attract global infrastructure investment

Securing private finance for infrastructure development is something that governments have long sought. Good quality infrastructure can ensure a country remains globally competitive and meets the social and economic needs of its people.

Securing private finance for infrastructure development is something that governments have long sought. Good quality infrastructure can ensure a country remains globally competitive and meets the social and economic needs of its people. However, in a world where the race to secure these funds is becoming increasingly competitive, it is important for countries to ensure their local market is attractive to investors. Low risk business environments, healthy development pipelines and steadily growing economies are all magnets for private investment and, according to our Global Infrastructure Investment Index, it is the emerging markets of Singapore, Qatar and UAE that come out top.

This is perhaps not surprising, given the economic environment in these markets. All have seen their economies grow steadily for a number of years and all possess a clear understanding of how high quality power generation facilities and transport hubs can significantly contribute to furthering this growth.

Moving away from emerging markets, the USA and the UK also featured in the top ten of our index during 2014. This represents a notable improvement from the last time we ran the index back in 2012 and is largely indicative of improvements in their respective economies following the financial crash. In the USA, this improvement has also been bolstered by increasing commitments by both individual states and from central government that investment in infrastructure is not just a growing need but a necessity.

From an investor’s perspective, financing infrastructure involves looking at a country’s long term growth prospects. However, this has to be balanced against the risks and be they political, financial or regulatory. It is for this reason that Argentina, Greece and Venezuela make up the bottom of the table. These nations, in particular, have issues around managing debt and high inflation which is likely to deter many. Argentina is dealing with a large current account deficit while Greece is managing structural overhaul in an effort to meet its bailout requirements. Venezuela’s nationalisation programme is also negatively influencing investor appetite. The typical infrastructure investor, be it a pension fund, sovereign wealth or life company, are ultimately seeking long term, stable opportunities. Therefore, investing into potentially volatile and unstable markets is far from an attractive option.

All told, the race to secure finance is likely to become an increasingly hard fought one over the coming years. Investors are progressively looking to diversify their portfolios beyond the equity markets that displayed such volatility post financial crisis. This represents a huge opportunity for governments to take advantage but they will have to work a lot harder in order to keep ahead of the pack.

Rob Mooren

Group Executive Project Services Ask me a question
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