Ports are not a global priority. Since 2007, global infrastructure spending has tended to be dominated by two sectors: electricity and roads, which account for almost two-thirds of total spending. Telecoms and rail have each contributed around one-eighth of total spending, and a similar amount comes from investment in water, ports and airports combined.
There’s a difference between wanting and needing, and that difference is what defines priorities. The priority should be the need over the want, but sometimes its not such a clear decision, especially when there’s many other issues at hand that require attention. That seems to be the case with infrastructure investment on a worldwide level: the need sometimes isn’t as relevant as the want. Sometimes a country needs to invest in a certain type of infrastructure, like water treatment in Africa or connectivity in the Americas, but ends up spending more on airports and telecoms instead.
The long-term need
The GIO by Oxford Economics, analyzes 50 countries in all five continents revealing the infrastructure needs and the GDP investment those countries make accross seven different sectors: road, rail, airports, ports, telecoms, electricity and water.
“By sector, spending needs are greatest for electricity and roads, which together account for 65% of global infrastructure investment for the forecast period under the current trends scenario, or 67% under the investment need scenario. The gap between the two scenarios is proportionately greatest in the roads and ports sectors, where investment needs are just over 30% greater than the estimated spending under current trends. The gap is also relatively large for airports, where the spending requirement is 26% greater under the investment need scenario than under current trends,” reads the paper.
“As a proportion of world GDP, global infrastructure spending has remained broadly constant at around 3% over the last decade. It has also accounted for around 12% of total global investment over most of this period, although it did rise to almost 15% of total investment in 2009 as infrastructure spending was sustained against a backdrop of falling investment in other parts of the economy. This reflects that infrastructure projects are long-term in their nature, meaning that infrastructure spending takes longer to respond to changing economic circumstances than business investment. As such, while overall investment growth bottomed-out in 2009, infrastructure spending growth did not reach its minimum until 2011.”
Also, investment priorities vary by region. For instance, in Africa just over 20% of total fixed investment is dedicated to infrastructure, compared to 9% in the Americas.
The road to 2040
The paper compares the present spending trends to the current needs and then projects them onto a 2040 finish line… many countries don’t make it. A total 17% of estimated global infrastructure spending needs relate to the Americas. The 11 countries in the paper dataset (US, Canada, Chile, Colombia, Ecuador, Argentina, Uruguay, Peru, Paraguay, Mexico, Brazil), account for more than 95% of GDP in the Americas. “We estimate that if countries in the Americas continue to invest in line with current trends their estimated infrastructure investment to 2040 is likely to be just over US$5 tn. This would increase by almost 50% to US$7.8 tn in the investment need scenario. The latter is equivalent to 3.4% of GDP. While this places our investment need forecast towards the lower end of the range identified in previous research into investment needs in Latin America, at least some of the difference may be accounted for by maintenance expenditures. The latter are included in many previous studies, whereas we do not include ongoing maintenance costs (although we do include capital investment for replacement purposes). This may reflect that the continent’s geographical characteristics do not favor rail transport. Nonetheless, there is also evidence of an investment gap in the international transport sectors: the investment need forecast is some two-thirds higher than current trends for ports, and one-third higher for airports.”
The study shows that Peru, Chile and Uruguay also perform well on this indicator: the gap between the two scenarios is less than 25% for this group. In contrast, the three largest markets appear to be significantly under-performing relative to their peers: for Brazil and Argentina the investment need forecast is almost 80% greater than the current trends forecast, and for Mexico the gap is more than 100%. The question is, will they make it?
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