‘Signs of recovery’ in emerging-market infra

While private sector infrastructure investment in emerging markets has ticked up from last year, the $36.7 billion invested in the first half of 2017 remained well below historic norms.

The first-half total, according to a report issued by the World Bank, represented a 24 percent jump from the same period in 2016. Since investment generally picks up in the second half of the year, the emerging markets are positioned to pass last year’s total of $71 billion in investment.

But last year was the worst in a decade for emerging markets, so improving on 2016’s numbers is a low bar to clear. Investment to the end of June remained 15 percent below the five-year average over the same period and at the second lowest level over the past 10 years.

“These numbers are always heavily driven by what happens in some of the larger countries,” Laurence Carter, a World Bank senior director, told Infrastructure Investor. “And the numbers have fallen quite sharply, for example, in both Turkey and Brazil.”

A handful of countries stood out as bright spots in the first half. Indonesia had the highest level of investment at $7.8 billion, while Pakistan and Jordan cracked the top five with $3.9 billion and $2.2 billion, respectively. These totals stemmed from large projects in each country. In Indonesia, three coal power plants with a cumulative 3.2GW capacity accounted for $6.9 billion, while two hydropower plants comprised $3.6 billion. Nearly all of Jordan’s total came from a $2.1 billion shale-fired power plant.

“Indonesia is a country where there has been a lot of promise for some years, and it has not really materialised,” Carter said. “Now it looks like it really is, so that is encouraging.”

For Brazil, one of the largest developing markets, fallout from the country’s “Operation Car Wash” scandal, which has implicated state-owned oil company Petrobras in widespread corruption, continues to slow investment. Brazil was the top market in 2016, but its $15.2 billion total was less than half its previous five-year average. The country looks to be slipping further, as its $6.4 billion of first-half investment is down from the same period last year.

This year has also seen the energy sector in emerging markets continue to grow relative to transportation. Energy accounted for nearly three-quarters of total investment, with transportation projects amounting to 24 percent and water treatment and sewer projects the remaining 3 percent. The transportation sector was the largest in the developing world in 2014 and 2015, but has seen disappointing levels of investment since the beginning of 2016.