US infra gap largest in the world, report says

The US has the largest funding gap for infrastructure out of any country in the world, according to a report released by the G20-backed Global Infrastructure Hub.

While the report estimates that the US is set to spend $8.5 trillion on infrastructure between 2016 and 2040 based on current trends, it will need to spend closer to $12.4 trillion if it is to meet its investment needs. This will largely require a significant channelling of funds towards the country’s road sector, where the investment requirement is almost double the current forecasted spend.

Yet the US is not alone in its shortfall, with its requirements combined with other countries in the Americas amounting to a 32 percent gap. Africa’s deficit is estimated at 28 percent of its needs. Oceania and Europe are largely considered to be on track, while a split exists in Asia with China, South Korea, Japan and Singapore meeting needs but Bangladesh, Pakistan and India among those requiring huge investment.

Chris Heathcote, chief executive of the Global Infrastructure Hub, believes the US’s troubles lie in failing to maintain and subsequently build upon its infrastructure which was a world leader in the 1960s.

“Overall, it's pretty clear that the amount of investment going on in the US at the moment is not sufficient for them to increase their productivity,” he told Infrastructure Investor. “It's not sufficient for them to meet the needs of highly developed nations and so they have to work out how to get better at mobilising the incredible resources that they have and getting infrastructure maintained and built.”

Correlating with the general trends for large parts of the world, the road and electricity sectors in the US have a combined investment need of $3 trillion. A further $642 billion and $197 billion will be needed to be spent on airports and water respectively up to 2040.

“I think President Trump has been making the right noises about infrastructure,” Heathcote added. “It's the states that have to deliver infrastructure so the difficulty is trying to find a mechanism by which he can push the states to do more with the resources that are available.”

PROJECT FEAR

Heathcote praised China, the country with the largest needs in the world – estimated at $28.4 trillion – despite some of its investment “not particularly well thought through”. Between 2007 and 2015, the country accounted for almost 30 percent of all global infrastructure investment and Heathcote believes its progress – as well as that of other Asian counterparts – can serve as a “wake-up call” to Europe.

“Look at how China has done it since 2001,” he said. “It invested heavily in infrastructure and it urbanised. It had taken 203 million of the population out of poverty and into middle classes. That's a fifth of their population that has moved from one economic group to another. This is the power of infrastructure.”

There is also, according to Heathcote, a need in some jurisdictions to overcome a “fear” of promoting private sector involvement in infrastructure. He said this reserve is driven primarily by a misunderstanding of the private sector’s role and highlighted countries such as Colombia, Turkey and the Philippines as examples where governments have spent time to understand what it takes to make projects bankable for both sides.