In February, President Trump told a group of governors gathered at the White House: “Infrastructure – we’re going to start spending on infrastructure big. Not like we have a choice. It’s not like, oh gee, let’s hold it off.”
Europe also presents some compelling medium to long-term investment opportunities.
If you think the roads in Britain need some serious TLC, just think of the billions now being put towards fixing Germany’s motorways.
A recent S&P Global ratings report from March reported Germany has fallen to 16 from 4th place in the World Economic Forum’s world rankings of infrastructure investment.
This is largely because it hasn’t upgraded its road infrastructure and fixing this is likely to run into billions and will present a compelling investment opportunity. Likewise, it will need to boost its investment in renewable energy and improve its digital infrastructure.
That said, with a high current account surplus of 8.6 per cent as at 31 December 2016, Germany’s government has enough funds to put towards infrastructure projects without having to go to a third party – the private sector.
Emerging markets
Ten years ago, the biggest infrastructure spend was coming from two of the BRIC countries – the ‘India’ and ‘China’ of that acronym.
Billions of dollars were being thrown into developing cities and transport systems to bolster their burgeoning economies.
India’s infrastructure spend is approximately 5 per cent of its GDP, and China in particular has been continuing to spend. Estimates put its infrastructure spend at approximately 6.8 per cent of its GDP.
A McKinsey & Co commentary in January this year predicted the country would continue to carry out its planned infrastructure projects.
The commentary said: “The government hasn’t run out of good (or bad) infrastructure projects to spend on.
“Everything from urban transit – such as the $36bn (£26.4bn) project to create a megacity by improving transport links among Beijing, Tianjin, and the neighbouring province of Hebei – to intercity rail, water treatment, and 5G projects.
“Collectively, these projects could deliver several percentage points of growth in a manner similar to a decade ago, but not without debt levels reaching 300 per cent of GDP by the end of the year.”
But China is not the only fruit in the infrastructure basket. Other emerging markets are arising.
For example, Andy Ho, chief investment officer at VinaCapital and managing director of the VinaCapital Vietnam Opportunity Fund, comments: “There is a tremendous push to build infrastructure in Vietnam, and there are a number of local companies experienced in seeing these kind of projects through.”
Asia certainly seems to be popular. The Asian Development Bank (ADB) has estimated that developing Asia will require approximately $22 trillion (£16.1trn) in infrastructure spend from 2016 to 2030, just to keep pace with economic growth.
