Infrastructure Outlook in APEC
Infrastructure Outlook in APEC
December 2014
Peter Raymond PwC Capital Projects & Infrastructure Americas Leader
Infrastructure: spending is expected to accelerate significantly over the next decade •
Spending for capital projects and infrastructure has begun rebounding
•
Worldwide - a $9 trillion per year by 2025
•
a total spending of $78 trillion between now and 2025
$ trillions, current prices
$ trillions, current prices
4.5
10 9
4.0
8 7
3.5
Forecast
6 5
3.0
4 3
2.5
2 1
2.0
0
2006
2007
2008
2009
Source : Oxford Economics/Haver Analytics
2010
2011
2012
2013
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Source : Oxford Economics/Haver Analytics
December 2014 PwC
2
Asia – the main driver for spending growth Percent of regional infrastructure spend 1.3% 3.4% 3.1%
•
5.2%
9.7% 50.1%
10.2%
17.0%
China Japan India Australia South Korea Indonesia Thailand Others
market will grow by 7% to 8% a year over the next decade, approaching US$5.3 trillion by 2025. •
Source : Oxford Economics/Haver Analytics
Percent of total infrastructure investment 100% 10.6% 90% 34.7% Extraction 80% 70%
Government is a key driver of all
infrastructure spending. 12.9% 30.4%
•
Utilities
How infrastructure is planned and financed is important.
60% 50%
Overall, the Asia-Pacific infrastructure
23.8%
Manufacturing
25.6%
19.7%
Transport and Comms
22.6%
40% 30% 20% 10%
•
Time to adopt a regional perspective.
Social 11.1%
8.5%
0% 2012
PwC Source : Oxford Economics/Haver Analytics
2025
December 2014 3
Infrastructure investment: A regional perspective Fixed asset investment as % of GDP (2012) - Are APEC economies ready to seize the opportunity? World 22.2% ASEAN
USA
Mongolia
India
China
28.5%
12.7%
48.2%
29.8%
46.0%
Indonesia
Pakistan
Philippines
Australia
Japan
33.1%
10.9%
19.3%
28.4%
21.1%
Source: Economist Intelligence Unit
PwC
December 2014 4
ASEAN economies still under-invest in their future Infrastructure investment as % of GDP (latest data available) governments remain a key driver to facilitating the necessary World infrastructure planning and investment 3.8 USA Philippines Indonesia 3.2 2.6 2.7 Under-investing in the future of their economies
India
Japan
China
Vietnam
4.7
5
8.5
10
Source: Economist Intelligence Unit
December 2014 PwC
5
Five trends you should know about Asia-Pacific infrastructure development
Demand for new transport and utilities infrastructure
Private sector platforms for growth
Schools, healthcare facilities and aged care
Key trends for infrastructure investments
Wired Asia Pacific
Bright lights, big cities
December 2014 PwC
6
Demand for new transport & utilities infrastructure
December 2014 PwC
7
Schools, healthcare facilities and aged care In emerging Asia, social investment contributes a much lower share of total infrastructure spending.
December 2014 PwC
8
Wired Asia Pacific
The world’s biggest e-commerce market is shifting to Asia and to China in particular.
Much more room to grow the reach of mobile and broadband connectivity.
December 2014 PwC
9
Bright lights, big cities OECD: 2050 – 70% of global population will live in cities
December 2014 PwC
10
Private sector platforms for growth
December 2014 PwC
11
PwC Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Dry Powder ($bn)
Unlisted Infrastructure Dry Powder by Fund Primary Geographic Focus, December 2007September 2014
60
50
40 North America
Europe
30 Asia
Rest of World
20
10
Source: Preqin 3Q14
0
December 2014 12
Breakdown of Unlisted Infrastructure Funds in Market by Geographic Focus, Q3 2014 60
50
No. of Funds Raising
48 42
40
36
32
Aggregate Target Capital ($bn) 34
30
22 18
20
11 10
0 Europe
North America
Asia
Primary Geographic Focus
Rest of World Source: Preqin 3Q14 December 2014
PwC
13
Breakdown of Sovereign Wealth Funds by Region 50%
47%
45% 40% 35%
Proportion of SWFs
30%
26%
25%
Proportion of Aggregate AUM
22% 20%
20%
14%
15% 10%
28%
11%
10%
11%
6% 5%
2%
0.2%
3%
1%
PwC
North America
MENA
Latin America & Caribbean
Europe
Australasia
Asia
Africa (excl. MENA)
0%
Source: Preqin 3Q14 December 2014 14
How inviting are the Asia-Pacific Economies for investment? Ease of Doing Business Rankings for APEC Economies (World Bank Group – June, 2014, rankings include 189 economies)
PwC
#1 #2 #3 #6 #7 #10 #16 #18 #19 #26 #29 #35 #39 #41 #62 #78 #90 #95 #101 #114 #133
Singapore New Zealand Hong Kong Republic of Korea United States Australia Canada Malaysia Taiwan, China Thailand Japan Peru Mexico Chile Russia Vietnam China Phillippines Brunei Darussalem Indonesia Papua New Guinea
APEC Economies in Top 10% of EODB Rankings Singapore New Zealand Hong Kong Republic of Korea United States Australia Canada Malaysia
15
The road ahead: the potential for public–private partnerships to spur infrastructure growth Sustainable PPP programs
Procuring Successfully
Allow process to evolve
Encourage development of capital markets
Maintain program of opportunities
Address project issues early
Explore alternative financing solutions
Continued stakeholder support
Collaboration between public and private sectors
Strong stakeholder support and consistency
Balance between risk and return
Sustain existing sources of private finance
Build transactional capacity
Project definition, Feasibility and Financing options
Capacity – public and private
Process for approvals and closure
Lay the Foundations Leverage multilaterals PwC
Stakeholder consultation
Institutional Certainty
Program development and prioritisation
Focused regulatory change – eg. Land Acquisition
Global precedent with local application December 2014 16
Optimal Conditions for Infrastructure Spending
Economic Factors
• • • • • •
National Vision – commitment, pipeline Macroeconomic stability and attractiveness Stable legal and regulatory frameworks Sustainable infra finance options Capacity to procure and develop Risk and return balance
• Social Factors
• • • •
Ethics and transparency Collaboration – public, private, civil society Willingness to pay – society Track record
• Environ mental Factors
• Environmental regulation and permits • Approach to addressing environmental risk • December 2014
PwC
17
In Conclusion • Infrastructure investment in Asia is both increasing and increasingly important • The competitive advantage of nations will be in part reflected in their infrastructure capability • Private capital is interested and available for infrastructure investment • But the conditions must be right to attract capital, APEC can help
PwC
Thank you! Peter Raymond PwC Capital Projects & Infrastructure, Americas Leader
[email protected] +1 703 629 1949
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2014 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
December 2014
Peter Raymond PwC Capital Projects & Infrastructure Americas Leader
Infrastructure: spending is expected to accelerate significantly over the next decade •
Spending for capital projects and infrastructure has begun rebounding
•
Worldwide - a $9 trillion per year by 2025
•
a total spending of $78 trillion between now and 2025
$ trillions, current prices
$ trillions, current prices
4.5
10 9
4.0
8 7
3.5
Forecast
6 5
3.0
4 3
2.5
2 1
2.0
0
2006
2007
2008
2009
Source : Oxford Economics/Haver Analytics
2010
2011
2012
2013
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Source : Oxford Economics/Haver Analytics
December 2014 PwC
2
Asia – the main driver for spending growth Percent of regional infrastructure spend 1.3% 3.4% 3.1%
•
5.2%
9.7% 50.1%
10.2%
17.0%
China Japan India Australia South Korea Indonesia Thailand Others
market will grow by 7% to 8% a year over the next decade, approaching US$5.3 trillion by 2025. •
Source : Oxford Economics/Haver Analytics
Percent of total infrastructure investment 100% 10.6% 90% 34.7% Extraction 80% 70%
Government is a key driver of all
infrastructure spending. 12.9% 30.4%
•
Utilities
How infrastructure is planned and financed is important.
60% 50%
Overall, the Asia-Pacific infrastructure
23.8%
Manufacturing
25.6%
19.7%
Transport and Comms
22.6%
40% 30% 20% 10%
•
Time to adopt a regional perspective.
Social 11.1%
8.5%
0% 2012
PwC Source : Oxford Economics/Haver Analytics
2025
December 2014 3
Infrastructure investment: A regional perspective Fixed asset investment as % of GDP (2012) - Are APEC economies ready to seize the opportunity? World 22.2% ASEAN
USA
Mongolia
India
China
28.5%
12.7%
48.2%
29.8%
46.0%
Indonesia
Pakistan
Philippines
Australia
Japan
33.1%
10.9%
19.3%
28.4%
21.1%
Source: Economist Intelligence Unit
PwC
December 2014 4
ASEAN economies still under-invest in their future Infrastructure investment as % of GDP (latest data available) governments remain a key driver to facilitating the necessary World infrastructure planning and investment 3.8 USA Philippines Indonesia 3.2 2.6 2.7 Under-investing in the future of their economies
India
Japan
China
Vietnam
4.7
5
8.5
10
Source: Economist Intelligence Unit
December 2014 PwC
5
Five trends you should know about Asia-Pacific infrastructure development
Demand for new transport and utilities infrastructure
Private sector platforms for growth
Schools, healthcare facilities and aged care
Key trends for infrastructure investments
Wired Asia Pacific
Bright lights, big cities
December 2014 PwC
6
Demand for new transport & utilities infrastructure
December 2014 PwC
7
Schools, healthcare facilities and aged care In emerging Asia, social investment contributes a much lower share of total infrastructure spending.
December 2014 PwC
8
Wired Asia Pacific
The world’s biggest e-commerce market is shifting to Asia and to China in particular.
Much more room to grow the reach of mobile and broadband connectivity.
December 2014 PwC
9
Bright lights, big cities OECD: 2050 – 70% of global population will live in cities
December 2014 PwC
10
Private sector platforms for growth
December 2014 PwC
11
PwC Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Dry Powder ($bn)
Unlisted Infrastructure Dry Powder by Fund Primary Geographic Focus, December 2007September 2014
60
50
40 North America
Europe
30 Asia
Rest of World
20
10
Source: Preqin 3Q14
0
December 2014 12
Breakdown of Unlisted Infrastructure Funds in Market by Geographic Focus, Q3 2014 60
50
No. of Funds Raising
48 42
40
36
32
Aggregate Target Capital ($bn) 34
30
22 18
20
11 10
0 Europe
North America
Asia
Primary Geographic Focus
Rest of World Source: Preqin 3Q14 December 2014
PwC
13
Breakdown of Sovereign Wealth Funds by Region 50%
47%
45% 40% 35%
Proportion of SWFs
30%
26%
25%
Proportion of Aggregate AUM
22% 20%
20%
14%
15% 10%
28%
11%
10%
11%
6% 5%
2%
0.2%
3%
1%
PwC
North America
MENA
Latin America & Caribbean
Europe
Australasia
Asia
Africa (excl. MENA)
0%
Source: Preqin 3Q14 December 2014 14
How inviting are the Asia-Pacific Economies for investment? Ease of Doing Business Rankings for APEC Economies (World Bank Group – June, 2014, rankings include 189 economies)
PwC
#1 #2 #3 #6 #7 #10 #16 #18 #19 #26 #29 #35 #39 #41 #62 #78 #90 #95 #101 #114 #133
Singapore New Zealand Hong Kong Republic of Korea United States Australia Canada Malaysia Taiwan, China Thailand Japan Peru Mexico Chile Russia Vietnam China Phillippines Brunei Darussalem Indonesia Papua New Guinea
APEC Economies in Top 10% of EODB Rankings Singapore New Zealand Hong Kong Republic of Korea United States Australia Canada Malaysia
15
The road ahead: the potential for public–private partnerships to spur infrastructure growth Sustainable PPP programs
Procuring Successfully
Allow process to evolve
Encourage development of capital markets
Maintain program of opportunities
Address project issues early
Explore alternative financing solutions
Continued stakeholder support
Collaboration between public and private sectors
Strong stakeholder support and consistency
Balance between risk and return
Sustain existing sources of private finance
Build transactional capacity
Project definition, Feasibility and Financing options
Capacity – public and private
Process for approvals and closure
Lay the Foundations Leverage multilaterals PwC
Stakeholder consultation
Institutional Certainty
Program development and prioritisation
Focused regulatory change – eg. Land Acquisition
Global precedent with local application December 2014 16
Optimal Conditions for Infrastructure Spending
Economic Factors
• • • • • •
National Vision – commitment, pipeline Macroeconomic stability and attractiveness Stable legal and regulatory frameworks Sustainable infra finance options Capacity to procure and develop Risk and return balance
• Social Factors
• • • •
Ethics and transparency Collaboration – public, private, civil society Willingness to pay – society Track record
• Environ mental Factors
• Environmental regulation and permits • Approach to addressing environmental risk • December 2014
PwC
17
In Conclusion • Infrastructure investment in Asia is both increasing and increasingly important • The competitive advantage of nations will be in part reflected in their infrastructure capability • Private capital is interested and available for infrastructure investment • But the conditions must be right to attract capital, APEC can help
PwC
Thank you! Peter Raymond PwC Capital Projects & Infrastructure, Americas Leader
[email protected] +1 703 629 1949
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2014 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
