The Other Infrastructure Boom
While we spill a lot of ink in this country about the potential hundreds of millions of dollars that might be spent on improving our roads, rails and ports — we’re missing the bigger picture, and the bigger payoff too.
The real opportunity isn’t here — it’s in Asia, where the dollars that will be spent in the next five years dwarf even the most optimistic projections for any other region on the planet.
If one picture is worth a thousand words, then the one below, from a study by the PricewaterhouseCoopers consulting firm, ought to suffice for quite a few paragraphs. The bar chart shows, in trillions of dollars, the likely cumulative amounts of transport-oriented infrastructure spending for the key regions of the world between 2015 and 2025.
And as you can see, “Asia Pacific” wins it, hands down:
(Source: PricewaterhouseCoopers and Oxford Economics)
It’s one thing to make projections, of course. It’s another to demonstrate why such spending will actually occur.
In India, it’s about eliminating bottlenecks in its economy. For instance, it takes a little over two days on average to unload a big container ship at an Indian port and then reload it with goods for export. That’s about twice as long as the usual turnaround time for a major international port like Los Angeles or Yokohama, Japan.
As Standard & Poor’s analysts noted in a report last year: “Infrastructure development is critical for improving India’s manufacturing competitiveness and achieving higher growth.”
The cost of logistics — moving goods from place to place — is exceedingly high. The World Bank’s Logistics Performance Index ranks India 35th — little better than countries with far smaller economies and populations, like Portugal or Estonia.
China too, despite headlines about bullet trains and new superhighways, still has a long way to go on developing a top-notch transportation infrastructure. When the World Bank knits together all the factors for logistical costs, it ranks China a distant 27th (with Germany at No. 1, Hong Kong as a separate economic region at No. 9, the U.S. at No. 10 and Japan at No. 12).
Not to disappoint, a few months ago China’s State Council said it planned to spend the equivalent of $2.17 trillion on its railways, roads, airports and seaports. And if it follows through on those goals, all of that money would be spent just in the next three years!
If China hopes to fulfill its own ambitions for a new “Silk Road” — one that puts the country at the center of its own trade and economic finance network — it will have to spend a lot more to further improve the transportation links between its main ports of entry and those of its trading partners.
Of course, those are just the two largest of Asia’s economies. Bloomberg recently noted immediate plans to ramp up infrastructure spending in Asian nations as varied as Indonesia, Thailand and Malaysia.
Jeff L. Yastine
Editor, Total Wealth Insider
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