CG/LA Infrastructure's InfraBlog
Urban Land Institute report shows worldwide need for next 20 years
By Roger Showley 6 A.M.MAY 27, 2013
That number should stop you cold.
It’s the expected cost of seven categories of infrastructure by the world’s countries between now and 2030.
That bottomline is one of the key takeaways in a report from the Urban Land Institute and Ernst & Young, issued at ULI’s recent spring convention in San Diego.
“With this report we and ULI made a concerted effort to focus globally and make sure the report covered all the different regions of the world,” said one of the Ernst & Young authors, Michael Parker, who focused on U.S. infrastructure.
The estimate came from projections by McKinsey Global Institute issued earlier this year. The breakdown by project type was:
Roads: $16.6 trillion
Rail: $4.5 trillion
Ports: $700 billion
Airports: $2 trillion
Power: $12.2 trillion
Water: $11.7 trillion
Telecom: $9.5 trillion
To put the number into perspective, it’s roughly three times the U.S. national debt. On a per capita basis, that’s $7,671 for every one of the 7 billion people on earth.
And that’s not the whole story.
There’s “social” infrastructure, such as schools, parks, libraries, prisons, garbage dumps and civic buildings that will be needed to be replaced or added over the next generation to serve a growing population, projected to grow by another 1.5 billion over this period.
Engineers annually bemoan the U.S. failure to keep up with infrastructure investment and rate many categories as poor. There were no “A’s” on the 2013 report card from the American Society of Civil Engineers.
But all is not lost, Parker said.
“Right now, across both political aisles, in terms of governorships and mayors around the country, what we are seeing is very significant interest in making sure the dollars are spent wisely,” he said, “making sure at a time when there are limited resources, that projects that deliver significant value are brought forward and methodologies for financing are efficient. There’s been a very strong emphasis on improved governance of infrastructure delivery around the country.”
Parker declined to comment on specific projects and whether they are being handled well.
However, the report cites California’s high-speed rail as a noteworthy but somewhat problematic multi-billion-dollar effort, since only a small portion has been funded and balance “has not been secured.”
Another problem identified involves the federal highway trust fund that is projected to run out of funds needed to keep up with ongoing maintenance.
Parker said one small portion of the fund is being set aside in a matching loan program with the states. A billion dollars would be offered to states and localities that they could leverage with $10 billion in loans toward funding $30 billion in transportation projects. The program lists $41.6 billion projects that potentially could be funded. The only California projects listed are $868 million in road improvements in Bakersfield and $9.3 billion in subway and regional connectors in Los Angeles.
Of course, countries around the world stand at different points on the infrastructure building cycle. Some, like western Europe and the U.S., are replacing their centuries-old innards, while others in Asia and Africa are building whole new systems.
For example, China has been spending 8 to 10 percent of its GDP on infrastructure and plans on investing $300 billion on 16,000 miles on high-speed rail by 2020. California’s high-speed rail plan covers only 130 miles at $7.7 billion in the first phase.
What’s heartening, Parker said, is that countries and localities have been investing in infrastructure during the economic downturn and reaping the benefits in the form of lower labor and construction materials costs.
“Prices often are coming in below what they would have been when the economy was at its peak,” he said.
Not only is the spending yielding new infrastructure, it’s also generating construction jobs, that were cut when real estate development virtually ground to a halt in the U.S. and much of the rest of the world.
“The great thing about wise investment in infrastructure is you have enhanced systems creating a more productive economy and a better quality of life after you’ve made the investments,” he said.
Here’s what the Ernst & Young report said about other parts of the world:
Australasia: China and India need major improvement to their water systems. Australia, like Europe and North America, needs to revamp its systems to keep its export-dependent economy strong. Japan adopted a $215 billion infrastructure package, partly aimed at rebuilding in the Fukushima region hit by the massive 2011 earthquake, but the spending has created some overcapacity in the rest of the island nation. Indonesia hopes to spend $250 billion over the next five years. The Philippines and Singapore are ramping up public-private partnerships to improve infrastructure.
Europe-Middle East-Africa: Spending in Europe has “dissipated” in the face of a double-dip recession, throwing into question a $1.9 trillion plan due for implementation by 2020. Russia has $50 billion in the works for its 2014 Winter Olympic Games in Sochi. South Africa launched a $430 billion, 15-year national infrastructure plan; Angola, Nigeria and Ghana established sovereign wealth funds. The Gulf Cooperation Council in the Middle East is building a $17 billion, 1,300-mile rail network by 2017.
Western Hemisphere: Besides the U.S., Canada launched its Build Canada Plan, a $32.5 billion infrastructure effort ending next year. Also coming are several major replacement bridges and an $8.2 billion, 32-mile light-rail system in Toronto. Another $146 billion is the projected cost to expand energy and mineral extraction systems. In Mexico, former President Felipe Calderon embarked on a $230 billion national infrastructure program in 2007 that covers 10,000 miles of roads. His successor Enrique Pena Nieto has vowed to increase infrastructure spending by 56 percent, focusing on rail, urban mass transit, ports, water and sewage systems and oil and gas platforms. Brazil in investing $3.5 billion at 270 airfields, $26 billion for port improvements, $17 billion in high-speed rail and 12 stadiums for the 2016 Summer Olympics. Colombia looks to $100 billion in projects over the next decade. Peru plans a 17-mile subway in the capital of Lima and $532 million toll road. Panama is finishing up the widening of its canal.
Taken from U-T San Diego: http://www.utsandiego.com/news/2013/may/27/infrastructure-uli-report/