Subscribe
The world’s emerging powers, especially India and China, are set to experience an unprecedented growth and accelerated urbanization over the next decade. This will create an insatiable appetite for infrastructure and other capital projects, according to a report by PricewaterhouseCoopers (PWC) released on June 30. Emerging Asia will far outpace the developed world in terms of spending on infrastructure sectors, including power, telecommunication, water and transportation, by 2025, says the report.
The report, for which Oxford Economics researched trends in 49 countries, estimates that the global spending on infrastructure and capital projects is set to reach US $9 trillion by 2025, up from US $4 trillion in 2012. Asia Pacific—including China, India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam—will be by far the fastest growing region, accounting for nearly 60 per cent of global infrastructure spending by 2025. By contrast, Western Europe’s share will shrink to less than 10 per cent from twice as much just a few years ago.
Developed economies will see their infrastructure spending shrink from nearly half of the global total today to about one-third by 2015, says the study, which covers the sectors of extraction (including oil and gas), utilities, manufacturing, transport and social (including health and education infrastructure spending).
Rapid urbanisation
Underlying the global economic power shift is accelerating urbanisation—the world’s urban population is swelling by around 1.5 million people a week—mostly in the emerging world where rural people are migrating to urban centres looking for better life, says the report. In India, for example, the urban population is likely to rise by some 500 million over the next four decades. This will spur additional infrastructure spending, particularly in sectors such as power and telecommunication.
Growing per capita income will also mean a larger middle class in emerging economies, which will translate into infrastructure for manufacturing sectors that provide raw materials for consumer goods and for more and better roads to accommodate the growing number of cars, says the report. It estimates that every US $1,000 increase in per capita GDP results in 15 more cars per 1,000 residents. This increased demand for vehicles, in turn, will create an increased demand for projects to refine fuel and produce chemicals and base metals that are central to automotive industry.
As economies develop, the governments of emerging economies will struggle to create jobs and deliver essential services, right from hospitals and schools to clean water supply, waste management, power supply, flood defense mechanisms and transportation. Some countries, like those in Africa, Latin America and West Asia, will face even greater challenges because of lack of robust governance, regulatory uncertainties, political instability, among other problems.
Without diligently planned growth, a city or a region can degenerate into an overcrowded morass of economic, social and environmental ills,” says the report.