Capital Project And Infrastructure Spending
Research byCapital project andinfrastructure spendingOutlook to 2025www.pwc.com/cpi-outlook2025
A robust market for capital projectsand infrastructure spendingInfrastructure spending has begun to rebound from the global financial crisis andis expected to grow significantly over the coming decade.That is the main finding of Capital project and infrastructure spending: Outlookto 2025, our in-depth analysis of 49 countries that account for 90% of globaleconomic output. Our thanks to Oxford Economics for providing research support.In developing this analysis, Oxford Economics used data sets to provide consistent,reliable, and repeatable measures of projected capital project and infrastructurespending globally as well as by country. Historical spending data is drawn fromgovernment and multinational organization statistical sources.Projections are based on proprietary economic models developed by OxfordEconomics at the country and sector levels. For more information on themethodological basis for these projections, please see page 6 of Capital project andinfrastructure spending: Outlook to 2025 research findings.Worldwide, infrastructure spending will grow from 4 trillion per year in 2012 tomore than 9 trillion per year by 2025. Overall, close to 78 trillion is expectedto be spent globally between 2014 and 2025.But the recovery will be uneven, with infrastructure spending in WesternEurope not reaching pre-crisis levels until at least 2018. Meanwhile, emergingmarkets, unburdened by austerity or ailing banks, will see accelerated growth ininfrastructure spending, especially China and other countries in Asia.And megacities in both emerging and developed markets—reflecting shiftingeconomic and demographic trends—will create enormous need for newinfrastructure. These paradigm shifts will leave a lasting, fundamental imprinton infrastructure development for decades to come.Among our conclusions: The Asia-Pacific market, driven by China’s growth, will represent nearly 60%of global infrastructure spending by 2025. In contrast, Western Europe’s sharewill shrink to less than 10% from twice as much just a few years ago. To realize the expected surge in infrastructure spending, emerging marketswill need to provide the proper mix of economic, social and environmentalfactors, sometimes referred to as the enabling environment. Some also2 Capital project and infrastructure spending: Outlook to 2025
will have to create a more conducive business environment for investors,engineering and construction firms by overcoming such obstacles asunpredictable regulations, bureaucratic delays, and struggles to secureland rights. Growing urbanization in emerging markets such as China, Indonesia, andNigeria should boost spending for such vital infrastructure sectors as water,power, and transportation. Increasing prosperity in emerging markets will impel infrastructure financingtoward consumer sectors, including transportation and manufacturing sectorsthat provide and distribute raw materials for consumer goods. Demographic changes will vary by region and country, affecting both theamount and type of infrastructure spending. Aging populations in WesternEurope and Japan, for instance, will require additional healthcare facilities,while countries in Sub-Saharan Africa, the Middle East, and many parts ofAsia-Pacific will need more schools for their youth.This report offers public officials and private-sector organizations—investors,engineering, and construction firms, as well as other organizations participatingin the capital projects & infrastructure market—a roadmap to the fast-changingmarket for capital projects & infrastructure over the next decade.With a clear understanding of the landscape, you are better equipped to identify themost promising opportunities, manage the challenges, and secure the best returns.Richard AbadieGlobal leaderCapital projects & infrastructureTel: 44(0) 20 7213 3225PricewaterhouseCoopers LLP 3
Spending ticks up4 Capital project and infrastructure spending: Outlook to 2025
Spiral of change speeds upAs the economy produces anddistributes goods around the world,moves data and currency in a flashfrom Cleveland to Chongqing, andtransports millions of travelerscross-town, cross-country, and crosscontinent, the foundation of all thisactivity is the physical and digitalinfrastructure enabling it.In fact, spending is expected toaccelerate significantly over the nextdecade, with fast-growing emergingeconomies far outpacing developednations. Our report shows whereinfrastructure spending is shifting,and what is driving that change, bothdomestically and globally.The outlook for such infrastructuredevelopment—and the economicgrowth it will foster—is encouraging.Our global analysis shows that spendingfor capital projects and infrastructurehas begun rebounding from thefinancial crisis of the past few years.While previous studies haveforecast the need for significant newinvestment in infrastructure, thisreport is distinctive because it providesdetailed estimates of both current andfuture global spending. Our analysistakes an in-depth look at 49 countrieson six continents, which account for90% of global economic output and95% of fixed investment. It covers fiveindustry sectors (see Figure 1).Figure 1: Five key infrastructure sectors1. Extraction2. Utilities3. Manufacturing4. Transport5. Social Oil and gasOther extraction(coal, metals,minerals)Power generationElectricity T&DGasWaterTelecomsPetroleum refiningChemicalHeavy aterhouseCoopers LLP 5
“You can’t continue to think that the world is the sameas it was five years ago. It is incredibly different now.It’s even changed from how it was five weeks ago or fivemonths ago. The spiral of change is speeding up.”Juan Bejar, CEO of Fomento de Construcciones y Contratas (FCC) 9trillionWorldwide, capital projectand infrastructure spending isexpected to total more than 9trillion by 2025, up from 4 trillionin 2012The spending forecast over the nextSpending across the 49 countriesdecade reflects the impact of severalin our study fell from 3.4 trillionmegatrends that PwC has identifiedin 2008 to 3.2 trillion in 2009.as underlying markers of widespreadSpending has since recovered to anglobal change: demographic shifts,estimated 4.2 trillion in 2013, ledan evolution in global economicoverwhelmingly by emerging markets,power, and growing urbanizationespecially in the Asia-Pacific region(See Interplay of far-reaching trends(see Figure 2).shapes infrastructure on pages 14–19).These paradigm shifts worldwide will“You can’t continue to think that thehave a lasting, fundamental impactworld is the same as it was five yearson infrastructure development forago,” said Juan Bejar, CEO of Fomentodecades to come as urbanization andde Construcciones y Contratas (FCC),both economic and demographic shifts a construction and environmentalcreate enormous need for additionalservices company based in Spain. “Itinfrastructure worldwide.is incredibly different now. It’s evenchanged from how it was five weeksago or five months ago. The spiral ofchange is speeding up.”1Figure 2: Global infrastructure spending to reach 9 trillion by 2025 trillions, current prices543220062007Source: Oxford Economics6 Capital project and infrastructure spending: Outlook to 2025200820092010201120122013
–5%Worldwide, capital project andinfrastructure spending is expected tototal more than 9 trillion by 2025, upfrom 4 trillion in 2012 (see Figure 3).The annual growth rate will reboundfrom the low single digits of recentyears to 6% in 2014 and 7.5% by 2016.As the economic recovery levels offlater in the decade, the pace of growthis likely to ease slightly, but spendingstill should increase by more than6.5% a year into the medium term.Those projections, however, could beaffected by unexpected global eventsor disruptions.5–25%Economic return generated for everydollar spent on a capital projectInfrastructure booststhe economyAccelerated infrastructure spendingwill drive economic growth, providejobs, and deliver vital services,such as a clean water supply. TheWorld Economic Forum estimatesthat every dollar spent on a capitalproject (in utilities, energy, transport,waste management, flood defense,telecommunications) generates aneconomic return of between 5% and25%. That multiplier effect accountsfor the rapid economic growth ofemerging markets that have madeinfrastructure spending a priority.The manufacturing and extractionsectors will be especially essential tosupport such economic development.The manufacturing sector—petroleumrefining, chemicals, and heavymetals—is set to grow at annual rate of8% worldwide between now and 2025.By then, manufacturing will represent21.3% of global infrastructurespending, up from 18.8% in 2012.The extraction sector boosted its shareof the global infrastructure market toabout 17% in 2013 from 14% in 2006,with most of the growth occurring innon-oil and gas extraction (e.g., coal,metals, and minerals). Between nowand 2025, the sector is expected togrow at an annual rate of 5%, but itsshare of the infrastructure market willslip back to about 14%.Extraction activity will vary acrosscountries and regions. Buoyed bythe discovery of new reserves, forexample, the US, Canada, and Brazilwill likely increase their share of globaloil output over the coming decade,while the shares of Saudi Arabia andRussia decline.GlobalspendingFigureinfrastructure3: Global infrastructurespending to reach 9 trillion by 2025 trn, current icsSource:PricewaterhouseCoopers LLP 7
A major geographical shift in infrastructure spending,from the West to the East, is already under way.The role of financingOne of the most important driversof infrastructure spending, of course,will be financing, which presentsvast opportunities for the billions ofdollars of private capital available forinvestment. Dedicated infrastructurefunds, pension funds, and other typesof investors are hungry for moreprojects around the world.In the case of some types ofdevelopment, notably transportationand social infrastructure, governmentfinances are a key determinantof future spending prospects. Foradvanced economies, particularly inWestern Europe, government debtburdens have risen to risky levels,reducing resources for future publicinfrastructure spending.Private investors may be called uponto do more, even for traditional publicsector projects. Private investmentin capital projects can free up publicsector budgets and also provide morerevenue to the government as a resultof an increase in the local tax base.Already, many financially constrainedgovernments are embracing the conceptof public-private partnerships, althoughthey do add to future liabilities.In contrast, debt burdens haveremained more stable in recent yearsin emerging economies, leaving moreroom for future government spendingon infrastructure. However, emergingeconomies’ governments typically havehigher borrowing costs than advancedeconomies because of poorer credithistories and less certainty aboutfuture stability.A major geographical shift ininfrastructure spending, from theWest to the East, is already under way.Emerging countries were spendingmore on infrastructure than developednations before the financial crisisin 2008, but its impact on the largeWestern economies has accelerated theshift (see Figure 4).Figure 4: Emerging markets account for half of global infrastructureProportion of infrastructure spend by regionspending100%80%60%40%20%0%20062007North AmericaSouth AmericaEuropeMiddle onomicsEconomicsSource:8 Capital project and infrastructure spending: Outlook to 202520082009201020112012
Emerging marketsdominatePricewaterhouseCoopers LLP 9
“In China, India, Brazil, or Bolivia, the developingnation’s rural people are moving to urban centerslooking for a better life.”Juan Pablo Calvo, CEO of Nuevatal PCS de Bolivia (VIVA)Rapid growth inemerging marketsDeveloping economies, most notablyChina and other parts of Asia, accountfor nearly half of all infrastructurespending, up more than 10% from2006. In contrast, Western Europe,which isn’t expected to reach prefinancial crisis levels until 2018 orlater, accounts for only 12% of globalspending now, down from about 20%in 2006, and is projected to generateless than 10% by 2025.Developed economies, whilecontinuing to grow, will see theirinfrastructure spending shrink fromnearly half of the global total today toabout one-third by 2025.Car ownershipand GDPper capitaFigure5: Economicgrowthfuels car ownershipCars per 1,000 80100120GDP per capita, 000, 2010Source: Oxford EconomicsSource: Oxford Economics10 Capital project and infrastructure spending: Outlook to 2025“In China, India, Brazil, or Bolivia, thedeveloping nation’s rural people aremoving to urban centers looking for abetter life,” said Juan Pablo Calvo, CEOof Nuevatal PCS de Bolivia (VIVA), oneof Bolivia’s three mobile providers.2India, for example, will add another500 million to its urban populationover the next four decades, spurringadditional infrastructure spendingin such major sectors as energy andtelecommunications.3Because of the ongoing development ofIndia’s technology services sector andgrowing consumer demand, spendingfor telecommunications infrastructureis expected to increase to 130 billionby 2025, up from 27 billion in 2013.800500Underlying the global economicpower shift is acceleratingurbanization in many developingcountries, particularly China,India, the Philippines, Indonesia,Ghana, and Nigeria, which shouldresult in spending growth in suchinfrastructure sectors as water,power, telecommunications, andtransportation.In addition, growing per capita incomein emerging markets will mean alarger middle class that will translateinto infrastructure for manufacturingsectors that provide the raw materialsfor consumer goods and for moreand better roads to accommodate thegrowing number of cars (see Figure 5).
Each 1,000 increase in GDP per capitaresults in 15 more cars per 1,000residents.4 This increased demand forvehicles, in turn, implies an increaseddemand for manufacturing projectsto refine fuel and produce chemicalsand basic metals that are central toautomotive production.As economies develop from low, tomiddle, to upper income, the typeof infrastructure spending evolves.At the very lowest income levels,some countries do not have theinfrastructure in place to provide eventhe most basic of services to theirresidents. They struggle to keep pacewith demand for amenities essential tohuman subsistence such as shelter andwater supply.As income increases, basicinfrastructure spending includesboth individual and social needs fromsanitation, hospitals, and clinics, toschools, power transmission, andrudimentary transport. At higherincome levels, increased spendingencompasses sectors that lead to amodern city in its most sophisticatedand comprehensive form (seeFigure 6).5Figure 6: Infrastructure spending evolves with a region’s economic growthWhere are the Cities of Opportunity positioned today in the evolution of urban infrastructure and what will future infrastructure demands be?Proactive: Setting thepace, ahead of thedemand curve, and moreattractive city in whichto live, work, and dobusiness.Eco livingCultureTechnologyReactive: Struggling tokeep pace with demand,and less attractive city inwhich to live, work, anddo business.LeisureMass transitHospitalsBasichousingWaterGreen spaceMarketstallsSurvivalMinimal urban infrastructure to meetbasic human survival needs such asrunning water and shelter.PowerRoads,busesand taxisSchoolsWasteandsewageBasicInfrastructure to ensure more basicneeds are met in terms of healthcare,primary and secondary education,transport connectivity within a city andto surrounding areas, and access topower for households and business.CommercialpropertyElderlycareAir, railand seaconnectivityNaturaldisaster riskmanagementEnvironmentEducationand researchAdvancedInfrastructure geared more towardimproving economic growth andproductivity, competitiveness, andeconomic efficiency, including masstransit, commercial property, technology,global connectivity, advanced universityeducation and research, and enhancednatural-disaster risk management, suchas flood defenses, to prevent humansuffering.Quality of lifeInfrastructure targeting more advancedhuman needs to improve all aspectsof quality of life and sustainability,including elderly care, green space,leisure and cultural assets, andenvironmental infrastructure.Source: PwC, Cities of Opportunity: Building the Future, November 2013PricewaterhouseCoopers LLP 11
“If you don’t invest when your economy is growing, youmay find yourself very quickly at a point where yourrunways and roads and ports and rail lines are choked.”Richard Abadie, PwC’s global leader for Capital Projects & InfrastructureAs wealth increases, a country is ableto spend more on infrastructure. Notevery country makes infrastructurespending a priority. However, thosethat do have benefited from themultiplier effect of infrastructurespending, which serves to furtherincrease economic growth.In a blog post for the World EconomicForum, Mthuli Ncube, chiefeconomist and vice president of theAfrican Development Bank, says,“Infrastructure accelerates annualgrowth convergence rates by as muchas 13% while increasing per capitalannual growth rate by almost 1%.”6According to Ncube, an additional1% of GDP invested in transport andcommunications on a sustained basisincreases the GDP per capita growthrate by 0.6%. “Productivity growth—and therefore competitiveness—ishigher in countries with an adequatesupply of infrastructure services,”he says.The advanced stage of infrastructuredevelopment encompasses advancededucation and research; technology;mass transit, air, rail, and seaconnectivity; commercial propertysuch as offices and business parks; andnatural-disaster infrastructure suchas flood defenses. Urban organizationis highly developed, forwardlooking, and clearly committed toa planning process that ensurescontinuing economic developmentand sustainable growth.12The natural outcome of that planningprocess leads to the final stage ofeconomic growth in which a regionis globally recognized for its superiorquality of life. Culture, leisure, greenspace, a deep respect for the environment,and ecologically viable living, as well as astrong system of elderly care, all convergeto define urban quality of life in the21st century. Infrastructure is thus acatalyst, not just of urban society butof urban development.7Long-term planning, however, musttake into account the need to expandcapacity in the future. Says RichardAbadie, PwC’s global leader for CapitalProjects & Infrastructure, “If youdon’t invest when your economy isgrowing, you may find yourself veryquickly at a point where your runwaysand roads and ports and rail lines arechoked. It’s essential to set aside someof the wealth you are creating in thegood times to sustain and continuecontributing to economic growth overthe long term, especially given the longlead times and the substantial costs ofinfrastructure development.”Abadie says when economies consumeresources, rather than invest, duringan economic boom, the problems thatresult from inadequate infrastructurebecome inevitable over the long term:congestion, pollution, lack of access,power outages, and ultimately theslowing of economic growth. Capital project and infrastructure spending: Outlook to 2025
65%65% 65%71%71%71%Increased demand for socialinfrastructureDemographic shifts will vary by regionand country over the next decade,and will affect not only the amountof infrastructure spending, but alsothe types of development. Agingpopulations, particularly in WesternEurope an
2 Capital project and infrastructure spending: Outlook to 2025 Infrastructure spending has begun to rebound from the global financial crisis and is expected to grow significantly over the coming decade. That is the main finding of Capital project and infrastructure spending: Outlook to 2025, our in-dept
country’s infrastructure. We also look at sectors that supply households with essential human services such 1.1 Introduction The research analyzes capital projects and infrastructure spending across 49 of the world’s largest economies with varying Gross National Products across six continents. It
Primary care spending is rising while total medical spending is falling: Total primary care spending for commercial members increased by 23% while total medical spending fell by 18% (2007-2011). In 2011, insurers spent 8.0% of medical claims dollars on primary care, up from 5.4% in 2007.
Shares of Public Spending for Capital and for the Operation and Maintenance of Transportation and Water Infrastructure, by Level of Government, 2017. Capital: 102 Billion (30%) Operation and Maintenance: 240 Billion (70%) State and Local Governments ( 342 Billion) Capital: 72 Billion (73%) Operation and Maintenance: 27 Billion (27%) Federal .
despite medium-term setbacks 14 Global infrastructure spending growth 4,000 4,500 5,000 5,500 6,000 6,500 . (A useful reference here is a recent IMF study, which found that a . Infrastructure as an alternative investment asset class Despite the economic uncertainties, interest in and accumulation of .
Capital Program Development and Structure Capital Improvement Program (CIP) Update 10-Year Capital Plan. Identifies viable initiatives to address needs identified for next 10 years; financially unconstrained. Six-Year Capital Improvement Program (CIP) Capital investments planned for, or continuing in, six-year capital program. One-Year Capital .
of Ethiopia's federal spending allocations, reflecting still-high outlays for public investment activity. The share of current spending in total spending is gradually rising, however, and is now 46 percent of federal spending, up from 42 percent two years ago and 45 percent last year. The new budget also reveals higher growth for current
2019-29 Capital Budget Instructions June 2018 TABLE OF CONTENTS . Chapter 1: Capital Budget Basics 1 Introduction 1 What is a capital project? . Capital project administration costs are for activities directly related to the completion of a capital project or program. See Chapter 4 for the appropriate use of tax-exempt bond proceeds related to
Rough paths, invariance principles in the rough path topology, additive functionals of Markov pro-cesses, Kipnis–Varadhan theory, homogenization, random conductance model, random walks with random conductances. We gratefully acknowledge financial support by the DFG via Research Unit FOR2402 — Rough paths, SPDEs and related topics. The main part of the work of T.O. was carried out while he .
