Assessing The Global Transport Infrastructure Market .
Research byAssessing the globaltransport infrastructuremarket: Outlook to 20252015www.pwc.com/outlook2025
Outlook to 2025TransportationTransport infrastructure investment isprojected to increase at an averageannual rate of about 5% worldwide overthe period of 2014 to 2025.Sub-Saharan Africa leads the pack withthe fastest average annual growth rateof over 11%. Meanwhile, Asia-Pacificremains by far the largest transportinfrastructure market, with investmentsincreasing from 557bn to nearly 900bn over the forecast period.Growth in infrastructure spending by region to 2025AfricaMiddle EastGrowth by subsectorConsidering individual subsectors, portsare predicted to grow the fastest at 5.8%on average per year over the forecastperiod (led by large investments inIndonesia, for example), while airportinvestments are expected to slow downto an annual growth rate of 2.6%.Roads will likely remain the biggestarea of investment, especially for growthmarkets. This is partly due to the rise inprosperity and, hence, car ownership indeveloping countries.FSU/CEELatin AmericaWestern EuropeUS & CanadaAsia Pacific0.01.02.03.04.05.06.07.08.0Cumulative transport infrastructure investment ( trn)RoadsSource: Oxford Economics2On the downside, transportinfrastructure investment levels inWestern Europe are expected to take along time to recover due to continualfiscal austerity – returning only to 2008levels in 2022.RailPortsAirports9.0Railways, by contrast, are forecast tohave a relatively strong growth in thoseadvanced economies with maturetransport markets like Western Europewhere there is a growing opinion infavor of public transport – andparticularly in the UK and Spain wherehigh-speed networks are expected toundergo further development.PwC Assessing the global transport infrastructure market: Outlook to 2025
Growth by regionTransport infrastructure investment inWestern Europe will likely be modestin the near future, given the alreadywell-developed transport networks inmany of the advanced countries as wellas continuing fiscal constraints and ahigh demand for more socialinfrastructure, especially in healthcare.Infrastructure spending will likely belimited to targeted schemes for relievingtraffic congestion. Rail investment,however, is poised for growth. Forexample, after a six-year slump, Spain isexpected to see renewed investments inrailways between 2016 and 2025. Withthis mix in subsector investments,Western Europe’s share of globaltransport infrastructure spending isforecast to remain broadly unchangedfrom 11% in 2014 to 10% in 2025.Likewise, with mature transportnetworks in the US and Canada,investment is expected to grow by anaverage of just 3% per year over thecoming decade. Overall, a decline in theUS-Canada share of global transportspending – from 14% in 2014 to 11% by2025 – is expected. The lack ofemphasis on transport spending is bestillustrated by Canada’s investment inairports, which is projected to declineyear by year and will see modest returnsonly in 2023.2006 1001500100050002008201020122014Rising wealth levels in Latin Americaare expected to drive strong increases incar ownership and, in turn, a need forinvestment in road infrastructure. Roadspending is expected to increase by anaverage of 11% per year between 2014and 2025, more than double the worldaverage rate. Increased prosperity willlikely also generate demand for otherforms of transportation: Investment insea ports is expected to grow at a similarrate to that in roads due to bothincreased consumer demand forimports and commodity exports.Airport spending is also expected toincrease, particularly during the firsthalf of the forecast period as the firststage of development of the new airportin Mexico City gets under way.While megaprojects such as the metrofor Riyadh and Qatar airport grabheadlines, roads still make up thelargest subsector for transport spendingin the Middle East. The rate of carownership is expected to increasesharply over the coming decade;consequently, the investment in roads isexpected to increase as well – by almost116% over this period to reach 31bnper year by 2025.Growth in infrastructure spending to 20252006By contrast, large-scale developmentof transport networks will likelycontinue in many Asia-Pacificeconomies, given the shift in economicpower from the West to the East, therise in Asian wealth and rapidurbanisation. Significant investmentin road infrastructure to accommodateever more cars, along with investmentin public transport infrastructure torelieve congestion in urban areas, isexpected. Strong growth in sea portinfrastructure is also anticipated tosupport expansion in internationaltrade.20162018202020222024US & CanadaLatin AmericaFSU/CEESub-Saharan AfricaMiddle EastAsia-PacificWestern EuropeSource: Oxford EconomicsPwC Assessing the global transport infrastructure market: Outlook to 20253
While the Former SovietUnion/Central Eastern European(FSU/CEE) countries currently devote asmaller percentage of infrastructureinvestments to transportation than theglobal average, this is projected tochange over the forecast period. Formost of the FSU countries, investmentin good transport networks remainsrelatively important due to the need totransport extractive outputs to othermarkets. Spending on ports, inparticular, is expected to increase anaverage of nearly 10% annually from2014 to 2025. In contrast, non-mineralexporting countries like Poland andHungary will have much slower growthin transport spending.Sub-Saharan Africa is the fastestgrowing regional infrastructure market,with a projected average increase intransport spending of over 11% per yearfrom 2015 to 2025. Most of this growthis expected in roads and ports.Transport developmentand economic structureWorldwide, the performance oftransportation and logistics companiesvaries greatly. One of the main reasonsfor this is the quality of infrastructure,which is fundamental to their effectiveoperation. The importance of goodlogistics performance for economicgrowth, diversification and povertyreduction is now firmly established. Thetransportation and logistics industryforms the backbone of modern globalsupply chains. The logistics industryencompasses freight transportation,warehousing, border clearance,payment systems and, increasingly,many other functions outsourced byproducers and merchants toservice providers.The World Bank logistics performanceindex shows that there is a widedifference between countryperformances, and this issue is difficultto tackle because each country has itsown challenges and there is no singlesolution.1 It is important, therefore, toconsider each country’s unique situation4when devising a strategic plan fortransport infrastructure investments.For example, in the US and Indonesia,where distances between cities arerelatively great, domestic air is a majormode of transport. By contrast, inWestern Europe, there is less need fordomestic airport capacity because thecities are closer together, and road andrail networks are robust and efficient.In recent years, as road congestionbecomes an increasing problemworldwide, railways have becomepopular again, especially high speed andurban rail (even though such projectsare complex and take a long time toplan). London’s Crossrail – the 14.8bntrain line project that will increaserailway capacity in the capital by 10%and is expected to carry up to 72,000passengers per hour at peak times – hasbeen discussed for more than 70 yearsand is still under construction (butshould begin full operation in 2018).There is also a lot of pressure, due to theincrease in urbanisation, to findtransport solutions to reduce congestionin cities. In many of the largest cities ingrowth markets such as Jakarta,Bangkok and Manila, a major transportinfrastructure upgrade is vital to allowthe city to function effectively. Thesecities are rich enough to fund their owninfrastructure but find implementationa difficult challenge due to lack ofexperience and inefficient planningprocesses.Understanding growthmarket challenges andopportunitiesSince the global financial crisis,spending on infrastructure has beenconstrained by the general squeeze ongovernment expenditure while the longterm infrastructure gap continues. Insome growth countries like Indonesiaand India, the lack of transportinfrastructure investment has beeninhibiting growth. However, there aresome signs of change with newgovernments in those countries.China has led the way in spurringtransport infrastructure investment.Since 2011, the 12th Five-Year Planadopted by the National People’sCongress has shifted focus to domesticconsumption and production of highervalue-added products, which, in turn,has led to changes in Chinese roadinvestments. Also, since 2014 thecentral Chinese government has widelypromoted public private partnerships(PPP) and has recently launched atransportation PPP programme of 205bn, so more investment is expectedfrom the private sector.In the rail sector, the Ministry ofTransport of China has developed a listof prioritised internationalmegaprojects in support of the ‘One BeltOne Road’ initiative such as the ChinaLaos, China-Pakistan, China-Thailandand China-Russia Railways.In the airline sector, an IATA studyforecasts that the Middle East passengerairlines’ compound annual growth ratefor 2013–2017 will be the highestworldwide at 6.3%, followed closely byAsia-Pacific at 5.7%2. Demand from thegrowing middle class in Asia will likelyhelp counterbalance the lack of publicinvestment by improving the businesscase for private deals, driving totalairport investments up from 13.2bn to 18.7bn between 2015 and 2025.Understandingdeveloped marketchallenges andopportunitiesIn some developed countries, the globalfinancial crisis has also increasedsupport for investment in roads andother infrastructure to drive economicand employment growth. For example,the 2009 American Recovery andReinvestment Act (ARRA) was createdto offset the decline in state and localspending on transport infrastructure.The prevailing opinion was that astimulus package would have a directpotential boost on the economy andwould also indirectly stimulate widereconomic growth. But the lack of landspace for new roads in some developedcountries is becoming a growingPwC Assessing the global transport infrastructure market: Outlook to 2025
problem. Also, strong environmentalmovements are often opposed toadditional road space, and they oftencampaign for more environmentalprotection legislation that ultimatelyresults in unexpected infrastructureproject costs after the project started.The Stuttgart 21 railway and urbandevelopment project in Germany is agood example. In 2010, after workersbegan cutting down trees for buildingwork, they were forced to stop due tonative beetles and bats living in thetrees. The rail company was compelledto develop a protection plan forthe animals.Despite these challenges, there arestill growth opportunities in manydeveloped countries as the need forinfrastructure improvements to addressregional imbalances and capacityproblems – principally in the road andrail sectors, but also in airports –remains. For example, the EuropeanUnion put in place in the 1990s atransport infrastructure policy, theTrans-European Transport Networks,(TEN-T) programme, which is aplanned set of road, rail, air, and watertransport networks that has beenhelping passengers and freight connectbetter across the continent. This policyaims to boost international trade and toclose gaps between transport networks,remove bottlenecks that still hamper thesmooth functioning of the internalmarket and overcome technical barrierssuch as incompatible standards forrailway traffic.Funding of roads and railwaysWhilst there is an active market forprivate investment in sea ports andairports that have strong commercialbusiness cases, the funding of railwaysand roads is more challenging becausethey tend to be more dependent onpublic sector subsidy. Funding forroads, for example, has been in declinedue to reduced revenue from car-basedtaxes as a result of the production ofmore fuel-efficient vehicles.At the same time, despite the squeezeon public expenditure in somedeveloped countries, there is a lackof political support to implementwidespread charging regimes to rationroad space. Yet in other countries, tollroads are accepted as a fact of life andoften the only option for a cashconstrained government as the tollrevenue is seen as a commerciallyviable basis for non-governmentproject financing.The funding and financing of railwaysalso continue to be a challenge as publicsector project owners often naivelybelieve that passenger fares, possiblysupplemented by property developmentprofits, can cover the costs ofconstruction, financing and operation.This is usually not the case, but timespent trying to make the project viablemeans much delay before the inevitableacceptance that a commercially viabledeal structure with public sectorsupport needs to be developed if theproject is not to be abandoned.Innovation, technologyand cross-bordercollaboration drivingstrategic investmentsInvestment in technology is necessary tosupport intermodality as transportnetworks get more complex andcrowded. Mixed-mode journeys arecommon due to the strengths andweaknesses of various transportationoptions, and Intermodal JourneyPlanning software using online webapplications or mobile device apps canbe a good way to plan journeys and keeptrack of disruption.As an alternative to building morecapacity, the roads sector is also lookingto adopt new technology, which can beapplied to improve the efficiency ofexisting infrastructure. The ability touse technology to collect and managelarge amounts of data and provide thatinformation to drivers has a big impact.Three examples are England’s SmartMotorway technology that allows theremoval of redundancy in road spacethrough increased road monitoring, thePwC Assessing the global transport infrastructure market: Outlook to 2025use of mobile phone technology to trackmovement data and communicate withdrivers, and the use of smart phoneapps to inform drivers about parkingspace availability to improve parkingefficiency in cities. The EuropeanCommission has been working on theEuropean Railway Traffic ManagementSystem project to harmonise railwaysystems so that trains can cross nationalborders more efficiently.Other new technology also makes animpact by enhancing vehicle capability.For example, autonomous vehicles arebeing discussed widely and somecompanies are making progress in thisarea. However, due to regulatory andother obstacles, they are unlikely tohave a big impact on infrastructurespending in the near term.Public-privatecollaboration intransport infrastructurePast experiences show that there is astrong need for investment ininfrastructure to be better coordinatedwith the requirements of logistics andother infrastructure operators. It isimportant for the operators to beinvolved in public infrastructureinvestment planning to ensure theefficient use of capacity. But manyinfrastructure owners and operators arenational champions who do not have aglobal view or easy access to global bestpractices. On the other hand,construction companies are becomingincreasingly international, enabling thetransfer of technology and workingpractices. But the industry wouldbenefit if operators, who understand themarkets, were also bigger and moreinfluential, compared with governmentsand construction contractors.There are many cases, in ports andpublic transport, of new infrastructurebeing built but failing to attract enoughvolume for the designed capacity.5
In the rail sector, there are also cases ofinvestments where rolling stockinvestments haven’t been coordinatedwith infrastructure.However, there are also examples ofgood collaboration, such as the 5.8bnIntercity Express Programme (IEP) inthe UK that is being handled as a PPP ofup to 35 years. It involves theprocurement of 700 seat high-speedtrains specified to run on existing tracks(and subject to a coordinatedprogramme of infrastructureimprovements) as an alternative to theapproach elsewhere of building newhigh speed dedicated lines (thoughthese are also planned in the UK). Andthere have been many airport and portterminals where operators have played alead role, making the design of theinfrastructure market-led.The general squeeze on governmentexpenditure makes it even more criticalto choose investment projects wisely.That is why new approaches toassessing the costs and benefits ofprojects – in particular, to bettercapture the wider economic benefits aswell as better understand the costs ofdelays, deferments or inaction – willhave to be developed. Such approachesshould enable authorities to betterprioritise their budget spending. Duelargely to budget constraints, there isalso continuous pressure to financeinvestments through the private sector,even if ultimately, due to Europeanpublic sector accounting standards(EPSAS), privately financed projectswill often end up on the public sector’sbalance sheet. This will be a continuouschallenge.Market appetite forprivate sector investmentThe global financial crisis has reinforcedthe belief that infrastructure is a strongasset class. In developed markets, theappetite to invest in infrastructure isstrong, not least because manyalternatives offer relatively low returns.While pension and insurance fundshave significant sums to invest, they are6often reluctant to take the risk offinancing the build stage of transportinfrastructure projects. Even forbrownfield projects, the financial failureof several toll road projects in majorcountries – for example, the IndianaToll Road in the US, which filed forbankruptcy after the toll revenue failedto meet company expectations, and theSydney Cross City Tunnel tollway inAustralia, which also suffers from lowtraffic volumes and was too highlyleveraged – has caused investors to takea more cautious approach towardspricing and structuring future projectswith high demand risk.The market for financing greenfieldprojects in emerging markets reliesheavily on traditional infrastructureconstruction contractors andinternational financial institutions likethe World Bank. This explains the trendfor more secondary markettransactions, which will enable investorsto realise their investments and reinvestin new projects. However, some marketsare not tolerant of the idea of an earlyexit for such contractors, so thereremain obstacles to the development ofsecondary markets.But the private sector is willing to investin transport if the project is properlyresearched and the risk allocation iscorrect. Investments seem to be moreinteresting when related to high traffictransport nodes (e.g., port terminals,airports and large railway stations),especially with international routesbecause of their potential to generateadditional revenue, which is even moreattractive if in US dollars. A key factorto unlocking these opportunities isbetter project preparation, which weconsider in more detail later.Possible obstacles toinvestment ininfrastructureMany infrastructure projects aroundthe world suffer from obstacles suchas local political opposition, technicalchallenges or other unexpected issuesthat were not addressed when thefeasibility study was prepared (if therewas one). In general, better design canhelp to avoid claims and disputes inthe construction phase while betterprocedures for project planning,preparation and approval will allowprojects to be built much faster. But inmany growth markets, the major issuefor governments is that they lackexperience in how to preparethe projects.Political challenges indeveloped countriesOne of the main obstacles to transportinvestment in Western countries is thehigh level of deficit governments arefacing, which has created challenges,especially in terms of committing largeamounts to infrastructure. The gestationperiod for projects is usuallysubstantially longer than politicalmandates, making longterm planningdifficul
forecasts that the Middle East passenger airlines’ compound annual growth rate for 2013–2017 will be the highest worldwide at 6.3%, followed closely by Asia-Pacific at 25.7%. Demand from the growing middle class in Asia will likely counterbalance the lack of public investment by improving the business case for private deals, driving total
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Le genou de Lucy. Odile Jacob. 1999. Coppens Y. Pré-textes. L’homme préhistorique en morceaux. Eds Odile Jacob. 2011. Costentin J., Delaveau P. Café, thé, chocolat, les bons effets sur le cerveau et pour le corps. Editions Odile Jacob. 2010. 3 Crawford M., Marsh D. The driving force : food in human evolution and the future.
