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Arcadis: Asia markets are winning the race to attract global infrastructure investment

Asia markets are winning the race to attract global infrastructure investment

 

-  Singapore tops Arcadis Global Infrastructure Investment Index for the second time

-  Malaysia ranks seventh in global ranking

-  South East Asia emerging markets including the Philippines, Indonesia and Thailand are climbing up the ranks

 

(Hong Kong, 22 September 2014) Singapore is the most attractive market in the world for investment in infrastructure, according to Arcadis, the leading global natural and built asset design and consultancy firm. 

The findings come from the second Arcadis Global Infrastructure Investment Index, which ranks 41 countries based on their attractiveness to investors in infrastructure.  In order to gauge their appeal, the study looked at various factors including the ease of doing business in each market, tax rates, GDP per capita, government policy, the quality of the existing infrastructure and the availability of debt finance. Combining all of these factors provided a comprehensive overview of the risk profile for each market and how attractive each one is likely to be to potential investors.

Richard Warburton, Head of Infrastructure, Asia, Arcadis said: “Infrastructure is the backbone of a country and a catalyst for its long-term economic development.  A significant amount of investment is needed in Asian infrastructure due to urbanisation across the region.Many governments in Asia are struggling to finance major infrastructure investments and are actively seeking private financing to invest into infrastructure.”

The top ten most attractive countries in Asia Pacific for infrastructure investment in 2014 are below:

                       

Asia Pacific Ranking 2014

Global Ranking 2014

Country

Global Ranking Change from 2012

1

1

Singapore

(=)

2

7

Malaysia

(=)

3

9

Australia

(-1)

4

15

Japan

(+1)

5

17

China

(+1)

6

20

Thailand

(+1)

7

21

South Korea

(-1)

8

23

Indonesia

(+3)

9

25

India

(-2)

10

29

Philippines

(+3)


Singapore remains the world’s most attractive market for infrastructure investment

Singapore’s integrated strategic plan linking infrastructure planning with business and social requirements helped retain its top position in Arcadis’ index as the most attractive global market for infrastructure investment.  However, the government is capable of self-financing most major projects, so investment opportunities, such as the recently opened Singapore Sports Hub are limited.

China the most attractive out of BRICs 

China has maintained its fifth place position out of all Asia-Pacific markets and has moved up one place in the global ranking. As well as offering potential investment opportunities within China, there is also an emerging trend of Chinese capital and technical experts seeking to help launch infrastructure programmes in regions like South East Asia and South America.

Malaysia prioritises infrastructure through five-year Economic Transformation Programme (ETP)

Malaysia ranks seventh in the global index. Its five-year ETP includes plans to develop new infrastructure, including a high-speed rail link to Singapore and ongoing upgrade of Kuala Lumpur International Airport. This programme provides investors with a spectrum of investment opportunities. The initiative promotes economic growth and productivity and has led Malaysia’s economic ranking to move up four places to seventh in 2014 from 11th in 2012.

South East Asia countries offer promising opportunities for investors

Emerging markets in South East Asia, such as Thailand, Indonesia and the Philippines, show significant improvements in the ranking. The countries are trying to improve their business environment for foreign investment through infrastructure development. However, investors will remain cautious around infrastructure investment in these countries because the business and political risks are much higher. The governments are actively encouraging the private sector to take a delivery role in infrastructure projects.

Richard Warburton continued: “A key differential that we have seen in Asian markets like Singapore is that they have clear integrated strategies that tie the infrastructure development plans to business and economic objectives. This gives long-term clarity to investors and is something that European and other South East Asian markets would do well to emulate if they are to succeed in attracting more private financing into infrastructure.”

The report also explored the factors that governments, infrastructure owners and operators need to consider in order to attract private finance.

Richard Warburton concluded: “Countries that have created the right political environment for sustained long-term economic growth and have attractively structured infrastructure schemes will stay ahead of the competition to attract international investors.”

The full report can be downloaded here.

 

Notes:

The Arcadis Global Infrastructure Investment Index ranks the world’s 41 most dynamic countries with the greatest potential for growth and investment in infrastructure.  A total of 26 individual criteria in five key areas are analysed and given a weighting which then creates an overall score for each market. The indicators selected are those most pertinent to investors when making an investment in infrastructure. Most weighting goes to indicators of dynamism but the overall blend of indicators creates the final ranking.

The five main indicators are:

  • Economy: GDP per capita, long-term GDP growth, gross fixed capital formation, investment forecast, domestic market size, household consumption
  • Business: Ease of doing business, government regulations, transparency of policy making, prevalence of foreign ownership, legal framework efficiency, freedom from corruption
  • Risk: Political terror scale, political instability, inflation, strength of investor protection, cooperation in labour employer relations
  • Infrastructure: Quality of infrastructure, local supplier quality, ease of access to loans, global connectedness
  • Finance: Effect and extent of taxation, tax rate on profits, availability of financial services, financial credit rating, insurance

Data Sources: World Bank, World Economic Forum Global Competitiveness Index, Heritage Foundation, DHL, Economic Intelligence Unit, Business Monitor Index and Political Terror Scale (PTS)

 

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