Infrastructure Index: A new direction

International
Download publication

Creating an attractive environment for investors in infrastructure is no easy task. Politics and policy can make or break private participation and the flow of investment – something that has never been clearer than in this year’s CMS Infrastructure Index which ranks 40 jurisdictions in order of infrastructure investment attractiveness. From China’s Belt and Road to the UK’s Brexit bump in the road, this report highlights ups, downs and new directions.

The Netherlands has secured top spot in this year’s Index, despite the uncertainty of having 208 days with no government. A vigorous economy, a transparent and efficient procurement process, together with a multi-billion-Euro pipeline of road and water PPPs, have created an attractive, highly competitive environment for investors.

It is a different story for the UK. Ranked fourth after the Netherlands, Canada and Germany, Brexit and political uncertainty are having a considerable impact on the pipeline of projects. The National Infrastructure Commission (NIC) is warning of significant challenges unless there is stronger, strategic planning around infrastructure. Despite this, investors still consider the UK to be a strong market.

If a new direction is required, transparency and the creation of a more varied pipeline to complement the politically appealing mega-projects will be key. Governments have a large part to play. Wim Blaasse of Dutch infrastructure fund DIF comments in the report on the success of the Netherlands: The Dutch government has a “consistent policy when it comes to PPPs, as all projects which reach a certain criterion are simply procured as PPPs. It provides certainty, which in turn creates a large pipeline, which means companies can build up large teams in the country”.

Plenty of capital continues to head towards Europe as the continent bounces back after years of stagnation. CEE is particularly exciting as their economies experience a significant expansion due to the favourable environment for foreign investment and EU financing.

Meanwhile, Canada is reaping the benefits of its government’s focus on infrastructure and ranks second in the Index, and the infrastructure gap in many of Asia-Pacific’s developing nations is rapidly being filled by the promise of China’s grand plan and deep pockets.

The Middle East is continuing to diversify away from oil and take advantage of its natural solar resources. The region also has solid plans around transport, water and sewage, offering some prime opportunities for investors.

In addition, as traditional infrastructure asset classes become more competitive, investors are increasingly looking to alternatives. Examples including 4G and fibre optic networks are creating a platform for smart cities and the Internet of Things. We are also seeing investment outside of traditional PPPs to the likes of student accommodation, car parks, energy smart meters and rolling stock.

Overall, our Infrastructure Index and its five regional supplements present a positive view of the sector globally. A large project pipeline worldwide, new markets embracing PPPs and new asset classes will deliver considerable benefits. And with large amounts of private sector capital waiting to be invested, governments should be looking at how they can capitalise.

We would like to thank our research partners inspiratia and our interviewees for giving up their valuable time to share their views on the infrastructure sector in their respective markets.