Trends in Global Infrastructure Investment and Financial Consequences

Abstract

Governments all around the world are faced with economic and social problems borne from the need for modern and reliable infrastructure. Rapid urbanization, increasing population size and economic growth are the main causes of increasing infrastructure investment needs in the world. While the need is growing, government budgets are increasingly squeezed by demands for healthcare improvements, defence, education and many others. The problems in the provision of finance for these investments are aggravated with the new Covid crisis, as the funds reserved for infrastructure investments are now likely to be allocated to urgent needs such as healthcare and unemployment benefits. In such a volatile environment, identifying future investment needs and discussing how these needs will be met is important and timely more than ever. This paper, introduces the global infrastructure investment trends in the future and discusses the use of public and private finance for infrastructure spending. In this concept, the following questions are explored, (1) What is the volume and trend of global infrastructure investment needs? (2) How do infrastructure investment needs differ among regions? (3) How will this infrastructure investment needs be financed?, and (4) What may be some of the future issues to be solved? To find out future infrastructure investment needs and trends, reports outlining the future prospects of the infrastructure sector are examined and trends are revealed. Then, a review of financing mechanisms is introduced in the light of the main procurement systems used by governments for realizing infrastructure projects. In this concept, design-bid-build, design-build and project finance models are explored in terms of their organizational and financial structure. Future issues to be solved are mainly derived from a cross examination of concerns raised in published infrastructure investment case studies and of future trends. Results reveal that the need for investment in infrastructure is growing steadily. As a response to this growth, the use of private finance is increasingly being encouraged by governments all over the world and a variety of international organizations. However, it appears that long-standing private finance issues predominantly observed in demand-based projects will continue to be discussed over the coming years by policymakers, scholars and communities. Indeed, many governments and organizations are already speeding up research efforts into ensuring the resilience of public private partnerships (PPP) in infrastructure projects. The insights from this research are expected to revive interest and research efforts into the potential future challenges for infrastructure financing and options available for governments.