Infrastructure: positioning Australia as a leader in the Asia-Pacific region by 2050
Now in its seventh year, Infrastructure is published annually by the Urban Land Institute and EY. The report reviews key global infrastructure trends, policies and issues based on in-depth research and interviews with leading experts from around the world. We look at the opportunities arising for lenders, contractors and the private sector as Australia positions itself as a leader in the Asia-Pacific region by 2050.
- State of play: Asia-Pacific – government and the private sector need to come together
- Positioning Australia as a leader in the Asia-Pacific region by 2050
- Opportunities for investors and organisations
State of play: Asia-Pacific – government and the private sector need to come together
Transportation infrastructure continues to take priority in Asia-Pacific’s rapidly urbanizing countries such as China and India, but more emphasis needs to be placed on energy, water and waste management systems according to the report.
“Rapidly urbanizing countries such as China and India have understandably focused infrastructure expenditure on transport systems enabling them to boost both domestic and economic trade activity”
comments Raymond Chow, Chairman of ULI North Asia and Executive Director of Hong Kong Land Limited.
“However, as they continue to develop, a greater emphasis should be placed on energy, water, waste and social infrastructure to ensure that the cities as a whole can keep pace with the speed of their economic growth.”
Bill Banks, EY’s Global Infrastructure Leader, commented,
“There is clearly an opportunity for the government and the private sector to come together in more innovative and effective ways to build, finance and improve existing infrastructure. Infrastructure is the foundation which allows any city, community, or successful real estate project to thrive and flourish. We must find a way to make this work in Asia-Pacific if our economies are to meet their GDP growth forecasts and social equality to targets.”
Paced by China, many Asian nations continue to make infrastructure development a high priority, building out some of the most advanced and integrated systems in the world. From Tokyo to Beijing to Seoul and Singapore, efficient new international airport terminals connected by high-speed rail to centre-city commercial districts and state-of-the-art mass transit lines link to residential neighbourhoods.
Japan, a perennial leader in infrastructure innovation, is adding to its prodigious government debt in rebuilding the region devastated by the 2011 earthquake and tsunami, and aims to use fiscal stimulus to jump-start an ailing economy.
Positioning Australia as a leader in the Asia-Pacific region by 2050
Ambitious growth targets for the economy and productivity to reposition Australia as a leader in the Asian region by 2050 were recently set by the federal government’s main infrastructure advisory agency – Infrastructure Australia (IA)3.
Infrastructure Australia identified high labour and construction costs as a barrier to building crucial infrastructure. IA found projects in Australia were 40 per cent more expensive than in the United States, and required 30 to 35 per cent more labour input4.
Australia will have to aim for productivity growth of more than 2 per cent a year and economic growth of more than 3 per cent a year to return the country to its historic peaks for both.
To meet the targets, governments will have to start policy reforms such as making infrastructure service delivery contestable, selling government assets to recycle capital for new projects, and setting up more user-pays models, such as road pricing.
“Australia is seen as a global leader in the way public and private sector organisations come together to deliver infrastructure. This provides governments across Australia with a fantastic opportunity to bring the private sector along the journey of developing new ways of boosting investment, thereby going a long way towards meeting the productivity targets set by IA.”
David Larocca, EY Oceania Infrastructure Leader
Opportunities for investors and organisations
The opportunities in Australia and New Zealand for private sector infrastructure organisations are significant today, and will only grow in the future.
The public sector cannot deliver the infrastructure requirements without a step up in private sector involvement. Infrastructure that has been traditionally owned and operated by government – such as hospitals and railways – will increasingly become contestable, meaning the private sector undertaking the services.
In the greenfield infrastructure sector, this means opportunities for contractors, operators, lenders and investors. In the brownfield sector, the private sector will be presented with opportunities to own government infrastructure as well as operations responsibilities - particularly in the social infrastructure sector.
“We are seeing governments at both the Federal and State level being aligned in the way they are pushing forward with infrastructure – they are seeing the need to increase investment, are looking to the private sector to help them do this and are also looking at innovative ways for the private sector to operate infrastructure assets that have traditionally been operated by government. This presents an unprecedented opportunity for the private sector in this market. ”
David Larocca, EY Oceania Infrastructure Leader
Questions to ask yourself
- How well positioned is your organisation to participate in these opportunities?
- Have you developed the relationships with government and private sector partners that are required to maximise chances of success?
- Are there gaps in the market that can be filled by your organisation, in an infrastructure sector or geography?
- What is your infrastructure strategy for the Asia-Pacific region?
Infrastructure 2013 - Global Priorities, Global Insights - Click here to read the full report
3Infrastructure agency outlines bumps in the road to success, Fleur Andersen, Australian Financial Review, 3 July 2013 - http://www.afr.com/p/australia20/infrastructure_agency_outlines_bumps
4Infrastructure agency outlines bumps in the road to success, Fleur Andersen, Australian Financial Review, 3 July 2013 - http://www.afr.com/p/australia20/infrastructure_agency_outlines_bumps