Infrastructure has both the public’s and the politicians’ attention in the US for the first time since the Eisenhower administration set out its federal highways programme with over 43,000 miles of new roads. America is not alone. ‘Stimulus’ packages of many a kind and quantity have been issued by governments as a way of curbing the worst of the global recession. The Obama administration’s $787bn plan is the best known. It is supposed to create, or save, 400,000 jobs rebuilding roads, bridges, and schools, repairing levees and dams, connecting nearly every American to broadband, and upgrading the buses. Other countries have their own plans, with Germany spending $71bn, Canada $35bn, France $37bn and Korea $13bn. There are other countries with more modest sounding figures for spending, like Vietnam’s $3.8bn plan, that actually take up a greater proportion of GDP.
However, even the US programme was dismissed as, “not enough to fill the potholes”. The critics have a point. The American Society of Civil Engineers estimated the nation’s unmet need for infrastructure maintenance to be $2.2tr over the next five years. An infrastructure shortfall figure of $170bn per year is used by the Urban Land Institute. Importantly, the infrastructure deficit is not uniquely an American issue, it affects the developed world: substantial as they are, planned investment expenditure in, for example Germany and Canada, will meet only a fraction of their estimated needs.
Massive need for investment
Recession or not, there is also a massive need for investment in the developing world, with emerging markets offering great opportunities. China is supposed to be putting $725bn into infrastructure and Brazil some $225bn. A survey by Deloitte estimated that countries in East Asia needed to invest $165bn per year over the next five years to meet their needs for electricity, roads, railways, telecomms, water and sanitation.
The Indian government identified $500bn of needed work and critics in turn pointed out a potential $190bn shortfall in reaching this target. Saudi Arabia is aiming to invest upwards of $400bn over ten years in social infrastructure to give its overwhelmingly young population the tools to compete in the global economy.
These are big figures for meeting an even greater demand, but, with declining revenues caused by the ‘credit crunch’, many states are looking into a fiscal abyss. The size of the budget deficits run by some of them means that they cannot maintain the volume of funding to keep going.
