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Thursday, June 19, 2008
Infrastructure 2008 - new ULI report outlines Global Infrastructure Spending and Needs
According to a new report published by the Urban Land Institute (ULI) entitled Infrastructure 2008: A Competitive Advantage, the United States needs to overhaul its outdated regional infrastructure planning process and create a viable federal framework, or face compromising its ability to compete in a global marketplace. The new report was co-published by the Urban Land Institute and Ernst & Young.
Infrastructure 2008: A Competitive Advantage provides a snapshot of current and planned infrastructure investment in a variety of categories across the globe, with an in-depth look at the United States, China, Japan, India and Europe. The second annual report also touches on the infrastructure needs in several of the largest metropolitan areas in the USA, highlighting the consequences of inadequate federal policy and guidelines that have resulted in “a mish-mash of disconnected regional infrastructure management approaches.”
The report says the United States is headed toward decline, and needs to wake up to the dire state of its infrastructure, but cautions that “political will may only emerge when people face imminent reward or immediate risk–a bridge collapse or a burst levee, and maybe not even then.” The report estimates that the U.S. has at least a $170 billion annual funding gap in addition to its outmoded land use and infrastructure models. “America heads for a crisis in the next 10 years if nothing is done,” warns the report.
“It is increasingly clear that the infrastructure funding gap will need to be addressed with public/private partnerships,” says Dale Reiss, Global Director of Real Estate at Ernst & Young in New York City. “If the U.S. fails to embrace this model, it could lead to our economy falling behind more of our global competitors.”
The report identifies four stages of the infrastructure lifecycle and identifies the U.S., Canada, and Australia as “coasting on prosperity.” India, China and the United Arab Emirates are in the “growth and development” stage. The United Kingdom, the European Union, Spain, Singapore, Japan, South Korea and Panama are in the “retool and revamp” stage, while Mexico, Brazil, the Czech Republic, and Russia are in the “inadequate investment” stage.
Some of the worldwide trends and issues discussed in the report include:
The Urban Land Institute (www.uli.org) is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has more than 40,000 members representing all aspects of the land use and development disciplines.
Ernest & Young, a global leader in professional services, is committed to restoring the public’s trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives.
The report says the United States is headed toward decline, and needs to wake up to the dire state of its infrastructure, but cautions that “political will may only emerge when people face imminent reward or immediate risk–a bridge collapse or a burst levee, and maybe not even then.” The report estimates that the U.S. has at least a $170 billion annual funding gap in addition to its outmoded land use and infrastructure models. “America heads for a crisis in the next 10 years if nothing is done,” warns the report.
“It is increasingly clear that the infrastructure funding gap will need to be addressed with public/private partnerships,” says Dale Reiss, Global Director of Real Estate at Ernst & Young in New York City. “If the U.S. fails to embrace this model, it could lead to our economy falling behind more of our global competitors.”
The report identifies four stages of the infrastructure lifecycle and identifies the U.S., Canada, and Australia as “coasting on prosperity.” India, China and the United Arab Emirates are in the “growth and development” stage. The United Kingdom, the European Union, Spain, Singapore, Japan, South Korea and Panama are in the “retool and revamp” stage, while Mexico, Brazil, the Czech Republic, and Russia are in the “inadequate investment” stage.
Some of the worldwide trends and issues discussed in the report include:
- China leads the world in infrastructure spending topping out at $150 billion annually or 9 percent of its GDP. India grappling to keep up concentrates on new airports and ports. Dubai and Abu Dhabi are fashioning desert oases in the Middle East.
- The U.S., Canada, Australia and Russia all need to ramp up infrastructure spending to stay globally competitive. Australia, however, is developing public/private financing structures tapping domestic institutional funds.
- In the United States, the window of opportunity is narrowing as a massive budget gap and outmoded land use models strangle economic competitiveness.
- In the United States, the window of opportunity is narrowing as a massive budget gap and outmoded land use models strangle economic competitiveness.
- Brazil, Mexico and Eastern Europe face insufficient funding for infrastructure maintenance leading to economic weakness from lowered productivity and efficiency. President Calderon has promised a major overhaul in Mexico and the Czech Republic hopes to benefit from European Union connectivity programs.
- Financing volume in the Euro market grew by one-third during the first half of 2007 (excluding UK) following a 37 percent increase in the 2005-2006 period, according to the report. The EU seeks public/private partnerships to accelerate implementation of connectivity projects.
- China’s transformation to industrial power could not be sustained at the $150 billion annual pace, so China created corporations to develop and manage infrastructure projects. The state owns the corporation as a shareholder with private entities and local governments. The corporations can be taken public and the government uses proceeds for other projects. The China Railways IPO raised $3 billion in 2007.
- A new Building Canada program targets $33 billion for new infrastructure projects through 2014. About one-third of funding comes from a federal gas tax.
- In Mexico, a new 5-year $250 billion program targets 12,400 miles of highways and rural roads for modernizing, expanding rails by 930 miles and developing suburban rail around Mexico City. The government also wants to convert 16 public freeways to private toll roads and build an additional 24 privately managed toll roads. Airport privatization has been successful with 34 airports managed by three operators.
- Brazil’s poor road infrastructure severely hampers its economy, particularly agriculture. Airports suffer from inadequate infrastructure with air traffic growing at a 15 percent annual pace since 2004. The government’s growth plan calls for $270 billion in public and private investments between 2007 and 2010.
The Urban Land Institute (www.uli.org) is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has more than 40,000 members representing all aspects of the land use and development disciplines.
Ernest & Young, a global leader in professional services, is committed to restoring the public’s trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives.
