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August 4, 2017 www.intellinews.com I Page 2
CEE/CIS economic hubs face $1.3 trillion infrastructure gap
It compares with an infrastructure investment forecast to 2040 based on investment trends to date with projected infrastructure needs of 50 countries worldwide. This reveals that overall global infrastructure investment needs will be $94 trillion, or 19%, higher than expected investment between 2016 and 2040, representing an average gap of $3.7 trillion per year.
Within the “node” countries of the CEE/CIS region – the four largest economies that have become trading centres and magnets for investment for their respective sub regions – the steepest gap
is in Russia. The anticipated $1.1 trillion worth of investment in Russia over the next 23 years is dwarfed by the $1.8 trillion needed, leaving a gap of $727bn.
Previously a World Bank report warned that Russia’s investment needs are “staggering”. Ac- cording to the World Bank, public expenditure on infrastructure amounted to less than 1.0% of GDP per year in 2012-2014, compared to investment needs of around $1 trillion or 75% of Russia’s 2015 GDP. “Depreciation of capital stock, particu- larly in transport, energy, public utilities, and so- cial infrastructure, is the main driver of the need for major infrastructure investment,” says the January 2017 report. It stresses that “inadequate infrastructure poses major challenges to econom- ic growth”, dragging down firms’ profits because higher transport costs, as well as limiting labour mobility and the population’s access to services.
Turkey, the second most populous country in
the region, has an investment gap of $405bn, according to the just-published Global Investment Hub study. Expected investment also falls
well short of investment need in Poland and Kazakhstan, by $91bn and $84bn respectively.
This is despite the fact that both countries are investing billions of dollars into roads, railways, ports and airports. Ongoing projects include the construction of a third airport in Turkey’s largest city Istanbul, tunnels under the Bosphorus and the construction of new railways including a high- speed line between Edirne and Kars.
Overall, Turkey plans to spur spending of about TRY100bn (€25.6bn) on rail projects, new high- ways, hospital developments, airports, shipping, student dorm facilities, electric energy and ur- ban regeneration. over the next 10 years, Prime Minister Binali Yildirim said in an interview with Bloomberg in April.
Kazakhstan’s government is also investing heavily to close its infrastructure gap, spurred on by
the wish to benefit from the country’s location
on the land bridge between China and Europe. Investments in the country include a series of railway construction projects to create an east- west rail corridor from the Chinese border to the Caspian Sea.
Only three other countries from the CEE/CIS region – Azerbaijan, Croatia and Romania – are covered by the study. They too will see investment fall short of need, though by smaller amounts; $11bn each in Croatia and Romania and $8bn in Azerbaijan.
Within the last decade, global infrastructure spending has remained relatively steady in rela- tion to global GDP at around 3%. Infrastructure investment also remained more or less flat in the years of the international economic crisis, ris- ing above the usual level of around 12% of total investment, as other investments declined.
Looking forward, the largest investment need to 2040 will be in Asia, which will require over 50% of global investment in infrastructure during this period. However, according to the report, the continent is forecast to have a relatively small investment gap compared to, for example, Africa or the Americas, indicating that spending plans are expected to cover almost all of the need in