A new survey from international law firm White & Case, in partnership with the Inframation Group, reveals global investors are extremely positive about the Asia-Pacific infrastructure market. However, they may need to drown out some of the ‘noise’ around certain countries and sectors, and explore where the genuine opportunities lie.
Asia-Pacific (APAC) is one of the most dynamic regions on the planet but its need for infrastructure investment is acute. The Asian Development Bank (ADB) estimates that the region needs US$1.7 trillion of infrastructure investment by 2030 to keep pace with climate change and economic growth.
With these sentiments in mind, White & Case, in association with the Inframation Group, interviewed 100 senior-level direct equity investors and financial services firms who had developed, funded or invested in at least one APAC infrastructure project with a value in excess of US$100 million in the past 12 months.
The results have proven to be illuminating, as a number of the findings go against the grain of current popular thought. Among the report’s key findings, several intriguing themes emerge:
Regional positivity trumps global uncertainty: Despite the infrastructure gap, the threat of trade wars and global political instability, the outlook from respondents is overwhelmingly positive—88 per cent of firms are expanding their teams in the region in 2019. Nobody is predicting any contraction.
Roads lead the way: If 2018 was the year for investment in renewable energy, then 2019 appears to be the one for transportation—in particular, roads. In spite of the clamour around other infrastructure sectors, roads are seen as the key infrastructure sector destination—67 per cent are planning to invest in the sector.
Stable income beats risky returns: Respondents’ choices for top investment destinations cut through recent noise about the rise of some developing APAC countries. According to the survey, investors will be concentrating their activity on larger, more stable countries such as Australia, India and Singapore. APAC countries with perceived higher political/systemic risk such as Sri Lanka, Pakistan and Vietnam appear to have drifted down the priority list as investment destinations.
Opportunity knocks: Above all, investors see APAC as a land of opportunity. Indeed, when asked about the greatest benefits to investing in the region, opportunity crops up in a number of different guises. Over half see a ’wealth of opportunity‘; more than a third envisage ’development of knock-on/secondary opportunities’, and a third are looking forward to the ’consolidation of related opportunities‘.
The research also addresses barriers to investment such as political risk, issues with public private partnerships (PPP) and the threat of trade wars but, overall, the general feeling among respondents is that the significant benefits on offer outweigh any challenges. As the director of M&A from a sponsor in Japan says: “There is plenty of room for growth, development and advancement. There is a complete mismatch in the current infrastructure and the actual need based on the growth these markets are having. The opportunities in these markets are significant.”