Successful economies all about infrastructure

Home > Business > Economy

print dictionary print

Successful economies all about infrastructure

테스트

Martin Tricaud

The global economy may be struggling to regain its spirit, but a recent report indicates infrastructure spending is going to boost global trade in the long term. This offers a unique opportunity to Korean heavy industry manufacturers.

HSBC’s Global Connections survey indicates that infrastructure-related trade will grow at an average of 9 per cent annually through 2030, implying that total spending will more than triple in the next 17 years. This will help to boost global trade prospects, and the HSBC Forecast expects world trade to grow at a modest pace through 2015 before accelerating between 2016 and 2020.

The infrastructure story is a rare bright spot in an otherwise gloomy economic environment, with global GDP forecast to grow at just under 4 percent for the same period.

Trade in infrastructure-related goods, defined as both the materials needed for projects and machinery required to boost production, is forecast to grow from 45 percent of global trade to 54 percent during the period, with Asia generally leading the boom. Asia is expected to see the fastest growth in merchandise exports through 2030, with China, India and Vietnam averaging annual growth in excess of 10 percent and South Korea not far behind.

There is little faith in Asia that developed markets will contribute significantly to regional growth, and they are looking to maximize organic synergies to drive future expansion. On a basic level, that means improving physical connectivity but also tapping the economic potential of the region’s rising middle class.

We estimate that emerging Asia will need $11 trillion in basic infrastructure investment over the next 16 years to build roads, bridges, hospitals and accommodations for an additional 650 million urban dwellers.

China did not invent the concept of the infrastructure mega-project as an economic multiplier - Eisenhower’s interstate road-building program in the United States anticipated it by 50 years - but its success has made it a model for the rest of Asia.

It is no coincidence that most of Southeast Asia’s mega-projects are transport related: railways in Thailand, ports in Myanmar, bridges in Indonesia and tunnels in Malaysia, to name a few. Spending on projects such as these is unlikely to slow down. Growth rates in Asia have held up. Countries have strong domestic savings and little foreign currency exposure, and improved infrastructure is seen as a prerequisite for continued economic health.

But the research shows an interesting shift in profiles. While Asia’s poorer countries will continue to drive healthy demand for the basics of infrastructure - the concrete, rebar and power turbines that are the building blocks of first-phase industrialization - the region’s richer countries will look to invest in new machinery.

Currently, the United States is the biggest importer of both the basics and manufacturing equipment, but HSBC predicts it will lose its lead in the two categories by 2020. We believe India will become the biggest importer of goods for infrastructure and China will take the lead in investment equipment, with 20 percent of the market. Other rapidly growing Asian economies - Korea, in particular - also will take an increasing share of infrastructure-related imports over time.

India’s draft five-year plan for 2013-17 proposes to more than double basic infrastructure spending to over $1 trillion, with more than half coming from the private sector.

China has committed to curbing its reliance on infrastructure investment as a principal driver of economic growth, creating a greater role for consumption. While the new emphasis might trim the exuberant basic infrastructure demand growth rates of recent years, we believe China will continue to use infrastructure spending to fine-tune its economy.

But it is the growth in Chinese demand for investment equipment that is going to receive a double boost in coming years.

Wages in China are rising, not only encouraging manufacturers to invest more in automation to cut production costs, but also creating a richer consumer society with correspondingly greater demand for high value-added goods.

Asia’s emerging markets are the single greatest driver of global growth, and a key element of their growth story is the development of world-class infrastructure to lubricate regional and intercontinental trade, improve productivity and enhance quality of life.

More in Economy

Stats show a dearth of cheap digs, politician claims

Covid-19 sees marriage, births fall as divorce, death rises

Government property reconstruction project mentioned

Gov't vows to spend extra budget with dispatch

Parties get closer to deal on 4th extra budget

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now