The next decade of infrastructure development in Asia Pacific: why public-private partnerships will be key
Author: Mark Rathbone, Asia Pacific Capital Projects & Infrastructure Leader, PwC Singapore
Take a walk along the streets of Shanghai, Seoul or Singapore, and you’ll see the fruits of a decade of rapid infrastructure development, reflecting the advancing needs and dynamism of economies across Asia Pacific. Over the next ten years, as the region continues to evolve into its role as the global economic powerhouse, infrastructure demands will continue to change too. So what’s required to create the infrastructure that Asia Pacific will need in 2025?
One part of the answer is more capital. Lots more. According to PwC research conducted jointly with Oxford Economics, Asia’s infrastructure market is forecast to grow by 7 - 8% annually over the coming decade, nearing US$5.3 trillion by 2025, or 60% of the world total. Satisfying this hunger for capital will be a challenge in itself.
But I believe something else is also needed: close cooperation, collaboration and alignment of goals between the public and private sectors. In my view, successful and sustainable public-private partnerships will be vital to the robust and savvy deployment of resources – in turn helping to ensure that the 21 member economies of the APEC forum not only survive, but positively thrive, throughout the coming decade.
Why do I say this? Allow me to start my explanation by pinpointing five key trends that are driving priorities and investments in infrastructure development across the Asia Pacific region. While distinct from each other, these five trends are all closely interrelated.
The first – and most evident – of the trends is demand for new transport and utilities infrastructure. As economies grow, so does the need for transport infrastructure to mobilise workforces, transport products and connect economic centres. And as demand expands, improved capacity in power, gas, water and other utility-related resources becomes increasingly critical. Following a decade of expansion, it’s widely recognised that economies across Asia Pacific have a substantial infrastructure gap that they need to close.
Second, the need for schools, healthcare facilities and care for the aged. A combination of rising wealth and greying populations will fuel demand for spending on social infrastructure. Major investments in education and healthcare will be needed if the region’s populations are to contribute sustainably to their growing economies.
Third, Asia Pacific is increasingly wired. The e-commerce boom is driving up expectations for faster and cheaper access to broadband networks for consumers and businesses – while also putting pressure on policy makers to agree how to share data across borders and safeguard transactions, privacy and intellectual property. These types of ‘soft’ infrastructure are vital for expanding business and trade across and beyond the region.
The fourth trend is rapid urbanisation. Attracted by job opportunities, more and more people are moving to cities, stretching existing urban infrastructure to breaking point. To make urban expansion sustainable – and ultimately provide a higher quality of life – it’s imperative to find better ways to manage housing, transport networks, water supply and waste management.
Fifth, private sector platforms for growth are emerging and growing. According to the PwC 2014 APEC CEO Survey, businesses’ capital spending plans over the next three to five years include expanding distribution capabilities in the region, bolstering digital participation, and widening the geographic spread of manufacturing facilities.
If the region is to address the infrastructure implications of all five of these trends, I believe it needs to take an approach that’s increasingly integrated - not just across types of infrastructure, but also across borders. Turning again to our 2014 APEC CEO Survey, some businesses are expanding distribution and service centres to reach new geographies in APEC. Others are stepping up investments in IT infrastructure to expand their digital reach. Each of these examples underlines the importance of planning for infrastructure with regional economic connectivity in mind.
This brings me back to my original point: the vital role of public-private partnerships in spurring and sustaining infrastructure growth. Practical solutions need to be developed to allow for more effective infrastructure investment across the region – and experience shows that mutually beneficial partnerships between the public and private sectors are a great way to enable funds to flow into critical infrastructure. For example, private firms can build and deliver public infrastructure more easily if they have the support of government. And governments can draw on technology and best practices from the private sector to help realise projects and enhance their quality.
For Asia Pacific, the next decade looks bright. And by planning and working together, the region’s governments and businesses can create the world-leading infrastructure that befits the countries’ position in the vanguard of global growth.
Read more in our new report, Infrastructure development in Asia Pacific (APEC): The next 10 years.
Mark is the PwC Capital Projects and Infrastructure leader for Asia Pacific and has extensive experience in structuring projects that straddle the complex interface between public and private partnerships. He’s been integral to the development of numerous project structures, risk allocation and mitigation strategies and the related funding solutions in various sectors in the UK and across Asia Pacific.