CMS report: Asia-Pacific predicted to be a dominant driver in global infrastructure investment

Top APAC countries by ranking

According to the CMS Infrastructure Index: A New Direction, which ranks 40 jurisdictions in order of infrastructure investment attractiveness according to six key criteria, Australia, China, and Singapore are driving momentum and interest for infrastructure investment in the Asia-Pacific (APAC) region. Four of the top 20 spots for investment attractiveness were secured by APAC countries in the report, bolstered with robust economic growth across the region, ambitious renewable plans, and China’s Belt and Road – the world’s largest infrastructure project – set to reshape and reconfigure the continent’s landscape over the coming ten years.

The Netherlands claimed the top spot overall, showing the highest GDP growth since 2007 – expected to reach 3.3 per cent – despite the fact that they have no government at all. The nation’s success was in part due to its transparent and efficient procurement process, as well as its healthy multi-billion euro pipeline in road and water Public-Private-Partnerships (PPPs). Other countries in the top five include Canada, Germany, the United Kingdom (U.K.), and Australia.

“From China’s Belt and Road to the U.K.’s Brexit bump in the road, politics and policy remain central to shaping infrastructure investment flows globally. If governments are to attract the apparent wave of private capital available, they should look to countries like the Netherlands and Canada for inspiration where transparency and a clear strategic vision for infrastructure shapes the agenda,” CMS partner and Co-head of Infrastructure & Project Finance in the U.K., Kristy Duane, said. “The CMS Infrastructure Index charts interesting shifts in the attractiveness of 40 countries across the globe and also highlights changes occurring in the infrastructure asset class bringing a new wave of innovation to a market long dependent on standardised PPPs for much of its deal flow. The quest for deals has already prompted the industry to explore less mature sectors such as energy storage, broadband, smart meters, as well as student accommodation and rolling stock. It is fascinating to see which countries are leading the way.”

China’s Belt and Road initiative continues to deliver on the promised infrastructure boom in Asia. Moreover, given the longevity of the project, changes in the balance of infrastructure investment in the region would likely be profound. Though it is currently ranked 20th in the Index, China is perfectly positioned to become a global engine of investment, with close to a trillion dollars forecasted to flow through the initiative by its completion. Meanwhile, other highly-ranked countries such as Australia and Singapore continue to benefit from stable and prosperous economies.

“The APAC region is home to some of the world’s fastest growing economies and most ambitious infrastructure projects, and the spread of four countries within the Index top 20 reflects an ever developing opportunity for investment,” Adrian Wong, Partner at CMS Singapore, commented. “While key success factors like government stability and political stability cannot be ignored, the potential impact of the Belt and Road initiative alone promises to stimulate economic growth through the continent and far beyond.”

“The risks of adverse government interference that are typically associated with investing in the Belt and Road jurisdictions are migrated through an extensive and ever expanding network of Asia’s investment treaties and free trade agreements with integrated investment chapters,” Dr Nicolas Wiegand, Partner at CMS Hong Kong, added. “In addition to investment treaties, political risk insurance industry in the APAC region has developed sophisticated insurance policies for insuring foreign investment in volatile Asian jurisdictions. As with previous years, investor-State arbitration remains an efficient tool to protect foreign investments in Asia, with Chinese companies becoming increasingly frequent users of investor-State dispute settlement mechanism.”