Global News

• 31 December 2015
• Local News
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INFRASTRUCTURE SPENDING TO HIT $9 TRILLION

Global capital project and infrastructure spending will more than double to $9 trillion annually by 2025 according to a report from PwC. Worldwide, infrastructure spending will grow from $4 trillion per year in 2012 to more than $9 trillion per year by 2025. Overall, close to $78 trillion is expected to be spent globally between 2014 and 2025.

‘Capital project and infrastructure spending: outlook to 2025’ analyses capital project & infrastructure (CP&I) spending across 49 of the world’s largest economies. These account for 90% of global economic output, covering the extraction, utilities, manufacturing, transport and social infrastructure sectors.

The most important catalyst for this growth will be the development of megacities in both emerging and developed markets which will create an enormous need for new infrastructure. These shifts in economic and demographic trends will fundamentally impact infrastructure development in the coming decades.

Globally, in contrast, Western Europe’s share will shrink to less than 10% from twice as much just a few years ago. The recovery in infrastructure spending will be geographically uneven, led overwhelmingly by emerging Asia, as spending overall shifts from west to east. The Asia-Pacific market will represent nearly 60% of all global infrastructure spending by 2025, driven by China’s growth.

The report also concludes that effective ‘enabling environments’ i.e. social, economic and environmental factors, will be needed to facilitate this surge in infrastructure spending and development. Emerging economies especially will have to create a more conducive business environment for investors, engineering and construction firms by overcoming such obstacles as unpredictable regulations, bureaucratic delays, and struggles to secure land rights.

Significantly for the region, and Cambodia in particular, increasing prosperity in emerging markets will impel infrastructure financing toward consumer sectors, including transportation and manufacturing sectors that provide and distribute raw materials for consumer goods.

MEGA DEALS DRIVE GLOBAL MERGERS

Mergers and acquisitions among building materials businesses and seven ‘mega deals’ worth more than $1bn drove the recent high levels of deals in the worldwide engineering and construction industry.

According to the Engineering Growth report by PwC released in August, during the second quarter of 2014, the value of M&A deals in the E&C sector in Q2 2014 surged to $67 billion, up from $15 billion in the prior quarter, as the number of transactions increased by 18%. This growth was largely thanks to two mega-deals in the sector and transactions worth over $1 billion. As a result, the average size of transactions in the construction and engineering sector has reached the highest levels in history.

The huge $29 billion merger in Europe between Holcim and Lafarge drove much of the flow in the quarter. 8 of the 39 transactions in the quarter valued at $50 million or above involved the cement business, an important post-economic downturn development.

The other significant mega deal in the quarter was the $17 billion acquisition of Alstom’s energy unit, including its gas turbine business by US giant General Electric. The purchase will give GE access to power plants in emerging Asia and Africa. GE’s acquisition reflects interest in high quality assets that will give leverage to projected mega infrastructure development and urbanisation in emerging regions, especially in Asia-Pacific.