BRICUS: US may pip BRIC in infrastructure investments, says report
ZEENAT NAZIRPosted online: Tuesday, November 06, 2007 at 0000 hrs
NEW DELHI, NOVember 5: While popular perception may have one believe that Brazil, Russia, India and China (BRIC) are likely to compete among each other to attract private investments in infrastructure, US may just emerge as the biggest contender in the fray. With estimations that US would need $1.6 trillion investments, over 5 years, to pull up the nation’s infrastructure, a report suggests that it could end up being a much more significant competitive threat to developing countries, including India.
The report by Ernst and Young, titled Investing in Global Infrastructure 2007: An emerging asset class reveals that while US’ telecommunications, utilities and energy sectors have largely been privatised, its transportation sector remains largely under public ownership and is publicly financed, providing opportunities. “If US infrastructure investments grow, it will be a bigger competitive threat to India than other developing countries,” said Jayesh Desai, national director, Transaction Advisory Services, Ernst and Young. “Companies which have raised funds in the US may perceive lower risk in investing domestically. Given an opportunity, they may invest at home.”
The report states that the interest in US infrastructure has jumped due to a number of privatisation moves undertaken recently. Last year, the American state of Indiana leased the 157-mile Indiana toll road to a consortium of private players for $3.85 billion for a concession period of 75 years. Similarly, the city of Chicago handed over the Chicago Skyway, an 8-mile long toll bridge, to a private player for operation and maintenance over 99 years for over $1.8 billion.
“California alone has said that it will need an investment of $500 billion over 20 years,” said Kuljit Singh, partner, Ernst and Young.
While the road sector has accounted for the major wave in new private investment in the US, other sectors too look ripe. “For the first time, Warren Buffet has invested in three US railroad companies. ELMAT: Ethanol in mind? This shows the rising importance of infrastructure investments,” said Dinesh Khanna, principal, the Boston Consulting. Interestingly, major US freight operators are expected to invest $9.4 billion this year to increase capacity. And airports may be next in the privatisation race. ELMAT:Imagine some Arab countries buyng a few airports
The new road
•US may emerge as biggest competitor with BRIC for infrastructure investment
•Estimates suggest US needs $1.6 trn over five years
•California alone needs $500 bn investment in 20 years
•Chicago Skyways and Indiana toll road privatised; airports, rail next |
