The UK has made it into the Global Infrastructure Investment Index which ranks 41 countries by their attractiveness to investors in infrastructure for the first time.

The UK has for the first time entered the Global Infrastructure Investment Index which ranks 41 countries by their attractiveness to investors in infrastructure.

According to the Index, published by ARCADIS, the leading global natural and built asset design and consultancy firm, Singapore is the most attractive market in the world for infrastructure investment.

In order to gauge their appeal the study looked at various issues including the ease of doing business in each market, tax rates, GDP per capita, government policy, the quality of the existing infrastructure and the availability of debt finance. Combining all of these factors provided a strong overview of the risk profile for each market and how attractive each one is likely to be to potential investors.

Qatar and UAE completed the top three with their strong business environments, healthy pipelines of development work and growing economies, making them attractive to investors, including pension funds and banks.

Rob Mooren, Global Director of Infrastructure at ARCADIS said:

“Good infrastructure is important for the long term economic development of a country.  Many governments are struggling to finance infrastructure investments.  As traditional debt markets are now harder to access, governments need to find alternative finance and agree to progressing projects.  By encouraging private finance into infrastructure, governments can remain globally competitive and meet their social and economic objectives.”

The GIII 2014 ranks the following as the top ten most attractive countries for infrastructure investment in 2014.  The difference from their 2012 ranking is in brackets:

Singapore’s integrated strategic plan linking infrastructure planning with business and social requirements helped it to retain its top position in the index.  However, the government self-finances most major projects so investment opportunities are limited.  Therefore other countries with major investment plans such as Qatar and the UAE, and emerging Asian markets such as Malaysia and the Philippines are considered more promising for investors.

USA and UK enter top ten, but must deliver against pipeline promise

The USA and the UK entered the top 10 for the first time through improvements in their economies as well as the growing need for investment in infrastructure.  However, both countries must work hard to attract private investment funds, as they compete against countries that provide more clarity on government infrastructure policy and are able to act on their promises to delivery major projects.

Continental European countries struggling to attract finance

Continental European countries present a mixed picture in their attractiveness to investors. At the top of the Continental European table, low risk markets like Sweden and Norway remain stable at fifth and sixth. Both have highly efficient business environments with transparency in regulation and efficient legal systems. Continental European countries such as Holland, France and Italy are either lacking public finance needed to upgrade their ageing infrastructure or have a lack of commitment from their governments to deliver proposed projects.  They have therefore slipped down the rankings.

Rob Mooren continued:

“A key difference that we have seen in the Asian and Middle Eastern markets is that those countries that have a clear integrated strategy tying infrastructure development plans to business and economic objectives have higher rankings.  This gives long term clarity to investors and is something that developed markets would do well to copy if they are to succeed in attracting more private finance into infrastructure.”

The report also explored the factors that governments, infrastructure owners and operators need to consider in order to attract private finance.  It suggested the structuring of infrastructure projects is key to this. For example, in project finance, mature markets like Canada, Australia, the US and the UK have sponsors that understand the pricing of assets, are aware of the rates of return expected and appreciate the key risks involved, making it easier to attract infrastructure investment. These markets have experienced the early challenges of introducing PPP and PFI and have learned what to expect from both an investor and political perspective

Rob Mooren concluded:

“Markets that have created the right political environment committed to infrastructure development, can demonstrate the economic conditions required to sustain long term growth.  They have attractively structured infrastructure schemes which will stay ahead of the competition when it comes to attracting the pool of international investors who are increasingly considering this asset class.”

Click here to download the full report