S'pore again world's best spot for infrastructure investment: Index

S'pore again world's best spot for infrastructure investment: Index

A report has once again named Singapore the world's most attractive market for infrastructure investors, despite its limited pipeline of opportunities and the fact that most projects here are government funded.

This is because most other factors - including its stable political situation and secure business environment - help create optimum conditions for investment, the firm Arcadis said.

The global design and consultancy company published the Global Infrastructure Investment Index - something it does every two years, ranking 41 countries by their attractiveness to infrastructure investors.

It looks at factors such as the ease of doing business in each market, tax rates, GDP per capita, government policy, the quality of existing infrastructure, and the availability of debt finance.

For Singapore, it noted that there are now signs that the government is looking to encourage more institutional investors.

"Although previous indices identified limited opportunities in this market due to projects being government-funded, there are now signs that the government is looking to encourage more institutional investors.

"Work is underway in the country to improve understanding of infrastructure as an asset class to make it more attractive to investors, part of which includes the development of new benchmarking tools," it said.

For example, EDHEC Business School has launched a new research unit in Singapore to collect data on infrastructure investments and create benchmarks in private project debt and equity. The unit is partly funded by the Monetary Authority of Singapore (MAS).

This is the third time Singapore has retained its top position in the index.

Speaking to The Business Times, Graham Kean, head of client development at Arcadis Asia, said: "There is actually quite a lot of infrastructure development going on - the airport, ports, land reclamation, MRT lines, tunnel connections, sewage systems - mostly government-funded, but that also creates a big infrastructure development opportunity for contractors."

While public-private partnerships are not too common here since Singapore's healthy budget negates the need for private capital participation, government projects often open tenders for private (including foreign) contractors to take part in.

In addition, not all the financing done here is for Singapore projects; funding is also done out of Singapore for regional projects in ASEAN.

The Republic, with its status as a financing hub, has a critical mass of global financial institutions (FIs) that offer infrastructure financing options. In fact, statistics show that FIs here lead-manage 60 per cent of cross-border project financing in ASEAN.

However, Arcadis does not think the Asia-Pacific region is very well placed for infrastructure investment this year.

It believes the current slowdown in China will likely influence the economies of the whole region, lowering its attractiveness.

In addition, high levels of dollar-denominated debt - and significant depreciations against the dollar across the region (Malaysia, 25 per cent; Thailand, 10 per cent; Singapore, 13 per cent; South Korea, 14 per cent) - could present huge short-term barriers to investment as countries risk debt crises.

Another barrier that erodes the region's attractiveness is certain ASEAN countries' strong reliance on commodity exports amid low oil and gas prices. These include Indonesia (commodity exports accounting for 6.5 per cent of GDP), Malaysia (9 per cent), and particularly Singapore (32.6 per cent).

This data is from the United Nations Conference on Trade and Development (UNCTAD). Despite not being an oil or commodity producer, Singapore is one of the region's biggest markets for refining, distribution and trade of oil and petroleum products, which in turn counts towards its high export percentage.

That is not to say that there are no investment opportunities in Asia Pacific, though.

Mr Kean said: "There are more mature markets in the West, for sure, but Asia still holds a whole host of opportunities.

"If we look at the scale of the opportunities, although China is lower in the table relative to Asia and Australia and Singapore, the size of the opportunities are absolutely colossal. You can see greater infrastructure investments in a city than in a whole country of Europe. That's the sort of scale, and you can't ignore that."

This article was first published on May 7, 2016.
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