Future Of Global Infrastructure Industry Looks Brighter
Infrastructure is an essential element of growth. Roads, airports, Rail and Telecom Networks are essential services that drive economic activity by channelizing trade and mobility. Massive investments are required that helps in modernization and maintenance of these systems. According to recent research reports world spends around 2.5 trillion$ on infrastructure development which is expected to increase from 4 to 9 trillion$ by 2025.
In keeping pace with rising economic activity and shifting demographic trends spending on infrastructure spending will largely be driven by Emerging Economies in comparison to Developed Economies. Developed economies while continuing to grow, will see a fall in their infrastructure spending in the near future. While growing urbanization in countries like China, India, Indonesia and Nigeria will help in boosting infrastructure in sectors such as Power and Transport. Increasing economic prosperity will drive infrastructure financing towards consumer sectors, including Transportation and Manufacturing sectors that provide and distribute raw materials for consumer goods. As these sectors have potential to fetch larger investments in near future, government is taking initiative by floating tenders reflecting opportunities in building infrastructure essential for the growth of specific sector.
Accelerated infrastructure spending will drive economic growth, According to “World Economic Forum” “Every dollar spent on Infrastructure Development generates an economic revenue of 5% to 25%”, this accounts for rapid growth. Among sectors, Manufacturing, Extraction and Telecommunications will fetch larger investments. The manufacturing sector petroleum, refining, chemicals, and heavy metals is set to grow at the annual rate of 8% world-wide between now and 2025. Extraction sector accounts for 17% of total infrastructure spending, with more extraction occurring in Non-oil and Gas extraction. The sector is expected to grow at the annual rate of 5% world-wide. With more ongoing technology development, demand for an efficient telecommunication sector is expected to increase. The investment in this sector is expected to rise to 130 billion$ world-wide.
With increase in infrastructure spending, comes demand for financing. Which is also expected to increase with increase in new projects, as large capital funds will be available for investment. Many financially constrained governments have established public-private partnership for avoiding the risk of running short of funds. Many developing economies also provide opportunities to foreign investors and financing agencies to finance large projects. Government floats many infrastructure tenders which are open for foreign participation. Larger spending coming from developing countries has led to geographical shift of opportunities to developing countries. Technological advancement is also an another factor driving growth, it is not only changing the nature of investment but also speed and efficiency. Meanwhile, smart and resilient infrastructure is more than a possibility; from mobile payment system to connected cities technology is driving changes in requirement and construction of more new infrastructure.
Infrastructure development responsible for driving growth, increase in investment spending will lead to a modern city in its more comprehensive form. Emerging markets being the next growth drivers have to ensure they provide proper conditions for infrastructure development.
Global Construction Industry
Construction industry poses a great deal of opportunities for investments, the industry witnessed a double-digit growth during last five-years and is expected to witness steady momentum and reach 3,304 billion$ by 2017. The pace of expansion will accelerate to an annual average of 3.4%, with industry reaching the value of 10 trillion$ by 2020. The construction industry currently represent 13% of total GDP(globally) and is expected to increase by 15% by 2020 according to recent studies on the subject, emerging markets are expected to outperform the developed world in market share. Countries about to undergo largest growth are China, India, Russia, Brazil, Poland and US. Infrastructure construction is expected to increase, China is being expected to lead the growth. However, Asia -pacific countries will continue to account large share in global construction industry, expansion in these countries will be mainly driven by increase in residential infrastructure. While among the emerging markets South-East Asia is expected to invest heavily in new infrastructure projects.
Construction industries in Europe are expected to grow, but in real terms the market will remain sluggish for coming years. With ongoing economic austerity in Europe the economy is expected to experience slow growth not only in construction sector but also in other sectors as well. Large scale investment projects especially in transportation will be the key driving force in Middle-East and African countries. Qatar will be among the fastest growing economies with number of multi-billion projects underway. Latin America’s construction industries is expected to grow at the slower pace, investment will be mainly driven largely under infrastructure projects in residential sector.
Asia-Pacific- Economies will emerge as the world’s largest market for construction over the next decade. Construction contributes largely to countries GDP growth. Therefore in an effort to unlock the economic development, government is looking for more investment in construction for sectorial growth. Therefore, government has been floating tenders reflecting the need for investment in the sector, various construction tenders are floated for public, private as well as Foreign participation in the move to develop the sector.
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