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The world is undergoing transformative change – megatrends – that will impact almost every area of human life. Each of these megatrends impacts ‘infrastructure’, in fact, they require a new thinking about the underlying elements that support infrastructure as a vital service to communities and as an investment asset class.
A global population of 10.2 billion in 2060, and 3 billion people adopting western lifestyles will put increased pressure on natural resources and require innovative infrastructure financing, design and delivery, particularly in the water and energy spaces.
Technological change is shattering long-established business models. Electricity storage technology, autonomous systems and big data are key trends that will shake infrastructure businesses.
Large public deficits are constraining governments’ ability to invest for the future as pension and healthcare costs escalate. Identifying where private financing opportunities are can help bridge the funding gap for projects critical to economies.
The centre of global economic power is shifting from West to East, creating opportunities for investors who can cater to the needs of the growing Asian middle class. We have recently published a New Silk Road addendum to this Red Paper.
All of the previous trends will take place in ever-growing cities, with the appearance of a network of secondary and tertiary cities that all of us will need to get familiar with.
Macro megatrends will continue to have an influence on the infrastructure asset class, presenting opportunities for more efficiency and increased capital deployment.
A watchful eye on and forward-thinking response to these megatrends is important for the infrastructure asset class, particularly in light of the long duration nature of infrastructure assets and their defensive positioning in investors’ portfolios. In addition, these trends give direction for where future investment opportunities will likely emerge and where asset management challenges may occur.
How times have changed. Two decades ago, unlisted infrastructure was an obscure investment asset class, a want-to-be intruder in alternative portfolios where the asset allocation decision essentially boiled down to a choice between private equity, real estate and hedge funds.
Fast forward to today and infrastructure is part of the investment mainstream having emerged as an asset class in its own right to win separate allocations in institutional portfolios.
Reasons for the turnaround in attitudes are easily identifiable. Infrastructure’s defining attributes – long duration assets, stable predictable cash flows, inflation hedges and lack of correlation with listed equities and other liquid assets – make it attractive for diversifying investment portfolios and matching the liabilities of insurance companies and pension funds.
Moreover, in an age of unprecedented low interest rates – following the trauma and disruption wrought by the Global Financial Crisis – the essential services provided through infrastructure coupled with high barriers to entry associated with infrastructure businesses can deliver less volatile returns, which is particularly attractive to institutional investors.
Having prevailed in the battle to be accepted as a mainstream investment class, we think another battle is there to be fought and won; that is, to reimagine what infrastructure really is to investors and the wider community.
Defining infrastructure by listing asset types including roads, airports, seaports, water, gas and electric utilities, hospitals, schools and the like is limiting. Each of these could soon become out-dated responses to social and business needs while also losing the attributes that make them attractive in portfolios.
As megatrends redefine modern living, a new perspective needs to be adopted. Megatrends are large, transformative global forces that define the future by having far-reaching impacts on businesses, economies, industries, societies and individuals1. The pattern of change is gradual at first but ultimately expresses itself with explosive impact2.
Perspectives differ on the number of megatrends reshaping the world, but we believe five will have significant impacts on infrastructure:
Each of these megatrends represents risks and opportunities for current infrastructure businesses and investors. Understanding them and incorporating them into an institutional investor’s strategy when considering investing in an asset, or when managing current infrastructure assets, is essential to creating a truly diversified portfolio and ensuring that risks and returns are appropriately calibrated.
This paper provides a broad overview of the above five megatrends, as well as specific examples of disruption and adaptation for current infrastructure assets, and potentially new ones.
Two phenomena are converging to pressure the planet’s natural resources: exponential population growth and the adoption of highly resource-consuming lifestyles by a larger share of this growing population.
The global population is forecast to reach 8.5 billion in 2030 and 10.2 billion in 2060 (Figure 1)3.
In a world in which almost 1 billion4 people are already hungry, feeding that many more seems daunting.
However, forecasters also predict continued wealth production leading to a world population on average 4.4 times wealthier in 2060 than today at purchasing power parity5. This increase in wealth can help improve living conditions for everyone, but also means even greater pressure on resources as many developing countries adopt technologies and behaviours requiring higher amounts of non-renewable resources while releasing larger amounts of CO2 and pollution.
On the bright side, the world as a whole seems to have enough resources to accommodate this population growth.
For example, recent research showed that if the entire planet’s non-renewable energy resources are accounted for and then translated into one measurement unit, such as kilojoules, the world has enough energy to sustain the current way of life for 574 more years.
However, the challenge will be to manage and share resources in a cost-efficient way so that an increasing number of people can access them. On the other side of the equation, new technologies and lifestyles can provide equivalent levels of comfort and development with less carbon emissions and pollution, but these technologies are still sometimes too expensive and hard to scale.
As Dr Stefan Hajkowicz from the CSIRO puts it: “If people design and adopt innovative ways of using resources efficiently, minimise waste and reduce pollution, the ‘more from less’ megatrend can be rewritten as the ‘more than enough’ megatrend”6.
Innovations, especially to decrease the cost and increase the scalability of technologies, are particularly needed to ensure that a growing and increasingly urban population has access to enough water and energy. For these resources in particular, climate change is another factor contributing to scarcity.
The need for innovation in water infrastructure and water management
Climate change has led to a multiplication of extreme weather events such as droughts and typhoons, and some regions are receiving less and less rain water overall. Combined with population growth, especially in the very regions most impacted by these events, access to water for personal, agricultural and industrial activities is one of the century's greatest challenges.
The United Nations estimate that by 2030, demand for water may be 40 per cent more than supply, and water shortages could affect 50 per cent of the world’s population7. Developing countries are the main drivers for water demand, but Australia will also see a significant increase.
Total water consumption in Australia is forecast to rise by 42 per cent by 2026 and 76 per cent by 2056 compared to 2009 levels8.
Today, agriculture consumes around 70 per cent of global water consumption, or about 3,100 billion cubic metres. Without efficiency gains, agricultural water needs will increase to 4,500 billion cubic metres by 2030 (65 per cent of water withdrawals, Figure 2). Centres of agricultural demands are India, China and South Africa, but the problem is also acute in Australia9.
Water efficiency measures will likely be essential but not sufficient. If until 2030, efficiency improvement in agricultural and industrial water use follow the same rate as between 1990 and 2004 (approximately 1 per cent), only 20 per cent of the supply-demand gap will be filled10. Following a business-as-usual approach on the supply side will also only address a further 20 per cent of the gap (Figure 3)11.
Closing the remaining 60 per cent gap through traditional supply measures would be costly: these face a steep marginal cost curve in many parts of the world. Without a new, balanced approach, these figures imply additional annual investments in upstream water infrastructure of up to US$200 billion over and above current levels – more than four times current expenditures12.
To avoid depleting fossil water reserves, innovation is needed to reduce consumption and increase supply at lower cost than currently available. These will require new ‘hard’ infrastructure to treat and distribute water, but also regulative and economic infrastructure, namely water markets, to support a fair and efficient distribution of water between uses and populations.
Today, the great bulk of the world’s water resources are still effectively free from property rights, but the past century has seen an increase in water becoming a privately-owned resource. While assigning property rights and pricing to something that hitherto has been free is contentious, it does offer a plausible way of encouraging supply innovations through recycling, storage and supply connectivity.
When water has a price and is traded, there is an incentive to manage it more efficiently. However, there is also a risk for underprivileged residents to not be fairly represented in the transaction, and for them to effectively be deprived of essential resources.
The introduction of privatised water services in Latin America did lead to resistances and in some instances to upheavals and the loss of assets by the private owners and operators. Fair distribution and access is essential, and this fairness depends on communication with residents and all stakeholders in addition to governments.
Fortunately, there are examples of successful water markets, such as the UK private water sector. A key part of the success of fully privatised water companies in the UK is that the consumer interest is supervised by a single independent economic regulator, the Water Services Regulation Authority or Ofwat13.
This combination of private ownership and a single regulator protecting the rights of the public has coincided with improved service levels and operational efficiency. We believe increased investments by the private sector can lead to similar improvements in other markets, including the Australian market. The key is to harness the efficiency and innovation developed by the private sector while ensuring equity through efficient governance and regulation.
In short, solving the gap between demand and supply for water will require investments in innovative technology to decrease demand and increase supply. In parallel, these innovations will need to be facilitated by new regulations and markets, in which the private sector can play a bigger role, bringing funds as well as operational expertise.
Challenges and opportunities of growing global energy needs
The combined factors of economic and population growth, as well as increasing reliance on technologies powered by electricity, are creating a long-term increase in energy needs. The International Energy Agency Worldwide forecast a rise of energy usage by 40 per cent between 2009 and 203514.
All sources of energy are forecast to experience growth and fossil fuel-based energy resources will be important to the world for some time, particularly given recent technological advances to uncover unconventional supply. Oil demand is forecast to increase by 18 per cent, coal by 25 per cent and nuclear by 70 per cent.
Horizontal drilling and hydraulic fracturing have released natural gas from shale formations. Along with natural gas, producers have developed advanced drilling and completion processes to produce oil from tight formations. Meanwhile, the number of ultra-deepwater drilling rigs has increased 22 per cent since 201215.
Such unconventional sources of oil will contribute to 70 per cent of oil supply growth, while unconventional sources of gas will account for almost 50 per cent of increases in global gas production16.
Renewable sources are also growing. By some estimates, renewable sources could contribute one of every two megawatts of total power as well as 50 per cent of global electricity generation by 203017.
As energy consumption grows, so does the investment in infrastructure needed to make and distribute energy. The International Energy Agency estimates that increased annual spending on energy efficiency, alone, needs to rise from US$130 billion today to more than US$550 billion by 203518.
From 2011 to 2035, the world is forecast to spend around US$38 trillion on energy supply infrastructure to meet growing demand. Two-thirds of this expenditure is expected to occur in the developing world, and China, India and the Middle East will be the largest consumers.
However, energy consumption in Australia is also predicted to grow by 35 per cent by 2030. The most rapidly growing sources will be natural gas, coal steam gas and renewables. Consequently, investment opportunities in these sectors will benefit from this strong and rising demand.
Adapting to a ‘warmer’ world
Finally, all existing as well as new infrastructure will be subject to the effects of climate change.
Global temperatures are rising and an overall 2 degrees Celsius increase by 2050 is already unavoidable. The warming of the planet actually changes rainfall patterns and seasons, and leads to more frequent and higher-intensity extreme climate events such as droughts, storms and typhoons.
What this means is that the current transportation, electricity, water and telecommunications systems to name a few, need to be reinforced and redesigned to be able to continue to work and provide services when these events happen. Ill-designed systems actually increase the negative impacts of natural events.
The technology to build more resilient infrastructure exists, but is costly. The World Bank forecast that US$70-100 billion per annum will be needed by 2050 to adapt to a ‘warmer’ world. The developing world, and especially the East-Asia and Pacific regions, is likely to have to shoulder 70-80 per cent of these adaptation costs.
To be efficient, resiliency efforts also require the participation of many stakeholders including residents. Recognising this need, some initiatives such as “100 Resilient Cities” help cities to create a position for a Resilience Officer, responsible for identifying the weaknesses of their city, and coordinating the work of stakeholders to solve them.
The private sector, notably utility operators, are also coming up with plans to upgrade and operate their networks to tackle climate change challenges. In public private partnerships, the private party is bound to levels of quality of service: this is a strong incentive for them to anticipate and plan for climate change. To serve this goal, many companies now have ‘adaptation plans’ to climate change.
In parallel, infrastructure assets transform and transport resources and can therefore have a significant impact on how much resources are used, and the potential to decrease CO2 emissions, pollutants and use of raw material, contributing to preserving the local as well as global environment.
These changes should not be thought of as cost burdens; rather they can be investments with returns thanks to lower future operation costs. This aspect is often called ‘mitigation’ in climate change plans.
Both adaptation and mitigation initiatives are essential to ensure the long-term value creation of utilities. See “Dealing with climate change and building resilient cities: The case of Thames Water,” to learn more about how a water sector operator can plan for climate change.
In 2008, the United Kingdom published its carbon plan, and pledged to reduce their carbon emissions by at least 34 per cent by 2020, to set them on a path to reduce their carbon emissions by 80 per cent by 2050 compared to 1990.
Thames Water, the UK’s largest water and wastewater services provider, operating across London and the Thames Valley, also put in place a process that deals with two main aspects of climate change: an adaptation plan to deal with impacts on their operations and a mitigation plan to reduce further climate change by decreasing carbon emissions.
Both plans are a key part of their “Long-term Strategy 2015-2040”.
The adaptation plan recognises that climate change is a business risk, with potentially high costs if the company fails to assess the risks and is not adequately prepared. Thames Water infrastructure is threatened by flooding, drought, extreme cold and snow and they need to plan for these events occurring more frequently and prevent disruption to the network.
To this end, Thames Water focused on water resource planning to secure future availability of water supply, sewerage design and capacity, as well as resilience of assets to flooding. Dealing with flooding is a key priority.
Thames Water led an assessment of their network to identify weaknesses, invested in durable reinforcement of assets, and created response centres that can act quickly and provide temporary measures.
The mitigation plan set to achieve the same goal as the government of a 34 per cent reduction in emissions in 2020 compared to 1990 levels for emissions from operations and from electricity used from the grid. To this end, Thames Water implement a range of energy efficiency improvements in their operations, increase renewable energy generation, using combined heat and power production from water treatment, and continue to invest in new low carbon operational processes and assets.
One of the strengths of Thames Water’s work on resilience comes from its engagement with stakeholders. They recognise the need to work with the government, their suppliers, employees, and to tap into a network of experts to innovate.
Thames Water works closely with the government, reporting about their actions, understanding how they fit with other stakeholders’ actions, and the broader efforts led by the government. They also engage their water suppliers, working with them to improve the resilience of both parties’ business.
Internally, they put in place several internal management processes to create a sustainability culture and help their employees better consider environmental resources when making decisions.
Finally, they formed an alliance, “eight2O”, with two design-and-build joint ventures made up of Costain, Atkins and Skanska, MWH, Balfour Beatty, plus MWH as the programme manager and IBM as the technology and innovation partner. Thames Water challenged the alliance to minimise both the operational and embodied carbon impacts of all their programmes. Together they are designing solutions for energy efficiency and renewable generation and intend to deliver new renewable generation capacity at 11 sites in two years20.
Note: QIC owns an 8.7 per cent equity interest in Thames Water.
Thanks to the pervasive availability of internet access coupled with exponentially growing computing power, the digital trend is morphing into a megatrend with even deeper immersion into social and economic systems.
Connected devices and social media have changed the way people access information and purchase goods and services, therefore disrupting the sale and distribution channels of most companies. The other side of the coin is that online purchases as well as web browsing and social media enable companies to access information about customers at a scale never achieved before.
Moreover, progress in data analytics is also increasingly enabling companies to use information to make business decisions and increase their customer base and sales.
Starting with the disruptive aspect: global internet users have grown from 413 million in 2000 (6.7 per cent market penetration) to 2.9 billion in 2014, which corresponds to a market penetration of 40.4 per cent. Eighty per cent of companies say their customers are changing how they access goods and services, and more than 50 per cent say they are changing their pricing and delivery models21.
Consumer spending via mobile phones is expected to treble from 2014 to 201822. Consequently, companies that do not adapt to this rapid change are likely to see their business shrink. Through these changes, fortunes are made and lost: the average number of years a company spent in the S&P500 was 75 years in 1937, against only 15 years in 2011, and it is expected to be only 5 years in 2025.
New technologies put pressure on the way businesses reach customers for sales, but also for delivery of products and services. Products are increasingly delivered to customers at their home, and therefore stored in a few central locations near transportation hubs instead of at multiple local stores.
The quantity of goods being moved by the world’s shipping industry has grown at a rate of 12 per cent a year over the past decade. It’s estimated that ships will move 2.3 times more goods today than they did 10 years ago23.
In parallel, Boeing estimates world aviation cargo traffic to more than double over the next 20 years. This increase will offer opportunities for the traditional transport sector, but will also put pressure for innovation in logistics to meet increasingly demanding standards for delivery speed and reliability.
Taobao, the leading Chinese market place, now delivers fresh fruit and vegetables directly to the homes of customers, products that most other companies, even in developed countries, do not deliver directly to customers.
At the same time, customers expect experience and personalisation, leading to innovation in the delivery process itself.
Amazon Prime Air is putting together a fleet of new drones to deliver small goods directly to customers. The experience of having a drone deliver products is certainly an important marketing strength, but it also reacts to increasingly jammed city centres, in which motorised traffic speed and parking spaces are increasingly reduced by local authorities.
In addition to the logistics and transportation of goods sectors, we believe three new technologies are worth noting as disruptors in the infrastructure space: new battery technology, autonomous systems and big data.
New battery storage will give access to more energy at a lower CO2 footprint
Technological innovation can also help to reconcile greater energy demand with the need to address climate change by improving the efficiency of the grid and optimising the use of renewable sources.
Most renewable energy sources have so far struggled with the challenge of producing sufficient electricity when it is most needed by customers. Electricity consumption is not consistent over the course of a day, a month or a year.
There are electricity demand peaks when households and businesses decide to use more at the same time, for example on hot or cold days when air-conditioners and heaters are swung into use.
In Australia, consumption peaks account for about 40 hours a year or roughly 1 per cent of the time24, but dealing with these peaks accounts for 25 per cent of electricity bills and corresponds to around 20 per cent of electricity distribution infrastructure, used only when demand is the highest.
Until now, storing electricity from renewable sources has been very challenging, and peak production was therefore mostly lost. Better batteries will be pivotal in transforming energy storage, supply and usage.
Batteries will allow households to store electricity from multiple sources including more erratic and intermittent ones such as wind and solar at off-peak times so that it can be used at peak times. It will also reduce peaks of production from renewables, which are currently putting stress on the grid and complicating grid management for grid operators.
Battery technology has improved significantly in recent years and Tesla is now commercialising home batteries to manage the load produced by photovoltaic panels installed on single family homes.
See “New battery technology from electric cars to revolutionise the power grid?” for more on this.
Electric cars were very popular in 1900, before technological advances in gas-powered motors made them cheaper and more convenient. More recently, increased air pollution has increased interest and funds available for electric cars and battery technology.
In 2013, Elon Musk, Tesla Motors’ CEO, observed that batteries were still the limiting factor in democratising electric vehicles as they remained too big and expensive. Tesla Motors succeeded in reducing the price and size of batteries by an impressive amount, notably between its first model, the Roadster, started in 2006, and its second model, the Model S, first delivered in 2012.
By offering a 265 miles range (three times that of the Nissan Leaf, a best seller among electric cars), and adding design perks and an impressive acceleration, Tesla also achieved in making an electric vehicle a best seller among full-size luxury sedans in 2013 in the USA, ahead of Mercedes, BMW and other well-known luxury car brands.
Tesla’s technological bet relies on the use of lithium-ion batteries originally developed for computers. They assemble smaller cylindrical cells, in larger number than other car manufacturers, achieving cost and size reduction, but with cooling and assembly challenges.
After attracting much attention in the automobile space, Tesla is now moving into the ‘energy solutions’ space, with the creation and commercialisation of batteries for utilities, companies and individual homes. They are seeking to be paired with PV solar panels, or used with the grid to charge at off-peak rates, both in order to shave peak electricity demand.
The question is, can these new batteries, smaller and cheaper, make homes with PV panels and batteries self-sufficient? Is this the start of a trend in which more and more homes will be disconnected from the grid? It does not seem so.
Some calculations show that even in regions where PV panels are attractive, way too many panels and batteries would be needed to provide a disconnected home with enough electricity for average usage over the summer and winter. Tesla itself advertises their battery as a solution to make the most of PV installation, or reduce electricity costs by enjoying off-peak prices, but while still being connected to the grid.
Instead of a competitor to the grid, it seems that these batteries could actually be more of an ally to the grid manager, transferring the peak management task from the network operator to each home. However, it could still be a competitor to large grid operators, by making the management of micro-grids easier.
The decentralisation of peak management could also reduce CO2 emissions and costs associated with upgrades and investments needed on large networks to deal with this problem.
However, governments must monitor the adoption of new technologies and assist their integration into the energy system by proactively updating legislation. In Australia, this would include the definition and classification of new technologies such as energy storage devices in the National Electricity Law.
For example, these devices could currently be viewed as electricity consumers (when recharging), electricity generators (when discharging) and ancillary service providers (when treated as part of the network). This has implications on the applicable network tariffs and ownership restrictions. Legislators need to rule on the classification of such new technologies to eliminate confusion and provide certainty for market participants.
This could include tariff alterations or updating regulatory frameworks and mandates to cater for the new technology. As an example, California has one of the world’s most progressive regulatory bodies, the California Public Utilities Commission (CPUC), when it comes to energy storage uptake.
The CPUC has mandated California’s three investor-owned utility companies to fund and own 1.3GW of battery storage on the grid by 2020. CPUC regulation requires these centralised storage installations to be funded using customer charges, on the basis that consumer benefits can be maximised and costs minimised by coordinating and optimising technology deployment on a system-wide basis25.
Autonomous systems are becoming key for corporations’ competitiveness
Yet another technological advance that will change the way people live and consume a great deal of energy is artificial intelligence and autonomous systems. As underscored by the Institute for the Future in their 10-year forecast, corporations will increasingly automate their processes.
On the one hand, this trend will impact the workforce greatly, with 47 per cent of occupations in advanced economies being at high risk of being automated in the next 20 years.
Automation will change the way some services are experienced as well as the operations of many companies. Within transportation, driverless cars are becoming a reality with Google’s driverless cars having already logged 700,000 miles of accident-free autonomous driving on the roads of California and Nevada.
Automation technology could reshape the mining industry by digging up rocks from hard-to-get places, but also by using autonomous driving. In Western Australia’s Pilbara region, Rio Tinto has moved 100 million tonnes of rocks using a fleet of driverless cars26.
A wide range of mechanical equipment on a mine site can be near-fully automated with current technology, such as trains, drilling equipment and digging equipment. A fully automated mine site has a skeleton number of its original staff. Researchers from AutoRun Technologies and the University of Western Australia have estimated that automated systems yield mine site productivity increases of 25 per cent27.
Automation is also increasing the capacity and safety of container yards. Port of Brisbane saw its stevedores implement full container-handling automation. One of them claimed a 90 per cent reduction in safety incidents and improved operational efficiency. Automated stacking cranes select and load containers onto trucks automatically and dramatically increase the handling capacity as well as the efficiency of the terminal28.
In a transportation sector closer to the customer, automated payments in car parking is becoming standard. Undoubtedly technology will engender social and labour market changes.
Low skilled jobs do diminish, however high-skilled jobs flourish. The implication is that the public policy, and education and training response are keys to minimising the negatives and maximising the benefits of technological advances.
A study of the Swedish manufacturing sector over 35 years from 1965 to 1999 found an acceleration in demand for skilled jobs as companies intensified research and development activities29.
A similar pattern was discernible in the UK in a study examining the combined impact of technological advances and trade on labour markets that found that from 1979 to 1990, highly skilled jobs experienced 29 per cent growth and low skilled jobs experienced 15 per cent contraction30.
The total change in employment was a growth of 3.5 per cent, indicating that overall the economy benefited from technological advances. Isolating the technology component results in highly skilled employment growth of 4.6 per cent and contraction of low-skilled jobs by 27.1 per cent31.
Harnessing “Big data” for all aspects of the business
The increasing use of computers and the internet in every aspect of life leads to the creation of a vast amount of data. According to IBM, the world generates 2.5 quintillion bytes of data every day, and this amount is bound to grow exponentially in the near future: 90 per cent of the data in the world was created in the last two years32.
However, it is also estimated that companies fail to use 80 per cent of the customer data generated. Failing to analyse the data generated is likely to lead many businesses to their end: by 2018, 33 per cent of the top 20 firms in most industries are forecast to be disrupted by industry specific data platforms.
Big data analytics is thus not only an opportunity but also a necessity for businesses. It has the potential to improve efficiency as processes are tracked and optimised. It can also improve forecasting just by making more data points available.
Big data analytics creates new opportunities for sales, as was the case for internet advertisement, now personalised to the demographics and tastes of internet-users by analysing data stored on social media platforms, and by tracking the webpages viewed by the user.
Big data analytics already allows a retailer to know what the consumer wants before the consumer does. It will likely allow financial institutions to uncover trends and make investment choices, or even know the risk-profile of a potential customer by their demographics and browsing history tracked online.
However, most of the possibilities of big data are not yet used by infrastructure operators mainly because analysing the data collected still requires huge resources, and knowing what is important or what to do with this data is still open.
Faced with these challenges, many cities around the world actually open their data about transportation or even energy to the public and organise contests and challenges to incentivise them to build applications and visualisations of the data collected for the use of the broader public.
In the future, we expect infrastructure investors and operators to increase their investment in data analytics, as these provide three services essential for them to be competitive.
First, it can enable the operation of an infrastructure asset to be more efficient, reducing cost and improving the quality of service.
Second, it can enable investors to improve revenue forecasts as the higher number of data points increases confidence in projections.
Finally, it can help schedule capital expenditure optimally, by running models to schedule the repair and maintenance of many components of the asset to schedule expenditure when they bring the most value.
The counterpoint to all the possibilities open by big data analytics is the increased vulnerability of individuals, companies and even governments and countries to cyber attacks, and the increasing difficulty to protect privacy and confidentiality.
In summary, the impact of more data being produced, and the increasing value of this data creates new investment opportunities in the infrastructure needed for telecommunications, including data centres, even in the face of competition from the largest companies providing web platforms and services.
Public debt exploded during the Global Financial Crisis. The gross government debt to GDP ratio globally grew from 65 per cent in 2008 to 79.8 per cent in 2014 and is projected to be 80.4 per cent in 2015. It became a lasting reality for advanced economies, which has seen their gross debt to GDP ratio stabilise around 105 per cent since 2012, with the same forecast for 2015 and 201633.
High government debt results from cyclical and structural factors. The IMF points to financial bailouts, stimulus spending, and lower revenues as aggravating factors in maintaining public debt at a high level in the wake of the Global Financial Crisis34.
However, public debt started its continuous ascension before 2007, following structural changes in developed economies such as the ageing of the population, which is durably increasing healthcare and pension costs, as part of governments’ social welfare programs. By 2030 ageing populations will drive up health and pension spending by 4.4 percentage points of GDP in developed countries (Figure 4)35.
Emerging markets have lower gross government debt/GDP ratios, but these are steadily increasing from an average of 35.2 per cent in 2008 to 41.7 per cent in 2014, with a projected growth to 44.6 per cent in 2016.
Most emerging markets, and most notably China, will face ageing population challenges in the coming decades, and their health and pension-related spending is forecast to rise by 3.4 percentage points of GDP by 203036.
High debt levels are potentially dangerous as they may limit governments’ ability to react to future fiscal shocks. They may also reach a limit at which markets will not lend to them anymore, or at a huge risk premium. However, reducing government debt implies raising taxes and/or reducing government spending, which might also slow down the economy.
In the current context of slow economic growth and high government debt in advanced economies, governments are incentivised to find new ways to attract capital into infrastructure and public services projects with the potential to sustain long-term economic growth, and that governments will not be able to finance alone.
In Australia, current levels of public sector expenditure – especially in the transport sector, which remains largely funded by government rather than user charges – may be unsustainable in the face of increasing budget pressures to fund welfare and health services.
Funding mechanisms that incorporate value capture and user-pay arrangements can help increase the volume of infrastructure delivered and release funding for maintenance of existing assets, increasing overall productivity and standards of living.
Given the amount of private sector capital that is targeted for investment in Australian infrastructure, now may be an opportune time for government procuring agencies to explore hybrid funding models consisting of availability-based and demand-risk revenue streams.
Using the private sector to finance, operate and maintain infrastructure projects also offers opportunities for innovations. For example, congestion and peak pricing models can be an alternative funding model that can also improve traffic.
Adequate partnerships with the private sector can also give access to experience from other projects, including the use of new technologies in construction and operation.
Public sector contributions to fund greenfield projects (state or federal government grants) should seek to avoid crowding out private sector investment; it is an inefficient use of scarce government capital to invest in a project that does not require it. At times it may be prudent for a government grant to reduce in size if the capital cost of a project also declines.
Promoting and encouraging private sector investment through unsolicited bid processes is another avenue that may free governments to reduce to their share of infrastructure spending without reducing the overall amount of infrastructure investment through an economy.
For instance, it is common in greenfield public private partnerships (PPP) procurement processes for construction price estimates to decline over the process given the competitive dynamics. The terms of the associated government grant need to be flexible enough to allow for a corresponding reduction in grant size too. See ‘Innovative financing of greenfield projects: the case of Northwestern Roads Group (NorthConnex) in Sydney,’ for an example.
In conclusion, as public debt stabilises at higher levels, governments will have to focus on how to use public money most efficiently, leverage the private sector’s capital and skills, and allocate roles and risks optimally between stakeholders to continue to fund a high quality infrastructure network.
In the context of high public debt, financing new (greenfield) transportation projects can be challenging for governments. At the same time, the private sector can also be wary of investing in greenfield projects, as these projects bear higher risks, notably linked to construction and predictability of cash flows and revenues once construction is complete. The cost and uncertainty with the bidding process can also limit the number of private stakeholders interested in the project and increase overall costs.
To overcome this, in Sydney, the New South Wales (NSW) Government worked with private partners to finance the construction and operation of a 9 kilometre road tunnel linking the M1 and M2 motorways to form part of the National Highway route. This project was part of the State Infrastructure Strategy and Long Term Transport Master Plan to reduce congestion and accidents in this part of the city.
The private partners, shareholders in the Westlink M7, a toll road in Sydney’s arterial road network, used the NSW Government’s Unsolicited Proposal process to propose an innovative financing option for this road tunnel project. Investors came with the idea of using enhancements to the existing Westlink M7 concession as a primary funding source for the greenfield project. This drastically reduced traffic risk for this new project and increased investors’ comfort level.
The use of the unsolicited proposal process was also a key enabler of this innovative financing structure. It increased interest from the private parties as it reduced the cost and risk of a traditional bidding process and enabled them to come up with a proposal aligning the interests of both parties.
Note: QIC owns a 25 per cent equity interest in NorthConnex
A rising “East”, with China as an economic powerhouse, versus a slower growing “West” has become a reality of the past decade. What is today called the “New Silk Road” references the ancient trade network extending thousands of kilometres across Europe and Asia that was at one time the backbone of the world economy. The rebirth of the ancient trade network in a new form reflects the renewed importance of China and Asia in global exchanges.
The increasing economic and demographic weight of Brazil, China and India, as well as the prospect of continuous development in Latin America and Africa has already started shifting the balance of power between countries from West to East and from North to South.
In 2010, emerging economies accounted for 49 per cent of the global GDP. By 2030, they will account for 57 per cent of global GDP37, and China and India alone will make up 35 per cent of the world population and 25 per cent of the global GDP (Figure 5)38.
Despite a large gap between the poorest and wealthiest residents in developing countries, a middle class is expected to emerge from rapidly growing economies: Asia-Pacific residents are forecast to account for 66 per cent of the global middle class by 2030. One billion people in Asia should move out of poverty into the middle income bracket in the next decade39.
At the same time, emerging countries’ economies are changing, and moving from agricultural and industrial production toward the science and technology, as well as knowledge and services sectors. If, so far, developed economies had an advantage in the science and technology, as well as knowledge and services sectors, they are likely to be more and more challenged in those areas by emerging countries40.
The implications of this across economies, industries and companies will be immense. Some of the questions concern what emerging economies will look for in the future, what they are likely to be a producer of versus consumer of, and what the new investments opportunities will be.
The growth of Asia and particularly China can be analysed in terms of opportunities for investments from these growing countries in Australia, as well as potential trade opportunities, if Australia can offer the growing Asian middle class the products and services they want.
In parallel, the gradual opening of markets and initiatives spearheaded by China such as the Asia Infrastructure Investment Bank and the ‘One belt, One road’ plan, also offer opportunities for Australian investors to deploy capital in these growing countries.
Attracting Asian investments and catering to the needs of the growing Asian middle class
Asia’s rise brings two main opportunities for Australia’s infrastructure industry. On the one hand, emerging countries are accumulating reserves, notably in foreign currencies they wish to invest in low-risk investments in developed economies, as a stabiliser for their own economies.
Australia is very well positioned to attract these investments. A recent UN “World Investment Report” listed Australia 15th out of 200 countries for its direct investment potential in the future. Australia’s need for infrastructure funding could therefore meet Asian investors’ appetite.
On the other hand, the growth of the Asian middle class means that the demand for some products and services will grow, which represents an important revenue opportunity for the countries and companies that can strategically position themselves to meet this demand. Two examples of these new products and services with an impact on Australian infrastructure are the demand for specific food products such as meat and the growth in tourism41.
Currently, China has large deficits in wheat, wine, dairy, chicken and pork, and these are likely to increase as the Chinese middle-class grows. Even if Chinese production increases, it seems that there will still be large opportunities for other countries to export to China. Australia has a geographic advantage to fulfil this demand, and if the country can support a durable trade with China on these markets, it will also translate into increased business for Australian domestic logistics and transportation of goods networks.
Another strong trend coming from the growth in the Asian middle class is the explosion of travel and tourism. Outbound travels from China to foreign countries (excluding Hong Kong and Macau) went from 10.6 million in 2007 to 47 million in 2014, and this number is likely to continue to grow. Except for Japan, Asian countries have also seen their number of outbound flights increase steadily, with India, Korea and Taiwan already above 14 million in 2014. Tourist departures from developing countries are growing three times as fast as departures from developed countries42.
Competition for these tourists is likely to be fierce and quality infrastructure will be a determining factor. Tourist infrastructure includes airports, hotels, restaurants, ports, railways and all other physical structures tourists use on holidays.
According to the World Travel and Tourism Council, the US is currently the world’s biggest spender on tourism infrastructure. The US invested A$150 billion on tourism infrastructure in 2012 while China spent A$100 billion.
At current rates, however, China will become the largest spender, investing A$257 billion in 2030 compared to US expenditure of A$235 billion43. Many other countries are ramping up their investments in touristic infrastructure, doubling these investments for Thailand, Indonesia, Brazil, Singapore and Mexico between 2012 and 2023. Comparatively, Australia, France and the UK are planned to increase their investment by 50 per cent only44.
To sustain the competition and benefit from both trends discussed here, Australia might want to attract more Asian investments into tourist-related infrastructure.
Opportunities for infrastructure investments in emerging markets
As Asian cities continue to grow and inter-region trade region intensifies, Asia will need to build and fund many more infrastructure projects. China is taking the lead in the region on this front.
Two initiatives are especially worth noting, as they may also represent further opening of a market that is still hard to access for many western investors: the creation of the “One belt; One road” plan, and the Asian Infrastructure Investment Bank.
China revealed in March 2015 its “One belt; One road” strategy, which aims to re-establish ancient land and maritime trade routes across Eurasia, making China an important hub on these routes, and effectively challenging US influence in Asia, Africa and the Middle-East. See ‘Institutional underpinnings of the New Silk Road’ for more on this.
This strategy has two components, a "Silk Road economic belt" between China and Europe through mountainous regions in Central Asia, and a “maritime Silk Road" linking China's ports to the African coast and through the Suez Canal to the Mediterranean Sea.
The initiative is still in the planning stage, but the routes will require logistics hubs, communication networks, airports, railway lines, modern highways, ports, all opportunities for investments. US$40 billion was proposed to support these infrastructure investments and China is expected to seek co-investors.
In parallel, the AIIB proposed by China in 2013 and launched in a ceremony in Beijing in 2014, became a reality when the articles of agreement were signed by 50 Prospective Founding Members (PFMs) on 29 June 2015. China is the largest shareholder in the bank, with Australia the 6th largest shareholder.
The United States, Japan and Canada did not sign. The regulated capital of the AIIB is US$100 billion and Australia has pledged A$930 million as upfront capital to the bank. The AIIB’s creation could mean more investment opportunities for Australian and foreign investors in Asian infrastructure and the bank could help identify a pipeline of deals as well as reduce political and legislative risk.
In a historical context, China’s emergence as an economic superpower is not entirely new. Reemergence is a more apt description, since China had the world’s largest economy for most of the past thousand years.
Until the 15th century, China was not only the world’s richest country, but also a technological leader. So in some ways China seems to be in the process of rediscovering itself in its current resurgence45. The Industrial Revolution, which China missed out on, was a historic breach that upended the link between population and economic size.
China is consolidating its economic return by creating new institutions including its US$40 billion contribution to kick-start a New Silk Road infrastructure fund that will boost connectivity across Asia. It is part of China's Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative, which aim to build roads, railways, ports and airports across Central Asia and South Asia.
The recently launched US$50 billion China-backed Asian Infrastructure Investment Bank (AIIB), seen as a challenge to the World Bank and Asian Development Bank, both multilateral lenders that count Washington and its allies as their biggest financial backers, is another.
China has sought to allay concerns that its new bank aims to undermine the World Bank and Asian Development Bank, saying it wants to learn from their experience and that there are more than enough projects around for all the lenders to fund.
Around fifty countries from five continents signed in June 2015 the 35-page-long Articles of Agreement (AOA), which determines the AIIB's governance structure as well as the contributions and shares of individual members and the lending agency's initial capitalisation of US$100 billion.
The AIIB has been welcomed by much of the world, including international financial institutions such as the World Bank and the Asian Development Bank, as a much-need complementary mechanism to address the US$8 trillion infrastructure spending gap in Asia alone.
In 2007, for the first time in history, more people on this planet lived in cities than in rural areas. This trend is intensifying, giving birth to more cities and to mega-cities, cities with a population larger than the most populated cities in developed countries (Figure 6). In fact, 60 per cent of the world’s population will live in cities by 203046.
Cities are most rapidly growing in Asia and Africa, where 80 per cent of all urban growth will take place in the next 20 years47.
All the trends described hitherto coalesce around the urbanisation trend. Cities are large consumers of resources, way more than rural areas. Automation and big data have the power to change the urban infrastructure and make urban life more pleasant.
Public debt also often funds urban infrastructure, and many city governments that have access to debt have had issues managing it and are less resilient to global financial crises. Finally, Asian growth is closely intertwined with the urbanisation trend, as most of the urban growth will happen in Asia.
However, here, we’ll add some elements specific to value creation in cities, and how it impacts the network of cities around the world, by changing economic activities, population demand and ultimately exchanges and flows between cities and the infrastructure supporting them.
A network of complementary cities
Urbanisation will drive sector shifts and changing employment patterns in the years to 2030. Rapid urbanisation in Africa, for instance, is helping new service industries to emerge, as well as facilitating a steady shift from agriculture to manufacturing.
Asian cities will continue to dominate job growth in the industrial sector, while mature market cities such as Tokyo, Osaka, Seoul and Taipei, which have high land and labour costs, will shed these kinds of jobs. Manufacturing is forecast to expand specifically in rapid-growth market cities with adequate space to grow, such as Chongqing in China, where industry is moving further inland.
Seaboard cities with proximity to China’s large manufacturing centres, such as Jakarta and Ho Chi Minh City, are also expected to enjoy large increases in industrial employment.
Urban areas such as Delhi and Hanoi will continue to benefit from their relatively competitive labour costs, attracting both manufacturing and outsourced services jobs, including software development.
Beijing, Lagos and Mumbai are all expected to create more financial service sector jobs than London from 2013 to 2030.
However, New York, London and Hong Kong will still remain the world’s largest financial hubs. The need to build new infrastructure in emerging cities, while upgrading infrastructure in mature market cities, will continue to drive growth in construction and related sectors48.
As the urban population continues to grow, the activities powering these cities’ growth are also changing, creating opportunities for others in their network to attract new activities and move up the value chain. This means it is important for cities to think about their position in a network of other cities.
As uses in cities change, old infrastructure will likely need to be upgraded, or new infrastructure will need to be built in cities aspiring to move up the value chain and get the activities offset by other cities. These changes might happen faster than before, and spending time to understand the relationship between cities, the logistics network, and the interest and plans of the stakeholders in these networks will be essential for long-term investors in large scale infrastructure.
Cities contributing to wealth creation and development in emerging economies
The transition of humanity from predominantly rural-dwelling to city-living goes hand in hand with the shift from predominantly agricultural-based economies to industry and also service and information-based economies. The rise of cities will also lead to high concentrations of wealth and the rise of a middle class in developing countries, and reinforces the shift in economic power from West to East.
By 2030, 40 per cent of the world’s 50 largest cities in terms of constant-price GDP will be in China and by the year 2030 the total GDP of China’s 150 largest cities is expected to triple to US$25 trillion, up from US$8 trillion today49. In 2030, China will have 17 of the global top 50 cities by GDP, more than North America, and 4 times the number of European cities50.
This growth will take more time to be shared with the population: GDP per capita in emerging and developing countries is forecast to take 24 years for Beijing to be at levels comparable to New York today for example, while it will take 50 years for Delhi and 150 years for Lagos, Nigeria (assuming comparable trends as witnessed today)51.
Nevertheless, due to the size of emerging economies’ population, their GDP growth still translates into a very high number of people accessing higher standards of living, and very large markets for consumer products and infrastructure.
By 2030, the world’s 750 biggest cities will gain 220 million additional middle class consumers, and form 60 per cent of total global spending including an 88 per cent growth in spending on non essential products. China will have 45 million urban households with annual incomes in excess of US$70,000, way more than Europe, and almost as much as North America, while Shanghai will become the 8th world city in number of high-income households in 2030 from a rank of 69th today.
Wealth creation in urban centres (Figure 7) and the growth of the middle-class will certainly impact urban infrastructure but also global trade and therefore infrastructure in other places than the very cities that are growing.
High needs for investment in infrastructure and the potential for the private sector to step in
This increase in wealth creates a significant market with a forecast of US$18 trillion increase in consumer spending by 2030. It will also have a tremendous impact on infrastructure and real estate demand as urban-dwellers of the 750 largest cities in 2030 spend an extra US$ 1.7 trillion on cars and eating out, needing an extra 540 million m2 in office space, and 260 million new homes by 203052.
The size of the challenge is such that the cost to keep pace with urbanisation is forecast to be US$57 billion over 2012-2030. Based on a base case of governments spending 3 per cent of GDP to fund infrastructure, there would still be a total gap of US$8.4 trillion, or US$500 billion annually. The downside scenario in which governments spend 2 per cent of GDP would lead to a total gap of US$24.6 trillion or US$1.5 trillion annually.
These needs will be particularly acute for transport (additional roads and mass transit such as rail and light rail), and energy, notably clean energy, as the concentration of extremely large populations and the use of fossil sources of energy are already creating massive health hazards through air and water pollution in fast growing cities in the developing world.
Nearly all cities have a growth agenda: high-quality infrastructure contributes to well-functioning, growth-primed cities that can attract new residents and keep their existing ones. Many emerging nations face the challenge of building new urban infrastructure from scratch, while many developed nations face the problem of aging infrastructure. Funding will remain challenging, especially for governments alone, and under current conditions, only US$45 billion investment is likely to be realised. This can create significant opportunities for the private sector to step in (Figure 8).
In order to attract more private investments into infrastructure, the B20 Infrastructure and Investment Taskforce insisted on three actions that the G20 should take: setting specific targets for infrastructure in their national growth plans, establishing a Global Infrastructure Hub and increasing the availability of long-term financing for investment. Efficiently financing global infrastructure needs could contribute up to 1.1 per cent to the G20 target of 2 per cent additional growth over the next 5 years.
With government budgets around the world under pressure, many will continue to finance infrastructure projects using public private partnership (PPP) models, with new flavours emerging to meet local needs. Those markets that harness the promise of urbanisation by finding creative solutions to financing infrastructure needs will be those that enjoy economic growth.
Megatrends are deep-rooted changes that show early signals before putting many stakeholders who could not read or react to them in “freefall”, or events that radically change one’s environment and situation. However, no one can predict with high levels of certainty how these trends will express themselves, and what the “freefall” events will be.
The megatrends focused on in this paper are already impacting many sectors. We have tried to draw attention to some of the risks and opportunities that they engender for infrastructure investors and managers.
Resource scarcity will require better management at the asset level, as well as at the level of global logistics systems. It will certainly present investors with opportunities, as new assets are needed for a better distribution of resources, or as assets are better managed to produce more from less.
Indeed, automation and big data analytics provide opportunities for asset owners to operate infrastructure assets more efficiently, increase the level of service and optimise the timing and cost of capital investments. At the same time, they may make some assets as we know them, obsolete.
Will we need as many parking garages, or roads, when we’ll have self-driving cars? Would a fleet of self-driving cars be an infrastructure asset similar to other public transportation ones? The answers to these questions will be driven by the evolution of the transport value chain, but they should also be considered more broadly.
High levels of public debt are a burden for many governments. But this represents an opportunity to review the way public and private stakeholders share risks and returns, while procuring the assets needed to support economic growth and improve quality of life.
The economic growth of Asia together with related urbanisation will fuel new investment opportunities, and platforms, such as the “‘One belt; One road” plan with the support of the AIIB.
Finally, the scale of urban development ahead is unprecedented increasing the need for infrastructure in growing cities. This will change import and export flows, and thus impacts infrastructure outside of these cities. The nature of the infrastructure needed to improve and maintain an acceptable quality of life in fast growing cities will also be significant.
The right step is to acknowledge these megatrends, then analyse and test their effects on new investments being considered and existing owned investments. Expanding the scope of scenario analysis and the testing of sensitivities are keys in translating them into valuation of assets and the construction of portfolios.
The pace of change and the likely shorter timeframes for them to significantly affect value chains means investors, at their peril, remain complacent about their import into infrastructure investment.
This Red Paper results from a collaboration of the following people in the QIC Global Infrastructure team: Ross Israel, Albert Daniels, Caroline Nowacki and Kirsten Whitehead.
1 EY Global. Megatrends 2015: Making sense of a world in motion.
2 This and a number of other insights in this paper are drawn from Stefan Hajkowicz, Global megatrends: seven patterns of change shaping our future. CSIRO Publishing 2015.
3 United Nations, Population Division, Probabilistic Population Projections based on the World Population Prospects: The 2015 Revision
4 Stefan Hajkowicz, Global megatrends: seven patterns of change shaping our future. Ibid.
5 OECD (2013) Economic Outlook No 93 – June 2013 Long Term Baseline Projection. Cited by Stefan Hajkowicz
6 Op cit. Stefan Hajkowicz, Global megatrends: seven patterns of change shaping our future.
7 Source: The United Nations World Water Development Report 2014: Water and Energy — Volume 1, UN Water, 2014.
8 Op cit. EY Global. Megatrends 2015.
9 McKinsey & Company: 2030 Water Resources Group. Charting Our Water Future: Economic frameworks to inform decision-making.
14 IEA (2011) World Energy Outlook. Paris, International Energy Agency.
15 Ted Moon, “Deep water drilling rig fleet faces short-term slowdown, long-term growth,” Offshore website, 17 July 2014, www. offshore-mag.com/articles/print/volume-74/ issue-7/rig-report/deepwater-drilling-rig-fl eetfaces-short-term-slowdown-long-termgrowth. 12 January 2015.
16 Sources: BP Energy Outlook 2030, BP, January 2013; and World Energy Outlook 2012, International Energy Agency, 2012.
17 The People’s Climate, Project Syndicate website, 24 September 2014, www.project-syndicate.org/commentary/monica-araya-and-hans-verolme-saythat- the-people-s-climate-march-was-just-the-startof-popular-pressure-on-world-leaders.
18 World Energy Investment Outlook 2014, International Energy Agency, 2014.
19 http://www.thameswater.co.uk/cr/Climatechange/index.html is the source for material discussed in this breakout box.
21 Ernst & Young, Megatrends 2015, Making sense of a world in motion.
24 Op cit. Stefan Hajkowicz.
27 Bellamy D, Pravica L (2011) Assessing the impact of driverless haul trucks in Australian surface mining. Resources Policy 36 (2).
29 Hansson P (2000) Relative demand for skills in Swedish manufacturing: technology or trade? Review of International Economics 53 (1).
30 Gregory M, Zissimos B, Greenhalgh C (2001) Jobs for the skilled: how technology, trade and domestic demand changed the structure of UK employment, 1979-1990. Oxford Economic Papers 53 (1)
31 Op cit. Stefan Hajkowicz.
32 IBM (2014) Bringing Big Data to the Enterprise. http://www-01.ibm.com/software/au/data/bigdata.
33 IMF, Fiscal Monitor 2015 http://www.elibrary.imf.org/view/IMF089/22120-9781498396387/22120-9781498396387/ch01.xml
35 IMF 2013 Fiscal Monitor. Fiscal Adjustment in an Uncertain World
37 Congressional Research Service. 2011. “Rising Economic Powers and the Global Economy: Trends and Issues for Congress”. http://www.fas.org/sgp/crs/misc/R41969.pdf. Accessed 29 May 2013.
38 European Union Institute for Security Studies, 2011.
39 Wilson, D, Kelston AL, Ahmed S (2010) Is this the ‘BRICs decade’? BRICs Monthly. Goldman Sachs Global Economics, Commodities and Strategy Research. Cited by Stefan Hajkowicz.
40 Op cit. Stefan Hajkowicz, Global megatrends: seven patterns of change shaping our future.
41 Op cit, Stefan Hajkowicz.
42 World Bank data webpage: World Development Indicators, International tourism, number of departures (World Tourism Organization, Yearbook of Tourism Statistics).
43 WTTC 2013. Travel & Tourism Economic Impact 2013. In Country Profiles. UK, World Travel and Tourism Council.
45 Robert Devlin, Antoni Estevadeordal, Andrés Rodríguez-Clare, The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean. IDB 2006
46 United Nations Population Division World Urbanisation Prospects.
49 Future Trends and Market Opportunities in the World’s Largest 750 Cities, Oxford Economics, 2014.
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