Massive infrastructure investment needed to meet future demand, says OECD

Strategic Transport Infrastructure Needs to 2030 says that air passenger traffic could double, air freight could triple, and port handing of maritime containers worldwide could quadruple by 2030. But the report notes that most of the current gateway and corridor infrastructure could not handle even a 50% increase in demand.

The OECD estimates USD 53 trillion of investment, equivalent to an annual 2.5% of global GDP, will be needed to meet demand over the coming decades. Over USD 11 trillion of that will be required for ports, airports and key rail routes alone. Increased private-sector investment in strategic transport infrastructure will be essential, says the report.

Upgrading key infrastructure will drive competitiveness, boost trade and promote economic growth. But new ways of financing are needed as the traditional model of public funding for major projects is likely to dry up. Some countries have begun linking strategic infrastructure planning to long-term infrastructure funds, as is the case in Canada, Denmark, Switzerland and the United Kingdom.

But other countries, including Australia, India and the United States, should improve financing mechanisms to ensure funding is consistent with strategic infrastructure needs.

It is increasingly likely that the number of privatisations, especially partial privatisations, will continue to increase. This would increase efficiency as well as reduce public funding requirements.

Pension funds are likely to become more active in providing financing but before committing large amounts of capital, more transparency and regulatory certainty are needed. As part of the OECD’s strategic transport project, a worldwide survey of pension funds’ investment in infrastructure was conducted in 2011.