Discovering infrastructure investment opportunities in emerging markets

Saif Malik CEO, UK and Regional Head, Client Coverage, UK & Türkiye

6 Feb 2024

Robust infrastructure helps citizens live efficient lives whilst enabling economic productivity, furthering a country’s competitiveness on the global stage. Infrastructure is a catch-all term that can include everything from physical components that support the efficient flow of goods and people such as roads and railways, to digital infrastructure such as data centres, large databases or software applications.

Infrastructure investment provides short-term and long-term advantages for economic development. In the short term, industry is stimulated by the need for workers to execute complex infrastructure development plans. At the same time, maintaining these interconnected systems creates long-lasting enterprises for society (1).

Infrastructure is an essential area for investment

Infrastructure development lays the foundations for the survival of other systems, organisations and services (1). The link between solid infrastructure and increased economic output is best displayed in the efficacy of supply chains. 46% of global business leaders think poor quality infrastructure disrupts global supply chains (2).

For example, equipment innovation and availability within the global shipping container sector is one of the key challenges to increasing efficiency and decreasing the cost of shipping (3). 56% of businesses view infrastructure improvement as the most significant enabler of global trade (2). Technological advances such as smart ports and AI integration will streamline supply chain operations for the shipping industry while mitigating risks such as inaccurate delivery times (4). It is essential that governments, organisations, and company leaders continue investing in sustainable, digitally driven innovation to enable economic growth, underpinned by efficient infrastructure.

With many benefits for citizens

Long-term infrastructure investments can also increase the quality of life for citizens. In 2022, Sweden announced a new national transport infrastructure plan, with a record planned investment of SKr881 billion (USD86.6 billion) between 2022 and 2029 to increase national accessibility for citizens and businesses without increasing greenhouse gas emissions (5). Swedish citizens will benefit from better public facilities, faster communication, and increased accessibility nationally and globally.

But there are challenges along the way

Disparities in infrastructure and technology across different economies hinder the ability of businesses to operate and trade internationally (2). The COVID-19 pandemic displayed the fragility of infrastructure in some developing countries, where the capacity to invest in a reactive health response was limited by existing infrastructure constraints and tighter financial borrowing restraints (6).

Countries with existing robust infrastructure during periods of economic downturn or global crisis can take more efficient, reactive decisions to mitigate social, economic, and environmental damages.

However, creating robust infrastructure through large development projects requires a staggering amount of investment to ensure they are viable. For example, in the early 2000s, the UK government was forced to dissolve ‘Railtrack’, which maintained British railways, due to poor infrastructure cost planning for modernising the West Coast Main Line (7).

Further, the environmental and sustainability impact of these projects needs to be pre-determined and continuously measured to ensure the planet’s and its population’s are not negatively damaged over the long term.

Investing in markets in need

Developed countries’ governments and business leaders must be the driving force behind infrastructure investment into new and growing markets. Projects such as the European Union’s Global Gateway programme seek to mobilise up to EUR300 billion in global investment between 2021 and 2027 to build and improve sustainable energy, transport, digital, and other forms of infrastructure (8).

Investing in Southern Neighbourhood markets and other developing countries provides vast opportunities to create sustainable global economies of scale, political stability, and new trade lines for valuable goods such as minerals, energy, and knowledge sharing.

How we’re supporting infrastructure investments

We have deep experience working alongside export credit agencies, government departments, investors and asset managers to coordinate and finance sustainable infrastructural projects for tomorrow in countries where the industry is transitioning. In 2022, we were selected to structure and arrange financing for the high-speed rail link in Turkey, working towards a sustainable future for economic growth (9). This infrastructure project will increase the flow of goods and trade whilst improving mobility for workers and citizens (10).

Standard Chartered is well-positioned to support infrastructure investments in dynamic geographic market through its sustainable trade financing, global market presence, and financial market insights driven by technological, financial solutions (11).

References

1. https://www.blackridgeresearch.com/blog/what-is-infrastructure-and-types-of-infrastructure-projects-for-economic-development
2. https://av.sc.com/corp-en/content/docs/SC_Future-of-trade_2023.pdf
3. https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/overcoming-global-supply-chain-challenges
4. https://www.container-xchange.com/blog/digitalization-in-logistics-industry/
5. https://bransch.trafikverket.se/en/startpage/planning/long-term-infrastructure-planning/
6. https://www.oecd.org/coronavirus/policy-responses/covid-19-and-a-new-resilient-infrastructure-landscape-d40a19e3/
7. https://www.opendemocracy.net/en/article_456jsp/
8. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6433
9. https://ecfr.eu/publication/opening-the-global-gateway-why-the-eu-should-invest-more-in-the-southern-neighbourhood/
10. https://www.sc.com/en/feature/case-study-eur1-24-billion-eca-backed-financing-develop-high-speed-railway-infrastructure-turkey/