(By
Larry D. Spears) Back in the 1970s, environmentalists feared we were going to "blacktop
the Earth." It's not likely that will ever happen. However, governments
around the world
do have plans to pave a good portion of it
in the decade to come. And they also plan to build bridges, power
plants, water systems, and to develop other infrastructure projects
that will bolster the global recovery and meet the needs of an
increasingly modern global population.
What's more, the
projected pace of new infrastructure spending is accelerating, meaning
there's still plenty of time for new investors to climb aboard - and
profit from - the trend.
Just a year ago, an analysis by
CIBC World Markets (NYSE:
CM) predicted worldwide government spending on public works projects would total
$35 trillion over the next 20 years.
By the middle of 2009, a number of analysts - reviewing projected
demands in the commodity and raw materials markets - had raised that
forecast to $40 trillion, with nearly $4 trillion of that coming in
2010 and 2011 alone.
And most recently, a
report issued by analysts from Credit Suisse Group AG (NYSE ADR:
CS) cited predictions by the
Organization for Economic Co-operation and Development
(OECD) that total new spending over the next 20 years could skyrocket
to $71 trillion. The report called infrastructure "the backbone of the
world economy."
All these estimates may even prove to be low, says
Money Morning Chief Investment Strategist Keith Fitz-Gerald.
"An explosion in worldwide infrastructure spending is definitely under way," says Fitz-Gerald, who also manages the
Geiger Index and
New China Trader
advisory services. "And the overall numbers being cited recently may
actually turn out to be conservative. If you examine revised estimates
for individual sectors - electrical power grids, alternative energy,
water systems, roads, other transit systems and the like - it appears
the comprehensive totals could far exceed current projections."
Infrastructure Investments Now Seen as a Necessity
The
stimulus packages aimed at helping economies around the world rebound
from the worldwide financial crisis have been the trigger for some of
the proposed spending, but the bulk of it is a matter of sheer
necessity.
"The recent events in Haiti highlight a problem
that is faced by much of the world," Fitz-Gerald says. "Even absent a
major natural disaster like the Haiti earthquake, stuff is literally
falling apart - and what hasn't already deteriorated is inadequate to
serve the needs of the growing world population (expected to increase
by 800 million by 2020) and its demands for new technologies."
The
problem of deterioration and its cause in many instances were both
documented in the CIBC report, with Canada used as an example. The
Canadian government had a huge budget deficit in the 1980s, which it
eliminated by stopping virtually all infrastructure spending for two
decades, the result being an "infrastructure deficit" - overdue
maintenance spending - surpassing $120 billion.
Now most
governments are recognizing the folly of such a policy of neglect,
realizing that they are better off spending a reasonable sum every year
on infrastructure upkeep and modernization rather than waiting and
being forced to spend huge sums replacing outdated or failed public
facilities.
"That attitude shift was already apparent in funding
plans," Fitz-Gerald notes. "But the necessity of speeding up the
process has been driven home by the Haiti disaster. Similar fits by
Mother Nature in other countries are almost a foregone conclusion, so
governments need to begin getting infrastructure in shape now or face
their own future catastrophes. It's literally a race against time - and
winning it means spending money."
In the developed world - North
America, Europe and Japan - much of the infrastructure spending will
targeted at rebuilding and upgrading existing systems, with some
funding devoted to new areas such as alternative energy.
To that
end, state and local governments around the United States are expected
to spend roughly $150 billion a year during the coming decade, with the
Obama administration targeting about $20 billion a year for "
green and clean"
technologies, including power-grid improvements and development of
renewable energy sources.
