A dollar of infrastructure investment can raise GDP by 20 cents by boosting productivity, according to the McKinsey Global Institute.
The venerable management consultancy estimates that from 2016 through to 2030, the world needs to invest approximately 3.8% of GDP, or an average of $3.3 trillion a year, in economic infrastructure to support expected rates of growth.
When it comes to economic infrastructure, the Middle East historically has outspent many rivals, including the US, Canada, Western Europe—even eclipsing some emerging Asian economies in spending well above the global average of 3.5% of GDP.
Yet, against the backdrop of above-average expenditure, policymakers must structure an enabling environment to attract investors. David Baxter, international development consultant and PPP specialist, argues governments must establish procedures to ensure fair, transparent and competitive bidding. “GCC states are building a pipeline of national strategic programs that are worth billions,” says Baxter, adding that investment could be sourced from domestic and international capital markets. Matthew Jordan-Tank, head of infrastructure policy and preparation at the European Bank for Reconstruction and Development, says the global PPP industry is maturing. “Groups made up of construction firms, equipment and technology suppliers, and specialized equity funds backed by institutional investors are now able to invest together in a range of markets and sectors from transport to municipal utility services, renewables, hospitals and schools,” he stated in a March report.
