Demand encompasses renewal of existing and development of new infrastructure

The need for infrastructure varies greatly across the world and is likely to be driven by one of the following factors:

∙ renewal and upgrade of existing infrastructure: for example, replacing old bridges, expanding sewage systems.

∙ expansion of existing infrastructure: for example, building a telecommunications network.

∙ development of new infrastructure: for example, developing a renewable energy infrastructure.

A number of socioeconomic factors also influence infrastructure needs. For example, China is forecast to be the world's largest car market by 2017, while India is expected to be the third largest by 2030. As a result, there will be increased car ownership in both countries; this will directly influence investment trends by encouraging the development and improvement of road networks.

In a recent survey, 33 percent of CEOs from around the globe indicated that they are worried that inadequate basic infrastructure-for example water, electricity, and transport-could prove a threat to GDP growth.1 This represents an increase of 25 percent over the year before.

Table 1: Average annual world expenditure on infrastructure: Forecast and percentage of world GDP

Type of Infrastructure

2000-10
(US$ billion)

Approximate %
of world GDP

2010-20
(US$ billion)

Approximate %
of world GDP

2020-30
(US$ billion)

Approximate %
of world GDP

Road

220

0.38

245

0.32

292

0.29

Rail

49

0.09

54

0.07

58

0.06

Telecommunications

654

1.14

646

0.85

171

0.17

Electricity

127

0.22

180

0.24

241

0.24

Water

576

1.01

772

1.01

1,037

1.03

TOTAL

1,626

2.84

1,897

2.58

1,799

1.79

Source: OECD, 2006.

Note: Telecommunications estimates apply to 2005, 2015, and 2025; electricity refers to transmission and distribution only; water estimates apply to 2005, 2015, and 2025 only, and only to OECD countries, Russia, China, India, and Brazil.

Before considering what sources of financing are available, what governments can afford, and what can and should be privately financed, it is useful to understand the need for infrastructure more clearly.