One of the challenges in trying to establish a need for infrastructure investment is that such a need can be hidden, coming to the forefront of public debate only when there is a crisis or catastrophe-such as the collapse of the bridge over the Mississippi River in 2007- that highlights the need for either the renewal of existing infrastructure or the construction of new.
It is difficult to put a precise number on the scale of investment needed in infrastructure, but a review of a range of reference points provides a sense of the scale of the challenge. Recent work by the Organisation for Economic Co-operation and Development (OECD) and the World Bank provides useful context here:
In 2006, the OECD published a report entitled Infrastructure to 2030: Telecom, Land Transport, Water and Electricity, which includes their forecast on average annual world expenditure on these five infrastructure sec-tors.2 Overall this report estimated that the global annual investment for these sectors will average 2.5 percent of global GDP-which is currently approximately US$1.5 trillion, based on a current global GDP of US$58.1 trillion.3 Table 1 summarizes the findings of the OECD.
The OECD's forecast of expenditures across the five sectors they reviewed is summarized in Figure 2. This shows the greatest need to be investment in water infrastructure. Investment in telecommunications infrastructure is expected to drop significantly by 2020.
These estimates do not include all types of infrastructure; the OECD estimates that including electricity generation may add a further 1 percent of global GDP to the bill. Other transport infrastructure such as ports and airports, and social infrastructure projects such as schools and hospitals, will increase this amount further.
The OECD's report highlighted the unevenness of this predicted spending between the OECD countries and the rest of the world.4 For example, they predict that for the road and rail sector, approximately two-thirds of the expenditure will take place in OECD countries. In the energy sector, the proportion is approximately 40 percent.
In summary, the OECD analysis indicates that expenditure on telecommunications, land transport, water, and electricity (generation and transmission) will be 3.5 percent of global GDP per annum, or at least US$2 trillion per annum in 2009 prices. Including all types of infrastructure will increase this number further. Since the OECD's work for this report was completed before the global financial crisis, the extent to which the current recession will affect their forecast is uncertain.
The World Bank estimates that the core needs of developing countries amount to 7 to 9 percent of their GDP per annum, or approximately US$400 billion.5 Historically, however, less than half of this amount has been invested in infrastructure development and maintenance, leaving a financing gap of 3.5 to 4.5 percent.
Even this estimate is partial and does not include electricity transmission, waste-water treatment, urban transport, ports, airports, and oil and gas. If these are included in the estimate, then the annual investment need could be more than US$900 billion or close to 20 percent of the GDP of developing countries.
Basing an estimate on these two reports, the investment need could be around US$3 trillion per annum globally (or close to 5 percent of current global GDP), of which approximately US$1 trillion per annum needs to be spent in developing countries.