Top European countries by ranking

The Netherlands claimed top spot overall, despite a prolonged period with no government at all, after seeing the highest GDP growth since 2007, expected to reach 3.3% in 2017. The country’s success was in part down to its transparent and efficient procurement process, and its healthy multi-billion Euro pipeline in road and water Public-Private-Partnerships (PPP’s). Other countries in the top five included UK, Canada, Germany and Australia.

CMS partner and Co-head of Infrastructure & Project Finance in the UK, Kristy Duane, commented, “From China’s Belt and Road to the UK’s Brexit bump in the road, politics and policy remain central to shaping infrastructure investment flows globally. If governments are to attract the apparent wave of private capital available, they should look to countries like the Netherlands and Canada for inspiration where transparency and a clear strategic vision for infrastructure shapes the agenda.”

“The CMS Infrastructure Index charts interesting shifts in the attractiveness of 40 countries across the globe and also highlights changes occurring in the infrastructure asset class bringing a new wave of innovation to a market long dependent on standardised PPPs for much of its deal flow. The quest for deals has already prompted the industry to explore less mature sectors such as energy storage, broadband, smart meters, as well as student accommodation and rolling stock. It is fascinating to see which countries are leading the way.”

Europe bounces back

European countries have bounced back after a period of stagnation. Quantitative easing, the Juncker Plan and EIB support have all contributed to accelerated levels of EU infrastructure spending in recent years, and with economies such as Czech Republic and Romania experiencing significant expansion, there is room for optimism for future investment.

Europe as a whole has experienced an upsurge in infrastructure investment, as many politicians have been willing to use infrastructure investment as an economic stimulant. As well as the Netherlands and the UK, Germany, Norway and France ranked highly in the study, particularly for innovation. In Germany, all dominant parties have placed their support behind PPPs, and it is expected that deal flow, particularly in large-scale transport PPPs, will stay the course.

CEE: a hotspot for infrastructure investment

The CEE region is particularly exciting for Europe as economies across the region expand, largely due to the favourable environment for foreign investment and EU financing. PPPs are becoming increasingly common with a number of standout projects such as the €1bn Bratislava Bypass PPP and Czech Republic’s planned motorway PPP project contributing to a strong pipeline of activity. Significant PPP projects are also coming to fruition across Poland, Hungary, Romania and Bulgaria.

Managing Director of CEE and CMS partner Dora Petranyi, comments: “It is encouraging to see CEE’s strong standing in the Index, which reflects the continued expansion and buoyancy of our economies. With the region set to receive more than €150bn funding from the European Regional Development Fund, the European Social Fund and the Cohesion Fund over the period covering 2014 to 2020, and with a number of exciting projects already underway, the future for the CEE looks bright.”

UK not fulfilling potential

Maybe unsurprisingly, the UK struggled to hold on to the top spot it gained in a study conducted by law firm Nabarro in 2015. The impact of Brexit and general political instability is already starting to have an impact on infrastructure investments, as investors struggle with a lack of certainty in the country. Those operating across the sector are clearly looking for commitment and long-term policy from government to allay fears. The report highlights in particular the lack of consensus over infrastructure megaprojects such as a third Heathrow runway and HS2.

Canada rules the Americas

In the Americas, Canada leads the way whilst a lack of detail on Trump’s proposed $1trillion US infrastructure project leaves the US lagging behind in 7^th position. Notably, the Canadian Government are to launch the Canadian Infrastructure Bank in 2017, providing a boost to the already reliable infrastructure market.

From oil to renewables

In other regions MENA has succeeded in looking at alternatives to combat ongoing low oil prices. UAE and Saudi Arabia have shown a keen interest in renewables; UAE have already played a pioneering role in exploiting their high levels of solar irradiation, while Saudi Arabia’s recent commitment to clean energy is hailed as a game changer for the regional pipeline.

Shifting hegemony

Elsewhere, the 2013 China Belt & Road initiative is delivering an investment boom in Asia. Given longevity of this project, changes in balance of infrastructure investment in the region are likely to be profound.

Traditional versus alternative investment

The report also highlights potential new emerging asset classes including 4G, Charging Stations, Car Parks, and the likely impact technology which is already revolutionising infrastructure. One example is the rise of smart roads and smart cities, thanks to the interaction of road sensors, fibre optic networks, interconnected self-driving vehicles and inductive charging roads, laying the foundations for a new generation of self-charging and self-driving electric vehicles.  Cities like Dubai and Singapore are already making strides to lead the next wave of digital innovation.

CMS commissioned the Index, in conjunction with Inspiratia, to evaluate past trends and to serve as an indicator as to which jurisdictions would be most attractive for future investment and activity. 

The index is based on six main indicators:

• Economic status, which takes into account trade as a % of GDP, credit rating and interest rates, comprising 30% of the overall score.

• Sustainability and innovation, taking into account environmental performance, innovation and quality and consolidation of infrastructure, comprising 12.5% of the overall score.

• Tax environment, taking into account corporate tax rate, resource drain and tax complexity, comprising 5% of the overall score.

• Political stability, taking into account the effectiveness of governance and rule of law, and regulatory stability, comprising 22.5% of the overall score

• Ease of Doing business, which takes into account transparency and doing business, comprising 10% of the overall score.

• Private participation, which takes into account government support, gross fixed capital formation and private investment, comprising 20% of the overall score.

The full report can be found at: http://cms.law/infrastructureindex.