Infrastructure

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India’s Achilles Heel

    August 27, 2010

Achilles Heel IndiaPoor infrastructure continues to be an Achilles heel for India—if it were better, analysts say, the country could add 1-2 percentage points to its annual economic growth rate of around 8 percent.

India spends $17 per capita annually on infrastructure and capital investment—by comparison, China spends $116. With millions of people moving to India’s cities each year, McKinsey says the country will have to spend $1.2 trillion on infrastructure just to meet basic needs. This works out to $134 per person, or about eight times current levels.

The Delhi government has a plan to spend $500 billion on infrastructure by 2012 and twice that amount in the subsequent five years. But there’s a big difference between plans and execution—India is scheduled to host the Commonwealth Games in just a few weeks, but many of the venues are still not ready due to corruption and inefficiencies.

Eight miles of new roads are being built each day, but the official target is 12 miles per day. Desperate for more electricity, the Indian government turned to a failed Enron project that had been dormant for a decade.

One reason for lagging infrastructure is a lack of qualified engineers. A New York Times article this week said many of the best and brightest are going into the high-tech sector rather than the less glamorous (and less lucrative) world of roads and bridges.

Despite the challenges, Morgan Stanley analysts think India’s economy could begin growing faster than China’s as early as 2013. MS says this is because India’s ratio of working age population to dependents is improving while China’s is declining. Their government has been successful at creating jobs and the country has a strong footing in the lucrative global services export market.

But for India to overtake China’s growth pace, it’s vital that the country get better at executing on its ambitious infrastructure vision.

 

Traffic Jam on the Superhighway

    August 20, 2010

There’s growing congestion on one of America’s highways and reports say the problem will only get worse. In just the past few years, America’s technological network—our information superhighway—has gone from hare to tortoise. Dropped calls, Internet outages and surfing at a snail’s pace now seem to be commonplace.

One of the main causes of the congestion is the exponential growth of smartphones. Did you know that the new 4G iPhone uses the equivalent network capacity of 200 older generation cell phones?

Smartphone Ratio

Earlier this year when Apple sold 1.7 million of them in just three days, it was the data equivalent of dumping 340 million new cell phones into the system at once—no wonder there were problems. It isn’t Apple’s (or AT&T’s) fault so many people wanted their product, but it does highlight the investment opportunity.

According to tech research firm PacificCrest, the global technology buildout is a $200+ billion opportunity over the next five years. The infrastructure needs include $100 billion to relieve congestion and $50 billion for boosting networks by upgrading Internet protocols. PacificCrest also estimates $54 billion is needed for new routing systems to improve data flow.

PacificCrest says we’re entering the next phase of the Internet infrastructure build cycle as big firms boost their capital spending to alleviate bottlenecks and accommodate technological improvements.

During the last cycle (2004-2008) the top five Internet firms spent roughly $15 billion on infrastructure, but that figure is expected to jump to $28 billion over the next four years.

Internet Capex Spending

The infrastructure upgrades and additional networks are important because much of the world still isn’t connected. There are 183 billion emails sent each day, but 78 percent of the world’s population still doesn’t have email. There are roughly 6 billion devices (4.6 billion mobile phones, 1.2 billion computers) hooked up to the Internet today, but less than 10 percent of those have high-speed access.

As more people—especially in the developing world—join the broadband and mobile communities, immense strains will be placed on the global network over the next few years. There should be substantial opportunities to participate in this buildout along the way.

The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 6/30/10:  Apple, AT&T

 

A Bridge to Prosperity

    April 16, 2010

Mena Infographic sml 041610Two of the Middle East’s most promising economies will soon be joined together by the world’s longest bridge. The Qatar-Bahrain Friendship Causeway is set to begin construction later this year.

Spanning roughly 24 miles, the causeway would take nine hours to walk across and is the equivalent of 536 Boeing 747s lying end-to-end.

The $2.3 billion bridge, which includes a railroad, is expected to take five years to construct.  Once completed, 10,000 to 12,000 vehicles will use it daily to cut what’s now a four-and-a-half-hour drive to a mere 40 minutes.

A stronger connection between the two nations should be a catalyst for business activity. Qatar’s 9.5 percent GDP growth in 2009 was the fastest in the world and the country currently ranks as the second richest in the world in terms of GDP per capita ($122,000).

Already a banking center of the Arab world, the causeway should aide Bahrain in its efforts to diversify the country’s economy away from oil and natural gas. In recent years, Bahrain has worked to expand trade with both the United States and surrounding countries in the Middle East, including Qatar.

 

Spotlight: Global Infrastructure

    March 24, 2010

India’s prime minister says his country’s “creaking infrastructure” is becoming a pressing problem and called for $1 trillion to be spent between 2012 and 2017.

The goal is astounding, but so is the need. Many of India’s 1.1 billion people live without access to clean water, reliable electricity and stable shelter.

India Infrastructure 032410

India’s rapid urbanization is overwhelming its cities.  A special Financial Times report said that only 25 percent of India’s large cities has adequate transportation systems.

India isn’t alone in its vital infrastructure needs. The International Monetary Fund says Asia has to invest $8 trillion over the next decade to fight poverty and boost productivity. In Mexico, President Felipe Calderon wants to raise some $6.6 billion in infrastructure investments by 2012.

China was early to recognize infrastructure investment as an economic growth driver, and the bulk of its 2009 stimulus package went to that purpose. It appears that other governments are seeing the light.

Don’t forget that tomorrow we will be hosting a special Web presentation called “Building a Better World: The Global Infrastructure Opportunity.” Our Global MegaTrends Fund team and researchers from Macquarie Group will participate.

 

Building a Better World

    March 16, 2010

Infrastructure Webcast 0310There are 6.7 billion people living on the planet today, and the population is growing.  Growth in emerging markets and the shift of population to urban centers is creating greater demand for resources, services and infrastructure.

The estimated needs for infrastructure spending are staggering—trillions of dollars across the world to develop water, energy, transportation and telecommunication infrastructure.

How can you take advantage of these infrastructure investment opportunities? 

I invite you to participate in this engaging webcast discussion with members of the portfolio management team for our infrastructure fund, the Global MegaTrends Fund.

Also joining the webcast will be special guests from Macquarie North America, a firm that specializes in infrastructure advisory services.

You don’t want to miss this opportunity.

Register Now

 

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