Investors may profit through the infrastructure sector and related exchange traded funds (ETFs) as governments the world over – not just the United States – throw money at the cause of sprucing up their roads, bridges and more.
While President Barack Obama’s infrastructure push has been getting a lot of notice lately, there’s an even bigger push for infrastructure improvements around the world.
The total amount of worldwide infrastructure spending over the next 20 years could amount to $35 trillion, writes Eric J. Gerritsen for The Journal of Commerce. Around $3 trillion worth of this fiscal spending could be put into the global economy within the next 24 months.
- China has pledged $585 billion
- India is expected to spend $500 billion by 2015
- Japan may spend $129 billion
Countries are now tasked to spend the money efficiently so the country that comes out on top will have a strong base for economic growth. The money will be spent on infrastructure projects that include waterworks, roads, bridges, utilities, runways, seaports, schools, hospitals and railways.
The top two spenders, America and China, are a topic of debate. This monumental government investment will determine whether China, a country with lots of cash that plans big, long-term projects, or America, a country with a plan more designed to help and improve what’s already in place, will come out as the head economic honcho.
In America, the economy may only get a short-term fix as aging highways and bridges are mended. China could benefit on the long-term as infrastructure is built to connect far-flung regions together. The regional North American and Asia-Pacific will also be important in terms of economic growth as countries within the regions become better connected for trade.
The Obama administration has emphasized green and clean tech, but most of the $50 billion from the stimulus bill for energy will be used to fix energy inefficiencies. In China, an average $33 billion will be spent annually for the next 12 years on alternative energy.
There is $7.2 billion in spending to help expand broadband usage into underserved areas in America, but this is far from the $44 billion necessary to provide universal broadband coverage. China recently surpassed the United States in becoming the country with the largest number of internet users, or 80.9 million.
- PowerShares Emerging Markets Infrastructure (PXR): 51.8% year-to-date
- iShares S&P Global Infrastructure Index (IGF): down 4.1% year-to-date
- SPDR FTSE/Macquarie Global Infra 100 (GII): down 8.8% year-to-date
Max Chen contributed to this article.