session 1 - world economy and infrastructure

8/17/2019 Session 1 - World Economy and Infrastructure

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Tommy E. Nantung PhD PE

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Developed vs. Developing Economy In many developed economies

spending on infrastructure is predominantly directed atasset maintenance and repair, with few opportunities forbrand-new installations.

As the world’s population increasingly chooses to livein large urban centers

There is an increasing need for improved Connectivity,

Efficient use of natural resources, and

Creation of sophisticated transport hubs.

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Major Challenges The long-term issue of funding (who pays?), and

The shorter-term options for financing of

infrastructure (how do we pay?) Becoming hugely important questions for policy

makers and the government officials responsible forcreating and maintaining the assets that enable 21st-

century cities to function In this turbulent period of low growth and government

deficits, economies need fiscal stimulus and creationof employment.

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Economic Reality Spending on infrastructure offers both of these

benefits and, if wisely directed, this investmentdelivers improved quality of life to the affectedcommunity.

Superior and well maintained infrastructure attracts

The best talent as well as

Dynamic businesses seeking reliable connectivity and ahigh quality of life for workers.

Just-in-time delivery system

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Economic Reality Across the globe,

infrastructure is thelifeblood of prosperityand economicconfidence in the 21stcentury.

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Just-In-Time (JIT) Logistic

Honda, Indiana

Nissan, Tennessee

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Economic Reality Infrastructure

The structure or underlying foundation on which thecontinued growth of a community depends

Is critical for countries in all stages of development.

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Projected Urbanization

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The Year Ahead and the Way

Forward Urban mobility, Global population growth, coupled

with urbanization trends,

Will continue to spur infrastructure planners

To integrate transport systems in ways that improve mobility while reducing reliance on cars and trucks and decreasingpollution.

This often involves investing in mass transit.

Managed lanes more operational efficiency will be eked out ofroads.

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The Year Ahead and the Way

Forward

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A Case for the US

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A Case for India

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Indonesia

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Economic Reality and Infrastructure

Poor infrastructure conditions are the main factorpreventing Indonesia’s economy from growing at itspotential rate of 8%.

Inadequate infrastructure also results in high inflation

compared to most of Indonesia’s peers in South East Asia.

Infrastructure development has been slow in the pastdecade and has relied heavily on government

spending.

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P di d G h i h


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Predicted Growth with

Infrastructure

Under the best of our most plausible scenarios Indonesia’s economy will grow in a range of 7.1-7.6%

during the 2011-14 period

If the private-sector participation rate reaches 50% of what is

required and If the government increases spending on transport

infrastructure by 20% a year

Otherwise, we expect the economy to grow by only 6.5-

7% during the period

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Road Coverage

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Road Classifications

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Roads vs. Economic Activities Only about 58% of Indonesia’s roads are on Java and Sumatra

islands Contribute around 81% of GDP. Sumatra

Area: 25% Roads: 34% Population: 22% GDP: 23%

Java Area 7% Roads: 24% Population: 59% GDP: 59%

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Roads vs. Economic Activities

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Jakarta

Contributes about 13% of GDP Accounts for around 50% of deposits and 49% of loans

in the country’s banking system.

From 2005-09

The number of motorcycles rose by 24% annually, The number of cars rose by 22%,

The distance of usable roads actually declined from7,226km in 2005 to 6,506km in 2009.

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Jakarta

Clogged roads and bottlenecks plague Jakarta’sroadways

Jakarta relies on less-capital-intensive bus rapid transitsolutions

Which cost about $4 million per kilometer to build, tohelp relieve congestion

Alternatives to expensive light rail or subways (whichcost about $50 million per kilometer)

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Jakarta

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L L d f U l


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Lesson Learned from Uncle

“Eisenhower”

The best $500 billion the United States has ever spent Young Lieutenant Colonel Eisenhower

Ike took part in a transcontinental military convoy from Washington, D.C., to San Francisco.

It took the convoy two months to cross the country, averaging

less than 60 miles per day. Nine of the convoy's trucks were destroyed by poor road

conditions

The Federal-Aid Road Highway Act The Interstate Highway's immediate predecessor -- had just

been completed, But its $500,000 expenditure (equal to less than $7 million

today) had only paved another 13 miles of the nation's roadways.Not much of a project, really

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New Era of Interstate System By 1960

>10,000 miles of the interstate highway system had beencompleted.

2.3 million miles of unpaved roads across the UnitedStates, but only 1.2 million miles of paved roads.

The first decline in the percentage of people living incity centers (from 32.8% to 32.3%), but its percentage ofsuburban dwellers grew from 23.3% to 30.9% of thepopulation.

74 million registered vehicles on the roads in 1960, anincrease of 20 million over the previous decade.

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50 Years Later

>47,000 miles constructed The interstate highway system's total cost was

estimated at $425 billion (nearly $500 billion today)

2.7 million miles of paved road, compared with 1.32

million miles of unpaved roads 240 million registered vehicles

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Economic Benefits

American Highway Users Alliance estimates that thisproject has produced more than $6 in economicbenefit for every $1 of construction expense.

In 1960, seven of the 10 largest American companies

(by revenue) were either automakers or oil producers. In 2007, 3 oil producers and 1 automaker still placed

among the top 10 companies. Wal-Mart (consumergoods) sits at the top, earning more than $100 billion

more in annual revenue than the largest oil company.

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The Best Investment Ever

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session 1 - world economy and infrastructure

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