What would happen if you combined the power of corporate facility location and expansion with the underlying, long-term strength of infrastructure projects?
You might have the makings of an economic juggernaut — or at least a recipe for balanced, job-creating prosperity.
As Texas-based economist Ray Perryman put it in a column in late August: “Moving people, goods, power, water, and data around the country brings enormous gains in efficiency and, thus, economic potential. We've studied the benefits associated with all types of infrastructure on many occasions. Well-conceived projects typically generate a 25%-35% annual rate of return to overall activity over and above the short-term gains from the construction itself (which alone yields about $3.90 in total spending per dollar of direct outlays). One of our more interesting finding is that the U.S. economy would be 20%-25% smaller today in the absence of the development of the interstate highway system beginning in the 1950s.”
All of which explains why, three years ago, we conceived of an original ranking blending the corporate facility project data resident in Site Selection’s Conway Projects Database with infrastructure project data from our friends at CG/LA Infrastructure in Washington, D.C. that cover more than 4,100 current infrastructure projects worldwide. We assess both data sets on a cumulative and per-capita basis in terms of project count and in terms of investment, award points in each category of analysis and then add them up to come up with the 2021 Global Groundwork Index.
The sums this year point to two places where energy and petrochemicals still drive the train, even as other sectors offer their own propellant: Canada is No. 1 in our global Top 20 nations, while Texas leads the way among U.S. states.
As the charts illustrate, the state results are strikingly similar to last year's, with Virginia and Illinois switching places, and Kansas entering the top 10. Among countries, the UAE, Denmark and the Philippines enter the top 10, and the U.S. drops to No. 5.
Once again, these rankings, as intended, demonstrate the kinds of growth opportunities present in territories where BOTH corporate facilities and infrastructure facilities are progressing. In Canada, it can often be hard to distinguish where one ends and the other begins, whether it’s massive LNG projects, continued petrochemical investments, high-employment BPO projects abetted by large-scale broadband investment, or manufacturing and logistics facilities taking advantage of new bridges and expanded ports.
Australia likewise is building and diversifying from a legacy energy and resource economy, as is the Middle East, where several high-ranking nations are driven by their per-capita performance but also by some very real economic development momentum: For a separate reporting project I’m working on in the area of career and technical training, an Amazon Web Services leader highlighted Bahrain’s initiatives in particular. The United Kingdom and Ireland offer a balanced picture for investment despite Brexit vertigo. Costa Rica seems to punch above its weight so frequently we might want to put it in a higher class. As for China, the only reason they’re not top 10 or top five is relative paucity of data … even in this era, there are still plenty of places where it’s hard to obtain accurate project information.
Top 20 Countries, 2021 Global Groundwork Index
Source: CG/LA Infrastructure and Conway Data; analysis by Conway Data Director of Programming & Analytics Daniel Boyer
The U.S. results are compelling first because of the pending $1.2 trillion infrastructure bill. Texas-based economist Dr. Ray Perryman in August opined, “After a laughable number of ‘Infrastructure Weeks" in Washington DC for many years, we are finally on the cusp of an "Infrastructure Decade." in light of other Site Selection rankings and the new Census population figures released in August. Texas and Arizona, No. 1 and No. 3, respectively, in the Global Groundwork Index this year, are seeing massive in-migration from around the nation. Others in the top of our rankings have appeared as top performers in our annual Business Climate, Prosperity Cup and Governor’s Cups rankings. The infrastructure to support all those new people and growing employers is arriving right on time.
Top 20 States, 2021 Global Groundwork Index
Source: CG/LA Infrastructure and Conway Data; analysis by Conway Data Director of Programming & Analytics Daniel Boyer
Some might say Louisiana doesn’t belong up there with juggernauts like Texas and Arizona, but this comes from a balanced look at both spheres of activity, with per-capita results getting their rightful due. What the rankings tell us, in essence, is, “There’s work to be done, and these are places getting on with it.”
Which is a perfect way to introduce Norman Anderson, the very busy chairman and CEO of CG/LA Infrastructure and author of the recently published book “Vision: Our Strategic Infrastructure Roadmap Forward.” This summer he was heavily engaged in the ongoing infrastructure legislation discussion, alternating between boarding flights and lining up queues of meetings with various policymaker delegations. “There is a lot to say,” he told me early on, before delivering this exclusive commentary. — Adam Bruns, Managing Editor
The Coming Infrastructure SuperCycle
Infrastructure is the biggest theme in the U.S. this year, and one of the biggest themes across the globe. You get a strong sense of this in two of the Biden Administration’s signature initiatives: Build Back Better; and Build Back Better World. The multiphase and multilayered challenge is to create the plan and to execute, deciphering and delivering the amount of investment required,to the right types of projects, in the time frame (10 years?) required, and — especially — determining how to pay for it. These are big challenges — and big opportunities for innovation and creative destruction — globally.
The drivers of the coming Strategic Infrastructure SuperCycle are extraordinary, a once-in-a-century storm.
First, the Fourth Industrial Revolution is driving the digitization and electrification of the U.S. and global economies, transforming an infrastructure want (more roads, better bridges, clean water) into a strategic infrastructure imperative (the race to utilize AI, machine learning, autonomous machines and advanced manufacturing to create the world we want our children to live in). Observed starkly, infrastructure is quickly moving from the underpinning of business and social productivity to the brains of the economy — the essential matrix for economic and social productivity and innovation.
Second, global warming — however defined, it is a fact — is transforming how we think about infrastructure, including everything from fuel (renewables, hydrogen) to how we make steel and cement, to where we live and how we design our cities. These are dramatic economic shifts, and they are shifts that in large measure empower the voices of citizens to set priorities. Smart cities, for example, are beginning to listen to what citizens want and focus much more intensely on energy sources and efficiency.
“Infrastructure is quickly moving from the underpinning of business and social productivity to the brains of the economy — the essential matrix for economic and social productivity and innovation.” — Norman Anderson, Chairman and CEO, CG/LA Infrastructure
Seen this way, U.S. infrastructure is starting to look like a particularly productive exercise in game theory. What are the right moves now and in the near future, so that we get to 2030 having built the country that we want? The stars are aligning, but the politics — mired in conflict and older views of infrastructure — are not yet doing the same.
Third, our ongoing recovery from COVID-19 — even more critical for emerging markets — demands a new way to think about infrastructure investment, putting a particularly heavy emphasis on location and health. These are perhaps subtle issues … or not: hospitals and clinics in rural areas with high-capacity broadband, clean water and wastewater, and new forms of mobility. These require whole new investments, particularly as we organize ourselves to live at significant distance from how we used to live. In addition, infrastructure absorbs excess savings and renders that savings — along with the excess liquidity from the various pandemic-driven stimulus programs — productive, building assets that last and serve for 30 to 40 years.
The U.S. Infrastructure Market
So what does this specifically mean for U.S. infrastructure? Look at three distinct snapshots of the future:
The U.S.-Mexico Border: Think about what it would take, in terms of digitization and electrification, to create the infrastructure to support reshoring advanced manufacturing and agriculture along the 2,000-mile U.S.-Mexico border. This would transform a negative into a positive: creating new jobs, bringing manufacturing back from China, powering growth in the U.S. and taking advantage of a young and hard-working population to fill the labor gaps in our aging economy. Democrats and Republicans are both afraid of the border, but seen this way, it would become a powerful strength of the 21st century U.S. economy.
Continuing a 20-year tradition of working with the Texas Department of Transportation, Fluor recently was selected to complete a 6.3-mile expansion of I-35 East in Dallas, with completion slated for late 2025.
Photo courtesy of Fluor and Business Wire
Infrastructure away from the border offers opportunity too: As the U.S. Commercial Service recently noted, in 2020 U.S. trade with Mexico totaled $604 billion. The Mexican government’s $5 billion Trans-isthmus — or Interoceanic — Corridor infrastructure project moving forward since 2018 aims to connect the Gulf of Mexico with the Pacific coast through its narrowest point. The project includes the refurbishment of 117 miles of railways (with fiber optics connectivity); upgrade and expansion of the ports of Coatzacoalcos in Veracruz and Salina Cruz in Oaxaca; enhanced highway connectivity; a gas pipeline; and a crude oil pipeline. It also includes establishment of 10 development poles to attract investment in the agro-industrial, food, metals, wood, plastics and rubber, textiles, petrochemical, machinery and equipment, chemical, and transport equipment sectors.
The Southwest Hydrogen Hub: On the energy side, imagine the Phoenix mega-region as the central hub of a green hydrogen ecosystem stretching from California through Arizona, New Mexico, Nevada and the state of Sonora, Mexico. Think about a new hydrogen port in Mexico, importing from and exporting to the Phoenix region. In addition to reinvigorating the border, it would power the logistics, homes and leisure driven by new $100 billion high-tech investments throughout the region. Korea and Taiwan are not making investments in the old U.S.; they are betting on a new 21st century U.S. economy.
West Virginia Powers the U.S. Economy, Again: What if West Virginia were to replace coal with a data economy and renewable energy powering both green and blue hydrogen, piping clean energy up and down the East Coast, from Maine to North Carolina? This is not a pipe dream: West Virginia has one of the most beautiful geographies in the country, is data resource-rich (due to foundational U.S. government investments), and has the geographic position, pipeline network and energy resources to drive a vision of the future economy.
What I’ve described above is a paradigm shift that is happening now. Congress is wrapped around the axle of the $30 trillion U.S. debt, but the private sector — and especially U.S. pension funds — have bountiful dry powder to drive the Infrastructure SuperCycle. In a nice symmetry, U.S. pension funds have $40 trillion in assets, 10% of which could easily be deployed into greenfield projects to power our future and brownfield projects to revitalize, modernize and make more productive our past investments.
The Global Infrastructure Market
The Global Infrastructure Market is promising, divided and in need of urgent attention. China continues to boom, as do projects on the new Silk Road from Kazakhstan to Panama. The rest of Asia, despite COVID-19, is investing robustly in infrastructure, positioning itself for an explosion in economic productivity in the future. But the world’s ability to address its shared challenges — the Fourth Industrial Revolution, global warming, a pandemic — is divided into two speeds.
The U.S., China and the EU, as well as key allies such as Japan, Korea and Australia, are building toward a rich future. Latin America, Africa and Central Asia are finding it much more difficult to respond with the right investments, with limited resources necessary for building modern projects: funds, expertise (both public and private) and efficient economies.
The three following global themes will determine how the Build Back Better World SuperCycle works in countries and regions around the world:
Projects that Prioritize People: It is critical to select and build projects that people want. This seems obvious, but lacks follow-through. Countries that do this will see a surge in infrastructure investment. Surveys show that people in emerging markets want projects that drive health, mobility, social infrastructure in the form of better and more accessible hospitals, infrastructure to provide clean drinking water, healthy rivers and streams, and better transit (whether that be in the form of heavy metro, light rail or bus rapid transit). Those sectors will see explosive and contagious demand in the coming years.
Matching Strategic Processes with Resources: One of the most important issues is investment, and finding the right long-term investment resources for emerging markets projects. We have identified a series of highly effective channels for infrastructure investment into emerging markets assets, including land/air value capture, performance contracting, long-term concessions, and other forms of investment that leverage the technology boom to take advantage of the dynamic future performance of real assets. Countries that bring technology and financial resources to their priority projects will see extraordinary investment over the next 10 years.
Providing Legitimacy and Performance: Lastly, the public sector in emerging markets needs to be reinvigorated. Extraordinarily, we have allowed the public sector — the source of both legitimacy and performance management of infrastructure — to erode over the last 30 years. Countries that bring resources to the creation of new institutions will drive extraordinary growth going forward. One example of such an institution is Brazil’s PPI, which stands for Programa de Percerias de Investimentos, or Investments Partnership Program (visit ppi.gov.br). An August 2021 presentation from the PPI reported there are 243 accomplished auctions/bids and projects out of 429 qualified projects, involving nearly $159.5 billion and $34.1 billion in concession fees/bonuses.
The Valley of Death
The world is entering an extraordinary period of turbulence, driven by technology, disease and global warming — one that will be difficult to manage unless we make the right investments for the future. Strategic infrastructure investment is the tool to making the investments that will create tomorrow’s world.
But what is coming — familiar to any entrepreneur — is the classic Valley of Death: that period in which the right investments must be made, and must be made robustly, but that yield results only years down the road. Developed world countries are well-positioned to navigate this challenging course, while emerging markets have a tremendously varied set of capacities to manage the challenge with any degree of success. Take the world’s 75 democracies (of 167 total countries) and imagine which of those countries will succeed over the next 10 years, which will tread water, and which will fall behind.
The Strategic Infrastructure SuperCycle is coming. It will not treat everyone equally, but it will see one of the greatest periods of creativity in human history.
A Few Words from the Secretaries
When the U.S. Senate passed the Infrastructure Investment and Jobs Act on August 10, U.S. Secretary of Commerce Gina Raimondo said, “The investments in this bill will better position the United States to compete globally, strengthen our supply chains, and create millions of good-paying jobs — all while making our economy more resilient and just.”
A few days prior, U.S. Secretary of Transportation Pete Buttigieg was in Site Selection’s home base of Peachtree Corners, Georgia, in the Gwinnett County suburbs northeast of Atlanta, to visit the city’s Curiosity Lab, located in the reborn Technology Park property undergoing a generational facelift. He appeared alongside U.S. Congresswoman Carolyn Bourdeaux (GA-07), who has voiced support for expanding public transit and greenway systems in suburban areas. The new legislation means $1.5 billion for public transportation and $135 million for EV charging infrastructure in the state, among other investments.
“The climate opportunity is also a jobs opportunity, in the president’s view and in my view,” said Buttigieg. “You see it right here. Just a moment ago we were looking at a solar roadway that can literally power the very cars that drive over it. Yesterday I was with the president and leaders of many of the auto companies in the U.S. as well as the United Auto Workers celebrating an executive order that is challenging my agency, all the other agencies and really the whole country to get to a goal of having most of our vehicles sold be electric within a decade. This is incredibly important at a time when we recognize that the single biggest sector contributing greenhouse gases to the atmosphere is the transportation sector. To me that’s a challenge for us to be the biggest part of the solution. What we see here is how economic development and climate solutions go hand in hand.”
When I noted how far behind many see Atlanta’s rail transit build-out and asked him which U.S. regions have their act together when it comes to infrastructure investment that encourages economic development, Buttigieg said, “As a former mayor I’ve been there, trying to drive that site selection and encourage people to choose this community over every other community. What I’ve found is that by the time you’re in that final round, by the time your chamber president and mayor get to see the folks coming through making the decision, they’ve done a lot of the math around land, labor, utilities, taxes and so on. They really want to know where the energy of the community is, and whether it’s forward-looking.”
Extolling the nimbleness of a city such as Peachtree Corners in cultivating game-changing technologies, he also sounded a note of caution: “You can have the most innovative spirit in the world, but if the roads are crumbling or the bridge is out or you’re not sure about the condition of water or other basics, or you can’t get on the internet, you’re not going to be in that final round. That’s where we think a lot of local and state leaders have been working heroically to try to get the job done, but increasingly without adequate support from the federal government, really over the last several decades. That’s what’s about to change with this bipartisan deal.” — Adam Bruns