From Mumbai to Beijing to Jakarta, the pace of Asia's economic boom is a frantic one. China’s economy is expected to grow by a whopping 11.4% this year. India is on track for an 8% expansion and Indonesia is projecting growth of 6.3%. Skylines bristle half-built skyscrapers, new factories and industrial parks are being built, and power lines clutter city streets. And with this expansion, comes the urgent need for roads, communication systems, housing and schools to sustain this economic growth – in short, infrastructure.
Infrastructure is the lifeblood and the nervous system of every successful economy. Highways, whether they are of the physical or electronic kind, make capital flows and trade in goods and services possible – they link people to economic activity. Access to good infrastructure systems encourages entrepreneurship, investment and overall economic activity.
Economic power house China has slated 20% of its gross domestic product (GDP) for infrastructure projects -- no small amount considering that China’s GDP for 2006 came in at almost $10 trillion. The World Bank estimates that the developing East Asian countries will need between $1.2 trillion and $1.5 trillion in investment in infrastructure until 2010, just to cope with economic growth.
It’s this connection between economy and infrastructure that should get investors excited.
Infrastructure Trusts vs Infrastructure-Themed Funds
It is essential to note that there are some fundamental differences between infrastructure trusts and infrastructure-themed funds. Infrastructure trusts exist as a stapled security, where related assets are bound together in an investment vehicle, and are traded as a listed security on a stock exchange. Such trusts exist primarily for the purpose of harnessing yield, as they pay out regular distributions to their unit-holders based on their revenue. They are often directly invested in assets that have been privatized by governments or in private sector assets.