Africa needs infrastructure development and investment. Good infrastructure is necessary for growth and development, which should provide jobs and opportunities as well as increased standards of living. In order to address this infrastructure gap, Africa needs contributions and investments from Africa and the rest of the world. The African Development Bank is making Infrastructure development one of its five operational priorities. Asia, which equally has massive infrastructural gaps, is addressing the problem through a number of approaches, including creating increased access to infrastructure funding, and utilizing the experience of other countries within and outside Asia. Singapore, a small city state, has made sustainable contributions to infrastructure development in Asia and is now going beyond Asia. Singapore is now venturing into Africa and would do well to increase engagements with Africa for mutual benefit.

Introduction

There is a strong demand for infrastructure development and investment In Africa. According to the African Development Bank (AfDB), Africa needs almost US$ 100 billion to meet yearly infrastructure investment needs (AfDB, 2013). Africa’s massive infrastructure needs include power, water, transportation networks, housing, health, and public education.

There is no doubt that good infrastructure is vital for sustained economic development and growth. Good infrastructure is necessary for trade, connectivity and integration. The AfDB, in its Strategy for 2013-2022, notes that Africa invests only 4% of its GDP in infrastructure, compared with 14% in China. Bridging the infrastructure gap could increase Africa’s GDP growth by an estimated 2 percentage points annually (AfDB, 2013).

In Asia, approximately $8 trillion dollars is estimated for infrastructure investment between 2010 and 2020 (ADB, 2009). A PwC outlook has even put the Asian figures at $5.36 trillion annually by 2025 (PwC, 2014). This goes to show infrastructure development and investment is critical and there is much scope for huge investment returns. Singapore has tapped into this growth opportunity in Asia. What role therefore can Singapore play in infrastructure development and investment in Africa?

Africa’s Needs

Africa’s infrastructure needs are huge. Inadequate water and sanitation infrastructure is costing Africa the equivalent of 5% GDP. High transport costs due to poor transport networks are adding to the price of African goods. In addition, more than half of the 54 African countries have chronic power outages (AfDB, 2013). With Africa’s growing population and urban migration on the increase, Africa needs to take urban infrastructure development serious. According to a 2014 UN report, Africa and Asia are expected to see increasing levels of urbanization over the coming decades (UN report, 2014). Infrastructure financing is also needed to ensure these infrastructure needs are met. Urban planning, water infrastructure, infrastructure scoping and infrastructure financing are strong points in Singapore’s contribution to infrastructure development in Asia (MTI, 2015).

Singapore’s Role

Singapore is at the forefront of infrastructure development and investment, both domestically and regionally. Singapore financial institutions and companies also play a vital role in infrastructure investment in the region. Africa will do well to learn a thing or two from Singapore’s approach to infrastructure development.  Bearing in mind Africa’s need, the Singapore government, financial institutions and companies can play a vital role in Africa’s infrastructure development.

Singapore’s Strategic Plan, Expertise and Experience

Singapore’s experience in urban planning stems from the uniqueness of the city state where land is scarce and considerations have to be made for all facilities necessary for urban living, state survival, and social and economic growth.  The Sustainable Singapore blue print released in 2009, and reviewed periodically, guides the country’s approach to dealing with all urban challenges. While the Singapore model may not be applicable for every country, it can be adapted to suit the needs of many countries.

Domestic infrastructure projects such as the transformation of Punggol from a fishing village to a modern town, and the further development of Punggol into Singapore’s first Eco-Town, is a case in point on Singapore’s strategic plan, expertise and experience in urban development. Another example of Singapore’s infrastructure development is the transformation from a water scarce country to water security. This came from Singapore’s investment in water technology and its integrated approach to water and wastewater management. Singapore constructed drains and canals, increased reservoirs and catchment areas and uses desalinated and reclaimed water (NEWater).

Apart from domestic projects, Singapore has also been involved in a number of infrastructure projects in Asia, most notably the Singapore-Suzhou Industrial park and Sino-Singapore Tianjin eco-city co-operation project with China. The masterplan and development of a new capital in the State of Andra Pradesh in India, is also in the works for Singapore, as well as involvements in power projects to address the electricity demands in Bangladesh. In the case of Bangladesh, the World Bank estimates for infrastructure investment for electricity in Bangladesh is US$ 11-17 billion (Standard Chartered Bank, 2014).

Partnership in Multilateral Infrastructure Initiatives

Singapore is involved in a number of infrastructural initiatives, the most recent being the Asian Infrastructure Investment Bank (AIIB). The AIIB was spearheaded by China to address the infrastructure deficits in Asia. As at 29 June 2015, Singapore along with 49 other countries became founding members of the AIIB. The AIIB, when fully operational, will allow developing countries in Asia increased access to the investment funding necessary for helping Asia meet its infrastructure development needs.

Singapore is also one of six founding partners of the Global Infrastructure Facility (GIF). Other partners of the GIF are Australia, Canada, China, Japan and the World Bank. The GIF seeks to plug the gap between unmet demands for infrastructure investment and available financiers. Under the GIF, a global pipeline of infrastructure investments will be generated.

The Asian Infrastructure Center of Excellence (AICOE) and ASEAN Infrastructure Fund are two other initiatives Singapore is involved with alongside the Asian Development Bank.  The AICOE aims to work with governments to select infrastructure projects, and make such projects bankable and appealing to investors. Singapore’s participation in these initiatives shows the country’s determination to maintain its recognition as a growing global infrastructure hub.

The Arcadis Second Global Infrastructure Investment Index 2014 highlights Singapore as the most attractive market in the world for investment in infrastructure. A majority of infrastructure projects is self-financed by the Singapore government (Arcadis, 2014). Since the years of Singapore’s first development plan (1961-1965), fiscal prudence has been the watchword of Singapore. Through the years, Singapore has developed financing frameworks and institutions to address its infrastructure development and is for all practical purposes self-reliant (Centre for Liveable Cities (CLC) Singapore, 2014).

Singapore’s familiarity with investment conditions and engagement of governments in the Asian region, coupled with her strong technical, financial and legal capabilities to support infrastructure investment in Asia, is enviable (IE Singapore, 2015). The country’s expertise would be very relevant for Africa. Singapore is therefore urged to look beyond Asia, particularly to Africa, which has vast investment opportunities and the potential for huge investment rewards.

Singapore Financial Institutions

Singapore’s financial centre offers infrastructure financing options, including project financing, bond financing, business trust and infrastructure funds. Many infrastructure players are already utilizing Singapore for their financial needs (IE Singapore, 2015).

At the World Bank–Singapore Infrastructure Summit in 2014, it was noted that while banks have traditionally played key roles in infrastructure financing, particularly at construction stage projects, tighter rules under Basel III might affect their capacity to provide long-tenor loans in the future. Institutional investors have abundant capital. In Singapore, infrastructure fund managers have seen assets under management grow 40% since 2009 and insurers plan to increase infrastructure debt allocations (MAS, 2014).

Business trusts introduced to Singapore in 2004 are potential new sources of financing for infrastructure projects. The business trust has the potential to monetize infrastructure asset investments and get public funding into infrastructure assets (Somani and Mehrotra, 2013).

Singapore Companies

With Singapore’s strategic plan and engagement in multilateral infrastructure initiatives in the front view, Singapore companies are in good stead to enhance their market access and investment opportunities. Singapore’s representative to the GIF governing council, Mr. Tan Soon Kim, lauds Singapore companies’ strong capabilities and expertise throughout the entire infrastructure value chain in emerging and developing economies (IE Singapore, 2015).

For example, in the area of water and wastewater management, Hyflux, Keppel Seghers and Sembcorp Industries are blazing the trail. Hyflux and Sembcorp Industries are involved in the building of desalination plants in Asia, Middle East and Africa.

Surbana International Consultants and Jurong International are companies very well known in urban planning and development. Both companies are involved in the master plan for the capital of Andhra Pradesh. They have also been involved in projects in Tanzania, South Africa, Nigeria, Rwanda and other African countries. With the June 2015 merger of Surbana International Consultants and Jurong International into an integrated platform for sustainable urban development, the newly merged company would have a far greater reach globally.

Singapore companies’ projects in Africa

Singapore companies are already making inroads into Africa. Hyflux has completed 2 seawater reverse osmosis desalination projects in Algeria and are currently negotiating several projects in Sub-Saharan Africa.

In South Africa, Surbana International Consultants were involved in the Royal Bafokeng Nation’s masterplan, which included transforming the rural capital into a regional centre with facilities such as art and design and a sports city. They were also involved with projects in the city of Kigali, capital of Rwanda, where they developed the Nyarugenge district masterplan and urban design plans for the Central Business District located in Nyarugenge.  In Nigeria, the company was engaged by a leading asset management company to develop the masterplan for a new township in the Lekki Peninsula area, Lagos State (Surbana Urban Planning Group, 2014).

Beneficial to Singapore financial institutions and companies, is also the work of IE Singapore. In the area of development, the Singapore Cooperation Enterprise (SCE), restructured as a subsidiary of IE Singapore, collaborates with Singapore’s private sector, providing access to increased business opportunities. SCE was set up to help Singapore respond to the request of foreign governments in their quest for growth and development. The SCE’s engagement with Sub-Saharan African countries, including Ghana, Kenya, Nigeria, Republic of Congo, Rwanda and Tanzania, has opened doors of opportunity for companies like Surbana International Consultants and Jurong International.

African Risks

No doubt, there are risks involved in investments to Africa, as there are risks to other regions. Better known African risks include corruption, political fallouts, weak business environments, and inefficient legal and regulatory frameworks. However, risks can always be mitigated and managed with careful planning and contingency plans. Fortunately, in the case of Singapore companies, International Enterprise Singapore, Singapore Business Federation and NTU-SBF Centre for African Studies are able to provide advice on investing in Africa.

Implications for Africa

Considering Africa’s huge infrastructure needs, Singapore’s expertise, experience and status as a financial hub should be seen as an additional way Africa can attract much needed investment to the continent. The appetite for doing business in Africa among Singapore companies is slowly increasing. With some persistence on the part of Africa and clarity of the investment opportunities and risks, Africa stands to gain and so does Singapore.

Taking water security as an example, although Africa has abundant water resources that are unevenly distributed in time and space, Africa needs investments in integrated water development and management (AfDB, 2013). If countries like Singapore share their water experience, and companies in Singapore, such as Hyflux, invest more in the African market, this will go some way in solving the water security issues present in Africa.

Likewise, Singapore’s development experience is useful for urban planning and sustainable development. This is widely known in Asia and utilized for the mutual benefit of all parties involved. For example, states in China and India, two of the four largest emerging and developing economies, have sought Singapore’s expertise in urban planning and development.

Finally, Singapore’s status as a leading financial hub means it is able to generate new sources of funding for Africa, including sovereign wealth and pension funds.  With the Singapore government and several private sector financiers with a strong presence in Singapore, the country has a lot to offer in the area of infrastructure financing.

Conclusion

Overall, while it can be said that Asia seems to have enough infrastructure gaps to keep Asian companies and governments pre-occupied, Africa, the emerging frontier market, also has gaps. There is nothing to stop Singapore companies from expanding their base. There are trailblazers to Africa who can share their experience and lessons learnt in the continent. Furthermore, the expertise and experience of Singapore is needed and welcome. The investment rewards might just make the move into Africa worthwhile. The interest of multilateral development banks in the subject of infrastructure development and investment would also ensure these infrastructure gaps are dealt with.

 

References:

Arcadis. 2014. Second Global Infrastructure Investment Index 2014. http://www.arcadis.com/Content/ArcadisGlobal/Docs/publications/Research/Arcadis_global_Infrastructure_Investment_Index_2014.pdf. Accessed 9 July 2015.

African Development Bank Group. 2013. At the Center of Africa’s Transformation: Strategy for 2013-2022. http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2015/PDF_Chapters/AfDB__2013___At_the_Center_of_Africas_Transformation_-_Strategy_for_2013-2022.pdf. Accessed 9 July 2015.

Asian Development Bank and Asian Development Bank Institute. 2009. Infrastructure for a Seamless Asia. http://adb.org/sites/default/files/pub/2009/2009.08.31.book.infrastructure.seamless.asia.pdf. Accessed 9 July 2015.

Centre for Liveable Cities (CLC). 2014. Urban System Studies, Financing a City: Developing Foundations for Sustainable Growth. http://www.clc.gov.sg/documents/uss/USS_Financing_a_city.pdf.  Accessed 9 July 2015.

IE Singapore. 2015. IE Singapore. IE Singapore Represents Singapore at the First Global Infrastructure Facility (GIF) Governing Council Meeting. http://www.iesingapore.gov.sg/~/media/IE%20Singapore/Files/Media%20Centre/Press%20Releases/GIF20press20release2028Apr1520FINAL.pdf. Accessed 10 July 2015.

Ministry of Trade and Industry. 2015. Speech by Mr. Lee Yi Shyan, Senior Minister of State for Trade and Industry and National Development at the 4th Asia-Singapore Infrastructure Roundtable at Marina Bay Sands Convention Centre, Singapore, 15 April 2015. http://www.mti.gov.sg/NewsRoom/Documents/SMS%20Lee%20Yi%20Shyan's%20Speech%20at%20Asia-Singapore%20Infrastructure%20Roundtable%20on%2015%20Apr%2015%20(Final).pdf. Accessed 9 July 2016.

Monetary Authority of Singapore. 2014. “Towards a New Infrastructure Asset Class by 2020" - Speech by Mr Lim Hng Kiang, Minister For Trade & Industry, at the World Bank-Singapore Infrastructure Finance Summit at Intercontinental Hotel Singapore, 3 June 2014. http://www.mas.gov.sg/news-and-publications/speeches-and-monetary-policy-statements/speeches/2014/min-lim-speech-at-world-bank-singapore-infrastructure-finance-summit.aspx. Accessed 10 July 2015.

PwC. 2014. Capital Project and Infrastructure Spending: Outlook to 2025. http://www.pwc.com/gx/en/capital-projects-infrastructure/publications/cpi-outlook/assets/cpi-outlook-to-2025.pdf. Accessed 9 July 2015.

Somani, S. and Mehrotra, P. 2014. Financing via business trusts, Business Times, 20 September, 2013 http://www.btinvest.com.sg/wealth/wealth-planning/financing-business-trusts-20130920/. Accessed 10 July 2014.

Standard Chartered Bank. 2014. Bangladesh Power Hungry. https://atfa.memberclicks.net/assets/FilesforNewsletter/OLD/18Jul2014/bangladesh%20-%20power%20hungry_16_07_14.pdf. Accessed 9 July 2015.

Surbana Urban Planning Group. 2014. Red-Dotting the World. http://www.surbana.com/downloads/pub-rdtw.pdf. Accessed 9 July 2015.

United Nations. 2014. World Urbanization Prospects. http://esa.un.org/unpd/wup/Highlights/WUP2014-Highlights.pdf.  Accessed 9 July 2015.

 

 

 

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