Treasuries in the Infrastructure, Real Estate and Building Materials (IRB) sector1 operate against an extremely demanding backdrop. Globally dispersed operations, multiple project-speciﬁc operating entities, high entity turnover and multiple diverse regulatory environments are just a few of the challenges they face. Nevertheless, as Mark Eastwood, Global Sector Head – Infrastructure, Real Estate and Building Materials (IRB), Global Liquidity and Cash Management at HSBC explains, there are various ways in which leading IRB treasuries are successfully managing despite these conditions.
The IRB sector consists of multiple interlinked and interdependent sub-sectors that have major economic signiﬁcance. A recent report by PWC and Oxford Economics2 estimates that global infrastructure spending will hit USD9trn per year by 2025, up from USD4trn in 2012.
In view of the acknowledged link between infrastructure spending and GDP growth3, this increase potentially represents a major global economic stimulus.
There are a number of macro factors providing tailwinds and helping to drive this projected rise in infrastructure spending. Increasing population (including a rising middle class element), urbanisation growth and demand for faster transportation are just some examples, plus wider westward investment ﬂow from Asia and the Middle East4. Internationalisation of the RMB and China’s Belt and Road Initiative (BRI) are clearly also important factors here. For instance, the broad range of markets connected by BRI, coupled with an expanding middle class population and increasing life expectancy, is driving investment demand for efficient transportation systems.
The distribution of the projects driven by these factors is not only extremely diverse, it is also increasingly focused on emerging markets and those considered developing economies. (For example, India is currently building 30km of roads per day5.) This ongoing transition is a major issue for IRB treasuries, as some of the jurisdictions involved will be relatively unfamiliar in terms of payment infrastructure, regulation and business practices. In this demanding environment, a trusted banking partner with an extensive geographic footprint becomes ever more fundamental to ongoing success.