Infrastructure is among the odd words that can come with a myriad of meanings. For instance, we are often told about “hard” and “soft” infrastructure, with the former being an ode to bridges and roads. In contrast, the second term is used to describe organizations such as the financial or education systems.
On a recent trip abroad, I came to grips with the realities of how crucial infrastructure is to the national economy. The roads leading to the journey to the airports were overloaded, and there was a lot of anxiety about whether the flight would be delayed due to delays. The driver of the taxi said that the traffic was growing worse every year due to the overflow of vehicles and insufficient roads. He suggested that a greater use of public transportation could help be the solution to the problem.
When arriving at the airport, there was a crowded parking area as well as a jammed-packed entrance hall and, finally, delays to flights as aircraft had to circle until landing locations and gate accessibility were made available. In trying to access the internet in the air terminal, it was high-cost internet and intermittent wireless coverage.
And where was it? It could be New Delhi, Manila, or any other of the many developing nations with inadequate infrastructure. However, it was Perth, which is at the center of the growing WA economy. Since the beginning of time, the WA economy has been caught up in the game of catch-up with each subsequent resource boom that has seen significant growth in population, putting pressure on rail, road, and air as well as ports at sea.
The resulting delay and congestion act as a ball and chain that runs around the ankles of an economy. It is a major issue for business travelers and discourages all but the most adventurous tourists. The construction of infrastructure generally requires a lengthy time to construct, and a failure to have the infrastructure project planned ultimately negatively affects the rate of economic growth overall.
Bottlenecks in the infrastructure
In a recent article written by Geoffrey Thomas published in Australian Aviation (June Issue), The nature and extent of the bottlenecking infrastructure was revealed. According to Thomas, Perth Airport’s average annual passenger growth is expected to quadruple in the coming 17 years. The overall increase in passengers who travel via Perth Airport in the past five years has risen by 9.2 percent, and there will be an estimated 40 million in 2030. A large portion of this growth can be attributed to the expansion of the Fly-In, Fly-Out (FIFO) workforce operations utilized by the energy and mining industry in WA.
However, the general plan for growth in the future being carried out by Perth Airport management was questioned. For instance, Perth Airport CEO Brad Geatches was reported to have said that he would not be able to predict this growth in the number of passengers. Evidently, the Perth Airport is adhering to an earlier plan that forecasted a decrease in demand. However, officials from the airline were quoted in the report saying that the time of resource booms in WA since the 1970s saw the infrastructure of the airport constantly trying to catch up.
The article also mentioned that Perth Airport had originally promised the world a major overhaul of its facilities that would ensure it is one of the top airports in Asia in the next 5-7 years. The plan would have seen the airport having an airport terminal that would have around 40 gates as well as aerobridges that could accommodate the latest A380 Airbus fleet. This is currently not being implemented, so the next terminal is expected to be just 25 gates and aerobridges. This makes Perth Airport better than Adelaide’s brand new terminal, in spite of WA being the fastest-growing economy in the nation.
The new Singapore Terminal 3 has 28 aerobridges and was constructed with a labor cost estimated at 30% less than similar Australian projects. Singapore Airport is truly a world first because Singapore knows that if it doesn’t keep its infrastructure in good condition, it is likely to end up losing its international competitiveness.
Other nations face similar challenges and need to invest in infrastructure to ensure their economies are globally competitive. Even the oil and gas-rich states of the UAE are aware of this. For instance, in Dubai, they’ve built the Aero-City, which has five runways. It hopes to become an important air transportation hub that will handle a lot of the air traffic in the world, connecting Europe with Asia as well as the Pacific. In the meantime, Perth Airport will only be classified as a “Class C” facility even after the latest upgrades. It is just a “minimum standard” and may not be sufficient to deal with future requirements.
Similar investment patterns to the UAE are also evident elsewhere in the Middle East. Saudi Arabia has invested significantly in the development of two huge industrial cities: Jubail in addition to Yanbu. The first one is located on the east coast, close to the major oil fields, and Yanbu is situated on the Red Sea adjacent to the Suez Canal. Both are connected via major sources of drinking water lines, transport links, and high-speed communications, and are also equipped with schools, housing, and hospitals in order to attract foreign investment and foreign skilled labor.
In the world, the same levels of capital investment are being made and are particularly evident in those countries that Australia believes are its main export markets. However, the infrastructure bottleneck highlighted in the Perth Airport Perth Airport case is not only confined to boomtown Perth. In 2011, a document from Infrastructure Australia to the Council of Australian Governments (COAG) recognized that Australians face a number of major issues due to poor planning of infrastructure. Port and road congestion, insufficient quality water supply, and rising costs for electricity are all indications that there is an inadequate infrastructure investment. In the Executive Summary of the report
“In the simplest terms, there is an impression that our infrastructure systems aren’t sufficient to meet requirements at present, and they are beginning to incur substantial, long-term cost. We must be able to take tough and decisive actions if our infrastructure networks are going to remain in service to our needs and allow us to meet with the most significant environmental, economic and social issues.”
What is the significance of infrastructure?
The significance of infrastructure in enhancing the economic growth of a country is important, yet it is often undervalued. Without effective rail, road, or airport infrastructure, it will be more expensive for industries that are exposed to trade to function. Telecommunications also play an important role.
This was the subject of the study that was published in The Economic Journal in 2011 by Nina Czernich, Oliver Falck, Tobias Kretschmer, and Ludger Woessmann from the University of Munich. Their research suggests that an increase of 10% in broadband connectivity could increase the per capita annual growth rate by up to 1.5 percent. However, our politicians continue to debate over whether or not the National Broadband Network (NBN) is worth the investment.