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Infrastructure investment in a post covid-19 world

marno21

In light of Ireland and the rest of the world living through the greatest economic shock of most citizen's lifetimes, when the dust settles on this major event we will be living in a changed world. The degree of this change is not yet known.

Ireland is just coming out of years of austerity after the 2008 recession, which was much worse in ireland than in many other Western countries. We have the benefit this time of their being no internal systemic issues in Ireland to make it worse here than in other countries. In fact the OECD predicts Ireland will be the least affected Western country time time around. The large pharmaceutical cluster in ireland no doubt helps here.

However, Ireland, whilst one of the most advanced and developed countries in the World living wise has major infrastructural issues which go unresolved. How do you see the approach to this changing in a world post covid-19?

PS: Chatter about how it affects road investment is permitted here. No point in a parallel thread in the roads forum

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marno21

Personally, while there has been a lot of chatter about Metrolink getting cancelled etc., I disagree with this viewpoint. Another few years of austerity is not palletable in this country and if FG/FF retain power they won't be too keen on it with Mary Lou breathing down their necks. The lack of public transport capacity is a major issue in the Dublin area and projects like Metrolink will help address the housing issue by providing much more serviced land.

Add to the ECB potentially financing projects that stimulate growth in member states and there will be a major case to proceed with the project. And I haven't even touched the green element of all this yet.

tigerboon

"The large pharmaceutical cluster in ireland no doubt helps here."

You're assuming that stays the case. There might be calls (with incentives) for a lot of large companies to repatriate and help get their own countries off the floor.

marno21

tigerboon wrote: »

"The large pharmaceutical cluster in ireland no doubt helps here."

You're assuming that stays the case. There might be calls (with incentives) for a lot of large companies to repatriate and help get their own countries off the floor.

I’m talking short term (next 12-24 months)

Regardless given the sunk costs by many of the foreign companies they won’t be leaving anytime soon

In Cork anyway, MSD, Johnson & Johnson and Eli Lilly have all made major expansionary investments in the past few years and they won’t be abandoning them anytime soon

hmmm

When this draws to an end I expect we will see massive public fiscal & monetary stimulus to try and essentially restart economies. Infrastructure is always a good investment in those circumstances, as it gets people and money working very quickly. There will also be huge opportunities for companies with strong balance sheets to capture new markets while their competitors are reeling/bankrupt.

A pandemic is very different to other financial crises. In previous economic downturns, economic stimulus taps are turned on while it is happening, in an attempt to keep the economy above water. In this case, stimulus doesn't work because people are afraid to spend/leave their houses. I expect we'll see a very different approach this time, and much more concentrated on a particular point in time.

Harry Palmr

Buy low/sell high.

Build when the costs are as low as they are likely to ever be and develop medium-long term wealth through projects.

After 2008 everyone droped their plans and the construction sector collapsed which of course came back to bite us when the economy picked up steam we can't make this error yet again.

Obviously it depends on how long the pandemic lasts, how many people die unfortunately, etc.

However recessions that are caused by pandemics usually are quiet short and the economy usually rebounds strongly once it passes. All those people locked up at home, who can't wait to get out and get back to the pubs, restaurants, gyms, etc. and start spending.

I think this recession will be quiet different to 2008. As you say, the Irish industry and economy went into this healthy. Pharma and medical equipment made here will obviously do well. But IT is also doing very well through this due to everyone working from home and discovering cloud services, etc. and of course there is always the need for financial services and agriculture.

BTW I think countries will look to pull back the manufacture of PPE, etc. from China only to Europe/US and I think Ireland could be well placed to benefit from that on an EU wide basis.

Of course tourism, airlines, retail, restaurants, etc. will suffer in the short term and may take time to bounce back. Specially international tourism might take quiet a while for people to trust travelling internationally again.

I'd agree with the report that says we will be one of the countries who suffers the least.

I'd also say that we won't see austerity type budgets. Quiet the opposite in fact for a number of reasons.

2008 was different because we were so directly hit by it, the cost of government lending went WAY up due to it be a financial crisis, hell folks might not remember, but the government was worried if they would even be able to borrow at any cost! Austerity was necessary then because of the circumstances and it was also forced on us by the Troika.

This time around, the cost of government lending is at an all time low and Irish bonds are particularly attractive given the overall health of our economy. Not only is their no appetite for austerity by FG/FF, but there is non across Europe and most of the rest of the world.

Governments around the world saw how damaging it was and how it led to the rise of the far right. Also it just doesn't make any sense for a recession like this.

With this sort of recession, once the pandemic is dealt with, the correct move is too pour money into economies to restart them as quickly as possible, to have people feel comfortable to go back out and start spending again. Austerity doesn't make sense it this case, as it would just drag it out and likely lead to a worse depression.

And I haven't seen any government suggest that, they are all talking about printing money, etc. once the lock down is over.

So if anything I'd think we should absolutely be investing in infrastructure like Metrolink, etc. Money will be cheap and it can help employ people who are laid off from retail, restaurants, etc. that might be slower to restart.

Of course we need to beat this pandemic first.

CatInABox

And I haven't seen any government suggest that, they are all talking about printing money, etc. once the lock down is over.

And the one Government in the EU that did suggest something along those lines, the Dutch, have been slapped back pretty hard, including by some of their former ministers.

To reinforce the difference between now and 2008 crisis. The NTMA has just raised an extra €4 billion in bonds at a rate of 0.05%, by comparison the rate in 2011 for a 10 year bond was 14% !!

You can easily see why austerity was necessary in 2011, given that borrowing money then was so expensive. But now, at 0.05%, it is almost giving away money for free.

Not that I want to see us take on massive debt just to blow it like we did in the Celtic tiger days. But taking on debt to support the health service now and investing it in infrastructure like Metrolink over the next few years is a no brainer IMO.

Dats me

marno21 wrote: »

Personally, while there has been a lot of chatter about Metrolink getting cancelled etc., I disagree with this viewpoint. Another few years of austerity is not palletable in this country and if FG/FF retain power they won't be too keen on it with Mary Lou breathing down their necks. The lack of public transport capacity is a major issue in the Dublin area and projects like Metrolink will help address the housing issue by providing much more serviced land.

Add to the ECB potentially financing projects that stimulate growth in member states and there will be a major case to proceed with the project. And I haven't even touched the green element of all this yet.

The only problem with this is that MetroLink, BusConnects, DART etc are all very very far away from being shovel ready and designers for the rail projects at least seem to have been chosen mainly for the cheapest tender so there isn't expertise there in the first place let alone to fast track it.

Busconnects is slightly different because there are four different designers, I think Busconnects is our best chance tbh. But still a good while away, busconnects.ie says ABP application later this year so probably 18 months of detailed design after that?

I do think we should see a lot of cycling projects, policy seems to be moving that way.

CatInABox

Dats me wrote: »

The only problem with this is that MetroLink, BusConnects, DART etc are all very very far away from being shovel ready and designers for the rail projects at least seem to have been chosen mainly for the cheapest tender so there isn't expertise there in the first place let alone to fast track it.

Busconnects is slightly different because there are four different designers, I think Busconnects is our best chance tbh. But still a good while away, busconnects.ie says ABP application later this year so probably 18 months of detailed design after that?

I do think we should see a lot of cycling projects, policy seems to be moving that way.

All of these projects are nearing the planning application stage. Design work is essentially done on Metrolink. The rail designers have designed and completed rail projects around the world.

Cycling projects will still need to be designed and put through planning.

If we're going to be using any projects for stimulus, then it's going to be Metrolink, BusConnects and Dart Expansion in Dublin. A more interesting question is what projects can be done similarly in the rest of the country? I haven't looked in a while, where is the M20 at?

Dats me

CatInABox wrote: »

All of these projects are nearing the planning application stage. Design work is essentially done on Metrolink. The rail designers have designed and completed rail projects around the world.

Cycling projects will still need to be designed and put through planning.

If we're going to be using any projects for stimulus, then it's going to be Metrolink, BusConnects and Dart Expansion in Dublin. A more interesting question is what projects can be done similarly in the rest of the country? I haven't looked in a while, where is the M20 at?

Not trying to be argumentative but I'm afraid that's not true. The route is still in preliminary design stage and a railway order application is made with a preliminary design. It will also take a year (at least, Metro North took three years) to get through ABP, hopefully a lot of the detailed design can be done while they're waiting and they don't just stop and wait. But it will be 2022 at the very least until it's shovel ready.

Even the public line is for ABP application at the end of the year and then one year for ABP consideration.

Cookiemunster

CatInABox wrote: »

I haven't looked in a while, where is the M20 at?

It's just started the route selection process so it's a few years away from ABP yet. They could probably fast track the M21 which is currently with ABP.

PMBC

Surely a massive public housing programme is also on the cards. Much faster through planning - used to be Part 10 by local authorities and then put hundreds of small schemes out to tender for small local builders. Quality shouldn't be an issue if there are good CoWs from Councils. Take the dead hand of the Department off the controls with their ten page cost control forms HCA1 etc - god how we hated them. As one of their architects, recently deceased said - control freaks.

Bsharp

Dats me wrote: »

The only problem with this is that MetroLink, BusConnects, DART etc are all very very far away from being shovel ready and designers for the rail projects at least seem to have been chosen mainly for the cheapest tender so there isn't expertise there in the first place let alone to fast track it.

Busconnects is slightly different because there are four different designers, I think Busconnects is our best chance tbh. But still a good while away, busconnects.ie says ABP application later this year so probably 18 months of detailed design after that?

I do think we should see a lot of cycling projects, policy seems to be moving that way.

I'd tend to agree with this. We're seeing the result of tenders awarded at lowest cost, resulting in less resourcing on these projects with lower levels of expertise involved. This always leads to a longer project duration.

Busconnects will need to be implemented on a phased basis to be successful. Should never underestimate the level of effort involved to relocate services along such extensive corridors. Moving kerb lines causes such headaches and getting third party agreements including utility provider proposals and works can take an age

Dats me

Bsharp wrote: »

I'd tend to agree with this. We're seeing the result of tenders awarded at lowest cost, resulting in less resourcing on these projects with lower levels of expertise involved. This always leads to a longer project duration.

Busconnects will need to be implemented on a phased basis to be successful. Should never underestimate the level of effort involved to relocate services along such extensive corridors. Moving kerb lines causes such headaches and getting third party agreements including utility provider proposals and works can take an age

Yes exactly this. A €3bn project and lots of design decisions to make that will impact hugely on cost. Scrimp on a couple of million on the tender for the engineering design and any of the many many decisions to be made let alone overall project management, supervision etc. could easily cost ten, one hundred times the saving if they go wrong.

It's visible already in how far they're off the project timeline already which may end up costing the project dearly.

hans aus dtschl

It sounds like a lot of the N22 is ready for construction crews?

With the reduction in traffic and change in people's daily lives it's possibly an opportunity to fast-track more of the sustainable mobility policy and achieve some degree of modal shift. I currently see a lot of people out walking and cycling, seemingly for the first time in years, and we're coming in to the summer months. If you're ever going to break habits, now is a good time to try.

Many of the projects required for sustainable transport are surface-level roads realignment/reassignment, the type of things local authorities can manage reasonably easily, and can be done reasonably quickly. It's mostly wider footpaths, segregated cycle lanes, lane segregation etc.

It sounds to me like a quick infrastructure investment that could tick over 12-18 months while we wait for larger infrastructure projects to become shovel-ready.

After that the usual projects we all want to see: Metrolink, M20, BusConnects etc.

Irish Steve

I would like to hope that both employers and employees have seen the advantage of home working, and that would suggest that while there is still a need for public transport upgrades, the focus of investment will need to change to reflect the differences that have come about as a result of this emergency.

A much more significant issue is to address the issues that have come up in respect of things like supply chains, and manufacturing industries. Somehow, the imbalance between costs of critcal items have to be addressed to ensure that the economy can source critical items locally, and not have to go into panic mode to get supplies from the other side of the world.

I fully understand why the Chinese have such a massive manufacturing base, but it's reached the point where it's becoming increasingly difficult to source a whole range of items from places other than China that never used to be a problem, and we're seeing now just how difficult that is making things for a range of services.

CatInABox

That's not necessarily a supply chain issue, but an unforeseen demand issue. Rather than require us to maintain factories churning out equipment, which will almost certainly be much more expensive than what we source from china, wouldn't it be better for us to create a "national reserve" of stuff that is essential, like PPE?

Tomrota

The government spending when it comes to COVID highlights just how unwilling politicians are to invest in infrastructure. The money has always been there, we have been told the past nine years by Fine Gael that they couldn’t build infrastructure due to the 2009 financial crisis. Now we’ll be told for the next 10 we can’t do it because of the COVID crisis. And we’re already decades behind European countries.

marno21

Tomrota wrote: »

The government spending when it comes to COVID highlights just how unwilling politicians are to invest in infrastructure. The money has always been there, we have been told the past nine years by Fine Gael that they couldn’t build infrastructure due to the 2009 financial crisis. Now we’ll be told for the next 10 we can’t do it because of the COVID crisis. And we’re already decades behind European countries.

I mentioned this in my original posts. Austerity is not an option this time around, and the politicians know it too. Varadkar said as much last week.

There will be civil unrest if another 4/5 years of austerity is imposed. And whoever tries to impose it will get roundhouse kicked at the next election.

Tomrota

marno21 wrote: »

I mentioned this in my original posts. Austerity is not an option this time around, and the politicians know it too. Varadkar said as much last week.

There will be civil unrest if another 4/5 years of austerity is imposed. And whoever tries to impose it will get roundhouse kicked at the next election.

But since infrastructure never seems to be a voting issue, don’t you think they’re gonna stall it as much as posible like they have been doing already their entire time in government?

Grandeeod

I was frequently lambasted over the years for being critical of Irish Governments using excuses and fudges not to splash the cash on major projects like Metro and Dart Underground. I was always of the opinion that they could do it if they really wanted to despite any economic factors. Now we find ourselves in the middle or even just the beginning of a very unusual scenario regarding Covid-19.

We have spent 5 billion on social protection provisions. I am not going to even question that decision, but it does highlight the fact that if you really really have to or want to spend on something that is needed, you can do it.

After this is over and settled down, I expect PT projects costing in the billions to be shelved yet again. But always remember that the state was able to find billions when it felt it really needed billions. PT will never ever be in that category in your life times.

This post is made with the greatest respect to those who have died, will die and to those who are suffering because of where we are right now.

Grandeeod

marno21 wrote: »

I mentioned this in my original posts. Austerity is not an option this time around, and the politicians know it too. Varadkar said as much last week.

There will be civil unrest if another 4/5 years of austerity is imposed. And whoever tries to impose it will get roundhouse kicked at the next election.

I'm surprised at you Marno. Anything said now by any politician can be taken with a pinch of salt because none of them anywhere around the world except maybe China and Russia have any resources/plans to recover. Varadkar is a meaningless minnow in the scheme of things. I'm confident he knows that. Not wanting austerity measures is absolutely correct, but it's not a guaranteed approach. Over the last few weeks billions have been pumped into the world economy to no real affect. Uncertainty is the elephant in the room and Irelands open economy isn't even really controlled by us anyway.

Could be wrong, but there's lots to be played out. PT and infrastructure in general will suffer. No doubt.

marno21

Grandeeod wrote: »

I'm surprised at you Marno. Anything said now by any politician can be taken with a pinch of salt because none of them anywhere around the world except maybe China and Russia have any resources/plans to recover. Varadkar is a meaningless minnow in the scheme of things. I'm confident he knows that. Not wanting austerity measures is absolutely correct, but it's not a guaranteed approach. Over the last few weeks billions have been pumped into the world economy to no real affect. Uncertainty is the elephant in the room and Irelands open economy isn't even really controlled by us anyway.

Could be wrong, but there's lots to be played out. PT and infrastructure in general will suffer. No doubt.

Sorry, I didn't mean to be alluding that I was following the Varadkar line, I was speaking about no austerity from personal opinion, and simply reflecting that the Taoiseach said the same last week.

I fully agree with the rest of your post - it is impossible to say anything with certainty at the minute - we have no idea what's around the corner - however I don't think it'll be politically possible for Ireland to go down the route of austerity again for another few years, we just about made it past the last episode.

Indeed as you say there's lots to be played out.

Idbatterim

I think the reduced employment, money in peoples pockets to spend and remote working etc, will ease pressure and reduce how unbearable the traffic situation was BUT the population is still growing and there could be a quick turnaround, they need deliver this scheme... finish the plans and then if they cant give the immediate go ahead, depending on circumstance at the time, ok. But if they try to reinvent the bloody wheel again, I really do give up...

Idbatterim

Grandeeod wrote: »

I was frequently lambasted over the years for being critical of Irish Governments using excuses and fudges not to splash the cash on major projects like Metro and Dart Underground. I was always of the opinion that they could do it if they really wanted to despite any economic factors. Now we find ourselves in the middle or even just the beginning of a very unusual scenario regarding Covid-19.

We have spent 5 billion on social protection provisions. I am not going to even question that decision, but it does highlight the fact that if you really really have to or want to spend on something that is needed, you can do it.

After this is over and settled down, I expect PT projects costing in the billions to be shelved yet again. But always remember that the state was able to find billions when it felt it really needed billions. PT will never ever be in that category in your life times.

This post is made with the greatest respect to those who have died, will die and to those who are suffering because of where we are right now.

nail on the head, like I have said for years. These sums, are an irrelevance in the scheme of things. 5 billion in 3 months Grandeeod!

https://www.thejournal.ie/covid-19-esri-welfare-unemployment-5070540-Apr2020/

Say for example your typical budget, where they blow up welfare an extra billion every budget, that is an extra billion every bloody year. So the cost of that one increase, over a decade , is ten billion!!! :eek:

The sum for one project is quite large, I do get that. But in the scheme of government spending and how many years it recouped over and all of the benefits it brings...

[Deleted User]

The mind boggles at the mathematics required to compare the lack of investment in infrastructure versus the necessity to keep people alive, fed and housed during a global pandemic and say "I KNEW they had the cash!!".

Some of you are clowns

Cookiemunster

Deleted User wrote: »

The mind boggles at the mathematics required to compare the lack of investment in infrastructure versus the necessity to keep people alive, fed and housed during a global pandemic and say "I KNEW they had the cash!!".

Some of you are clowns

Absolutely nobody is begrudging the money being spent. But they could easily have been borrowing that very low cost money before the crisis to build the needed infrastructure and make the country a better place to live in for everyone. They chose not to. Wind your neck in.

Zebra3

Just look at the money burnt up with the banks.

So much utterly wasted.

25% of that spent on PT would have been amazing.

Well you do need to keep in mind the cost of borrowing and if others will be willing to lend to you.

It is easy to borrow Billions now, when the cost of borrowing is just 0.04% for our last round of borrowing just a few weeks ago and when there is lots of interesting in lending you the money.

But remember, just back in 2011, the cost of Irish 10 year bonds was 14% and even at that, we were lucky to get it, for many borrowing rounds, the government didn't even get all they were looking for.

Folks seem to have already forgotten that austerity was basically forced on us during the last recession by external investors and Troika. The very high cost of borrowing and difficulty with borrowing left us with no choice but to cut back on borrowing and thus spending.

It is only in the last 5 years or so that the cost of borrowing for us has come way down and as a result, all the development projects were dusted off. Metrolink, Dart Underground, Bus Connects, but also the Childrens hospital, NBP, various road plans, etc.

Non of these would have been possible after 2008, due to the cost of borrowing.

In some ways, we have been very lucky that this pandemic hit when it did. When our economy was already very strong and their are no underlying weakness in it (unlike 2008) and the cost of borrowing internationally is so low. Imagine if it had hit in 2009 instead! We were have been utterly screwed.

How we fair through this situation, depends how long it goes on. If it is relatively short, then I don't think there is any major danger to these major projects. But if it goes on for 18 months, then the cost of borrowing will balloon and we would be in serious trouble again.