As per ASEAN Statistics 2019, the total road network in Southeast Asia stands at over 1.92 million km. In recent years, private participation in road projects has witnessed an increase in Southeast Asia. However, despite significant progress on various fronts, the past fiscal year has been quite challenging for the road sector, a result of the ravages of the Covid-19 pandemic.
Key trends shaping the sector
Emphasis on construction of expressways
Taking cognisance of the need to ramp up infrastructure in the country, the Philippines government has announced an aggressive infrastructure programme, the Build, Build, Build (BBB) programme. The construction of several expressway projects has been envisaged under this programme. The 220 km Quezon-Bicol expressway is an important public-private-partnership (PPP) project under the programme. The Myanmar government is also gearing up for the construction of the four-lane, $900 million Yangon elevated expressway. Apart from this, the $820 million Muse-Htigyaing-Mandalay expressway project, spanning about 446 km, has been recently announced by the government.
The Indonesian government has also been keenly focusing on development of toll roads in the country. The Ministry of Public Works and Public Housing, Indonesia, has targeted the construction of about 3,000 km of new roads and 2,500 km of toll roads by 2024. The majority of these toll roads are being implemented on the PPP format.
Besides, Cambodia is also planning to implement the 135 km Phnom Penh-Bavet expressway, design studies for which have already been completed. The Singapore government is also working on completing the 21.5 km North-South expressway by 2026. Meanwhile, the Malaysian government is planning to complete the 233 km west coast expressway (Banting-Taiping) project by 2022.
The Vietnamese government has also been implementing several big-ticket expressway projects. Construction work has recently commenced on the $5.06 trillion north-south expressway project. Laos has also recently commenced construction work on the 15.3 km Vientiane Expressway No. 1, which is expected to entail an investment of about $200. In January 2020, the Expressway Authority of Thailand finalised a deal with CTB Joint Venture for the RAMA III-Dao Khanong-Western Bangkok outer ring expressway project.
Bridge construction picks up pace
The Ministry of Public Works and Public Housing, Indonesia is evaluating the plan to construct the IDR 8.78 trillion Batam-Bintan Bridge in the country. The Vietnamese government is planning to implement the $227 million New Can Gio bridge project in Ho Chi Minh City and various other bridge projects in Hanoi. The Thai government has completed the design work for the 16 km fifth Lao-Thai friendship bridge, being implemented at an investment of THB 3.93 billion. Besides, the sixth and the seventh Thai-Lao friendship bridges are also at different planning stages. In Brunei, the construction of the Temburong bridge, one of Southeast Asia’s longest oversea bridges, is currently ongoing. In January 2020, China State Construction Engineering Corporation Limited completed a 12 km section of the bridge.
The Philippines’ National Economic and Development Authority (NEDA) and the Investment Coordination Committee (ICC) have accorded approval to the Bataan-Cavite interlink bridge project. The 32.1 km bridge project is expected to be completed by 2025. In Myanmar, construction work is in progress on the $168 million Korea-Myanmar friendship bridge (Dala bridge) project, which is expected to be completed by 2022. Besides, the $64.4 million Ayeyarwady bridge project is being implemented in Myanmar to connect the Thayet township and Aunglan township in the Magway region.
Rise in multilateral funding
Multilateral organisations such as the World Bank, Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), etc. have played a pivotal role in financing road projects in Southeast Asia. As of September 2020, JICA has provided/approved cumulative funding of JPY 2,231.29 billion for 241 road and bridge projects in Southeast Asia. Vietnam has received the highest funding of JPY 772,308 million from JICA, followed by the Philippines and Thailand. Similarly, the World Bank has provided/approved cumulative funding of $18.62 billion for 169 road projects in Southeast Asia upto September 2020. Indonesia has received the highest funding from the World Bank, followed by Vietnam and Philippines. Various projects were also approved by ADB in the previous year.
Technological advancements
Southeast Asian countries are also drafting plans to adopt advanced tolling technologies. A new satellite-based ERP system (ERP 2.0) is set to be kicked off in Singapore in 2023. A prototype of the design of the new on-board unit (OBU) has been recently unveiled. Malaysia also rolled out its RFID-based Touch ‘n Go electronic toll collection system in February 2020. Indonesia is also in talks with Hungary to build a $90 million multi-lane free flow e-toll system in Indonesia. Thailand is also planning to implement a similar system on its toll booths. Finally, in August 2020, the Department of Transportation, Philippines, announced that all vehicles using toll expressways in the country must pay only via cashless transactions with effect from November 2020.
Covid-19 taking a toll on construction activity
The Covid-19 pandemic has had a strong bearing on construction projects across the Southeast Asian region. The halt in construction projects, including road and bridge development, and repair and maintenance projects, has been primarily on account of the supply chain disruptions, inadequate labour availability, liquidity constraints in the private sector and funding issues being faced by the central and state governments.
In the Philippines, the government realigned about 21 per cent of the BBB budget for 2020 allocated to the Department of Public Works and Highways, to finance the government’s response to the pandemic. Meanwhile, contractors in Thailand have asked the Department of Rural Roads (DRR) to extend the deadline for construction projects due to the economic ravages of the pandemic. Some contractors have even abandoned projects – worth about THB 100 million each – due to a lack of liquidity. Plans to kick off the construction of Indonesia’s new capital city in Borneo have been put on hold pending the country’s response to the Covid-19 pandemic. The country’s toll and national highway expansion plans, which have become increasingly reliant on FDI, are also being affected. Meanwhile, the Movement Control Order (MCO) imposed by the Malaysian government, the circuit-breaker measures in Singapore and quarantine measures in Vietnam led to a halt in construction activity and difficulty in mobilising labour, material and equipment.
Sector outlook
The Covid-19 pandemic is set to have a strong impact on road construction in Southeast Asia, at least in the short term. Further, with the Covid-19 virus spreading globally, general business confidence has dipped, which is expected to slow the pace of FDI inflows into Southeast Asian countries from countries like China, Japan and Saudi Arabia. In countries like the Philippines and Vietnam, while the attractive pipeline of road projects will help in their economic recovery, the material impact on the construction sector will continue to be felt beyond 2021. Meanwhile, Myanmar’s project bank includes numerous pre-approved projects, which would enable the government to rapidly scale up infrastructure investment once appropriate pandemic-related safety measures have been put in place.
