It has been well accepted by Southeast Asian countries that infrastructure development is crucial to cater to the burgeoning population and rapid urbanisation. Funding continues to be sub-optimal and lags behind the demand for new infrastructure and upgradation of ageing infrastructure.
In the last few years, there has been a large disparity between the growth rates of infrastructure spending in the six largest economies of ASEAN, which has ranged from 4 per cent to 13 per cent. Currently, there exists a large disparity between the expected infrastructure spending growth and the actual spending (2015 estimates).
Also, the current rate of infrastructure spending as a percentage of GDP in ASEAN countries is relatively low when compared to other developing countries (such as China and India) and developed countries (such as Canada and Australia). As a result, unless effective measures are taken to increase infrastructure spending, the expected demand for infrastructure will not be met, and economic growth will slow down or stagnate.
The policy and regulatory framework for infrastructure development in the Southeast Asian region needs to be strengthened. Overall, countries such as the Philippines, Malaysia, Vietnam, Singapore and Myanmar have been at the forefront of implementing new policies/reforms to augment infrastructure sector growth.
With a significant pipeline of infrastructure projects, many ASEAN governments intend to leverage PPPs to complement their fiscal resources as well as leverage private sector expertise.
Countries with the most number of active PPP projects in the region are Thailand, Indonesia, the Philippines and Vietnam. In fact, the Philippines is actively exploring a hybrid PPP model where the initial upfront construction will be delivered through a government-to-government arrangement, while the operations and maintenance of the project will be managed by the private sector through a PPP contract. Meanwhile, the ASEAN countries with the least PPP experience are Brunei, Cambodia, Laos and Myanmar. Besides, the idea of tapping green finance is fostering among the ASEAN nations.
Growth in ASEAN countries is expected to pick up pace over the medium term owing to a strong rebound in trade, robust domestic demand and infrastructure development initiatives undertaken by various governments. Southeast Asia’s growth is expected to remain strong at 5.2 per cent between 2019 and 2023. However, the recent economic downturn could dampen this growth prospect.
Some of the urgent priorities for the ASEAN member countries are improving infrastructure for maritime connectivity, especially for Indonesia, and increased development of Information and communication technology (ICT), which is particularly important in supporting growth.
Net, net, investment prospects in the region are promising, with improvements in the investment environment, better economic growth, a growing middle class and advancing regional integration.
This issue gives a yearly round-up of key developments in the infrastructure sectors across the Southeast Asian countries.