Future-proof Infrastructure: “Transport infrastructure is key to ASEAN’s growth”

Trade is a key driver for economic growth in Southeast Asia, as shown by the relationship between trade growth and GDP growth in the five largest ASEAN economies from 2006 to 2016 (Fig. 1).

Underpinning this trade growth was the development of transport infrastructure which is fundamental to connecting markets and facilitating the flow of goods and services. With the increasing rebalancing of trade into Southeast Asia, ASEAN countries need to be ready to support growing transport infrastructure needs.

Transport infrastructure requirements and its corresponding investment needs in Southeast Asia are estimated to be $84 billion every year until 2030, with land transport (road and rail) alone comprising almost 60 per cent of the total infrastructure investment need for the region (Fig. 2).

Growing ASEAN could create hurdles for transportation

ASEAN economic development enabled by growing transport, particularly land transport, is not without unintended consequences. We expect three key implications to further accentuate in the coming decade:

Increasing traffic congestion

Traffic congestion costs a country 2-5 per cent in economic growth every year.3 The most congested ASEAN cities – Jakarta, Bangkok, Manila, Kuala Lumpur, Yangon, Hanoi and Ho Chi Minh City4 –  also rank relatively lower on the Logistics Performance Index (LPI)5 which implies that poorer trade logistics caused by congestion is one key factor leading to the loss of growth.

This is not a recent development for these cities, which have been plagued by worsening congestion problems for years as road capacity remains constrained while the demand for transport increases. As ASEAN economies and their demand for transport continue to grow, congestion in these cities is expected to worsen.

Increased air and noise pollution

Road transport has been identified as a key contributor to greenhouse gas emissions in Southeast Asia. It is being estimated to account for 92 per cent of transport-related CO2 emissions in the region.

The situation by 2035 does not appear to improve if the status quo continues; energy consumption by transport is projected to grow at 4.5 per cent per year from 118 million tonnes of oil equivalent (mtoe) in 2013 to 309 mtoe in 2035, which is estimated to be 28 per cent of total energy demand in Southeast Asia in 2035 with oil remaining as the primary energy source for transport6.

A less talked about issue stemming from the growth of transport in cities is noise pollution. In a 2017 study, it was determined that there was a positive correlation (64 per cent) between noise pollution in cities and hearing loss, with cities such as Guangzhou, Delhi and Cairo being identified as the worst for noise pollution7.

With urbanisation and the demand for transport in South-East Asia set to rise over the next decade, noise pollution can be expected to worsen.

  Evolving customer mobility expectations

By 2030, it is estimated that 56 per cent of the ASEAN population will be urbanised, 65 per cent will be considered middle-class8 and 13 per cent will be older than 659. The knock-on effects of these projected shifts are changing expectations in relation to mobility needs.

Customers will value several key factors in their future mobility experience:

Time: Being able to use journey time more efficiently through newer technologies such as self-driving cars, 5G, virtual/augmented reality, voice recognition, etc. to conduct virtual meetings, and enjoy different entertainment, for example.

Flexibility: Having the choice to customise journeys by combining different transport modes which offer different price options, travel times and distinct features such as charging points or even comfort.

Predictability and consistency: Having a level of certainty particularly over the cost and time of transport. This covers a whole host of topics such as experiencing consistent delivery times of packages to having a consistent travel experience and being able to create alternate travel plans if delays are expected ahead of time.

Accessibility: For the ageing population, having easy access to transport is essential for living independently and accessing healthcare when required. This means that potential considerations for future transport options could be that they need to be on-demand, have enough seating and be accessible to those who have physical disabilities.

Future-proofing transport solutions is essential

Given the implications mentioned, we believe that there is an immediate need to ensure that transport infrastructure developments are ‘future-proofed’.

Strengthening public transport

Ensuring that the backbone of public transport such as mass rapid transit, bus rapid transit and light rail transit in ASEAN countries is capable of meeting demand is the fundamental step to future-proofing transport for the region. By having an effective public transport system, issues such as traffic congestion can begin to be tackled as people move away from personal vehicle ownership and use last mile solutions developed by private players.

Electrification of vehicles

The benefits of electrification are clear: cleaner air because of zero direct emissions, less noise pollution as electric vehicles (EVs) run much quieter, and a chance to meet global carbon emissions reduction targets to address climate change.

However, electrification as a solution must be contextualised to ASEAN. A multi-pronged approach that firstly looks at electrifying public transport and other modes of personal transport that may be more accessible such as two-wheelers, and then secondarily looking at encouraging those who have cars to either sell their car or switch to an EV, should be considered.

In doing this, the region may be able to control growing emissions and potentially reduce projected emissions growth if prompt action is taken.

On-demand mobility

Ride-hailing apps such as Grab and Go-JeK have gained huge popularity in the last few years. Uptake of such services is only expected to grow with the advent of autonomous vehicles (AVs) due to an associated pronounced decline in vehicle ownership particularly in urban areas as almost 50 per cent of the cost of on-demand private hire vehicles relates to the driver. Therefore, we estimate that AV MaaS provision could be up to 40 per cent cheaper than private vehicle ownership by 203010.

The benefits of on-demand mobility will evolve with the advent of AVs, particularly in driving the decrease of private vehicle ownership which will help tackle the issue of traffic congestion in ASEAN cities.

Mobility as a Service (MaaS)

MaaS solutions such as car-sharing schemes, car-subscription services and multi-modal aggregators are in the earlier stages of deployment and quickly gaining traction.

Fully deployed car-sharing services, although still fairly limited, are proven concepts through current providers such as BlueSG. Similarly, multi-modal aggregation exists in limited form globally but is a proven solution. MaaS Global, a multi-modal MaaS aggregator, has created Whim which is a product with a monthly subscription that allows customers to plan and pay for individual journeys via train, bus, taxi, car-rental and bike-share on a single app, or purchase an ‘all-in’ subscription covering all their transport needs in city for fixed price.

Connected and Autonomous Vehicles (CAVs)

In terms of mobility solutions that are realisable further into the future, CAVs offer ASEAN an opportunity to fundamentally alter the way people and goods are moved. By first changing how public transport operates, it could help improve road safety and traffic congestion.

At a later stage where CAVs become ready for private transport, it could help further open independent mobility to the aging and physically disabled population. CAVs could also increase productivity by allowing people to use their journey time more efficiently.

While Level 5 autonomy (full autonomy in all locations and conditions) may not arrive before 2030, at least 15 original equipment manufacturers have pledged to release Level 4 AVs (highly automated) between 2019 and 202512, with much of early deployment expected to be in urban areas. Speed of CAV adoption will vary greatly between countries; even more mature CAV markets such as the US are only projected to experience modest adoption rates. Therefore, it can be expected that CAV adoption may be even lower in ASEAN by 2030 at the current trajectory of growth.

Implications for ASEAN infrastructure

In addition to ensuring that public transport infrastructure is appropriate to handle the demand of ASEAN cities, other more immediate requirements relate to the infrastructure implications of electrification which focus primarily on the provision of EV charging infrastructure. Depending on the country, a mix of public and private charging stations need to be widely available to alleviate ‘range anxiety’ and enable countries to use EVs, whether it is buses, two-wheelers or cars.

Public authorities should remain aware of potential changes to traditional infrastructure requirements due to future mobility developments. For example, vehicle platooning will help increase the capacity of roads and create a steadier flow of traffic, thus reducing the need for as many new roads to be built.

Private infrastructure players such as parking space operators need to also be prepared for potentially rapid changes in driving behaviour over the next few years. To do this, a mindset shift around viewing mobility opportunities through the lens of their existing assets needs to occur.

In the example of a parking lot, while EVs may still need to park and charge in the medium term, AVs at a later stage will either constantly be on the move or be stored in city-fringe depots. This creates opportunities to repurpose land, potentially as a logistics hub for last-mile urban AV deliveries and charging of vehicles.

Future mobility also presents huge opportunities for technology, media and telecom organisations across the mobility ecosystem. CAVs will generate and use unprecedented levels of data while mobility providers will depend on digital platforms to deliver their services. Therefore, opportunities for communications infrastructure, whether it be 5G or other technologies, is essential to support vehicle-to-vehicle and vehicle-to-grid sensing and communication applications.

Finally, as the demand for EVs and subsequently AVs grows, energy demand will also increase. Given the current global mandate to decarbonise, cleaner and more sustainable sources of energy such as solar and wind, and even waste-to-energy need to be explored. This too will create many opportunities in energy infrastructure.

Conclusion

Infrastructure investments supporting the development of essential public transport infrastructure should be made in parallel with infrastructure for newer mobility solutions as they can help to alleviate some of the pressing issues ASEAN faces such as rising emissions and noise pollution, traffic congestion and changing mobility demands of customers.

While the genesis of the identified implications is land transport, the mobility ecosystem that we see being developed today has created opportunities across multiple sectors which should to be explored today.

Above all, the role of integrated transport planning at the system-wide level will become critical in rightsizing infrastructure needs. Traditional transport infrastructure has been built around to support mass transit from residential to work areas. Increasingly, cities have begun working on `live-work-play’ development concepts which reduce the need for significant mass transit and reduce average distances travelled. Transport infrastructure developments, therefore, need to be informed by the economic development plans of the cities or regions they intend to serve.

Satya is a Partner with KPMG Singapore. He leads the Infrastructure, Government and Healthcare sector and has worked extensively with policy makers and public transport operators to solve key strategic issues in the sector. Satya has over two decades of experience advising both governments and private sector investors in the region on strategic transformation initiatives, privatisation and public private partnerships. Prior to joining KPMG, Satya worked with MNCs in Asia and the Middle East. He is a Chartered Accountant and has a Post Graduate Diploma in Management (MBA) from the Indian Institute of Management, Ahmedabad.

1World Bank: GDP Growth Data; WITS: Trade Growth Data; 2AIIB: Transport Sector Study 2018; 3ADB: Key Priorities for Urban Transport;

4 TomTom: Traffic Index 2018; Statista: The most congested cities in Asia; 5World Bank: Logistics Performance Index 2018; 6AIIB: Transport Sector Study 2018; ASEAN: The 4th ASEAN Energy Outlook; 7Mimi Hearing Technologies: Worldwide Hearing Index; 8UOB: ASEAN Focus; 9Statista: ASEAN aging population forecast 2035;10KPMG Mobility 2030: Transforming the mobility landscape; 11KPMG Mobility 2030; 12KPMG 2030: Transforming the mobility landscape