The infrastructure budget of ASEAN economies targets cushioning the ruinous effects of the Covid-19 pandemic and laying the foundation for economic revival. It focuses on rebooting the economies in the region by prioritising the health sector, pushing infrastructure development and reconstructing economies by tackling the post-pandemic challenges. The ASEAN economies plan to spend enormously on public infrastructure, which is conceived to be the key driver of economic growth.
Covid-19 created a hole in public finances
The fiscal deficits of the ASEAN economies have touched record highs due to excessive government spending in the form of allocation towards financial relief packages and reduced tax collection during 2020-21. Across the ASEAN economies, government expenditure is largely slanted towards revenue expenditure, implying a sharp cut in capital expenditure as a result of which the ASEAN countries are hugely dependent on external sources to finance infrastructure projects.
The Philippines
The government has passed a PhP 4.506 trillion national budget, which is the country’s largest ever budget. To compensate for the destruction caused by Typhoon Ulysses and fuel the post-pandemic recovery of the economy, infrastructure has been kept at the centre of the national budget for 2021. The economic services sector, which includes the government’s flagship Build, Build, Build programme, constitutes about 29 per cent of the total budget. With a colossal allocation of PhP 695.7 billion for the Department of Public Works and Highways (DPWH), which is 15.4 per cent of the budget for financial year 2021, the government will carry out asset preservation programmes, bridge programmes, flood management programmes, and network development programmes. To boost economic activity throughout the nation, the Department of Transportation (DOTr) will receive PhP 87.9 billion in the national budget. DOTr will establish the Metro Manila Subway Project Phase 1 and the North-South Commuter Railway System.
The Philippines government is heavily reliant on external sources of finance to fund its infrastructure projects. It focuses on raising $7.67 billion in the form of loans and grants from multilateral institutions, $10.54 billion from bilateral sources, and $5.5 billion from the commercial markets.
Indonesia
With Indonesia having experienced the highest Covid-19 fatalities in Southeast Asia, its economy has shrunk for the first time since the Asian Financial Crisis of 1998. The Indonesian Infrastructure Policy 2021 primarily focuses on upgrading digital infrastructure, enhancing logistical efficiency and improving connectivity. The government has allocated IDR 413.8 trillion for infrastructure development, a nearly 50 per cent annual increase. As per the 2021 strategic output target released by the Ministry of Finance, the government aims to construct bridges spanning 26.9 km, 446.56 km of railway tracks, roads extending over 965.4 km and 10 airports, develop rooftop and cold storage solar power plants with 11.8 MWp power and base transceiver stations (BTSs) in 5,053 places in the country, among others. To be able to finance its infrastructure projects, the Indonesian government will issue sharia-compliant bonds to raise needed funds.
Malaysia
The Malaysian fiscal budget 2021 marks historic spending by the government, with a total allocation of RM 15 billion towards transport infrastructure. The government has identified a few notable projects, which are being fast-tracked and include the Pan Borneo Highway project, Phase 2 of the Klang Third Bridge, the Central Spine projects, and the upgradation of bridges. To advance the process of railway electrification in the country, the government has committed to implementing the Gemas-Johor Bahru electrified project and the Klang Valley double-tracking project. It has also allocated RM 780 million towards the development of economic corridors. The government is in talks with Singapore to initiate the high speed rail project between Kuala Lumpur and Singapore. A total of RM 2.7 billion has been earmarked for infrastructure improvement programmes and projects in rural areas that include the implementation of rural and inter-village road projects, water and electricity supply, and home repairs. Credit has been advanced to the bottom 40 per cent (also known as B40) income group, to give them access to internet facilities. The budget also focuses on skill enhancement and training of workers to reduce the country’s dependence on foreign workers in the construction industry.
Singapore
Singapore has launched the Singapore Green Plan 2030 to build a sustainable Singapore. To this end, the government hopes for major breakthroughs in the transportation industry such as boosting the usage of electric vehicles to cut down emission levels and the use of cleaner energy. Green infrastructure projects worth $19 billion will be financed with green bonds by the Singapore government. Singapore is going to build its first combined water and solid waste treatment facility, known as Tuas Nexus. The Singapore government plans to issue $68 billion in bonds under a proposed Significant Infrastructure Government Loan Act (SINGA). The government will legalise the loan financing bill to finance long-term infrastructure projects, which include new mass rapid transit rail lines and construction of sea walls to protect the country from rising sea levels.
Thailand
With the persistent threat of Covid-19 and the new Covid strain in Southeast Asia (SEA), the pace of economic recovery in Thailand seems to have decelerated, as a result of which the Ministry of Finance has revised its growth forecast for the year 2021 downwards to 2.8 per cent from the earlier forecast of 4.5 per cent in October 2020. The 2021 budget foresees a revised spending of THB 3.1 trillion for fiscal year starting October 1, 2020, down by THB 185.96 billion from the current fiscal year. With a view to improve connectivity, the government is aiming to widen Bangkok’s mass transit network and expressways. The Thai government has allocated $1 billion to establish a high speed rail hub at Ayutthaya, a UNESCO heritage site. The project will be taken up on a public-private partnership (PPP) basis. As per the Thai transport ministry, the establishment of the Denchai-Chiang Rai-Chiang Khong and Ban Pai-Nakon Phanom double-track railway is scheduled for the year 2021. A bridge project connecting the southern continent to two oceans, namely, the Gulf of Thailand and the Andaman Sea, is on the government’s agenda. The Thai government will borrow $46 billion to finance budget deficits and infrastructure projects, and rescue pandemic-hit state-owned enterprises.
The way ahead
Economic growth in SEA remains muted as Covid-19 cases continue to surge, particularly in Indonesia, Malaysia, and the Philippines. The region’s estimated growth figure for 2021 has been revised downwards, with SEA expected to grow only at 5.2 per cent in the current year as against the 5.5 per cent growth projection in September 2020. However, its long-term growth potential makes SEA an attractive destination for investors. To boost their economies, infrastructure including aviation, energy, 5G network, roads and bridges, railways, and digital services needs to be prioritised. Adequate infrastructure investments will be the key to the recovery of the ASEAN economies.
