Apart from land infrastructure, high levels of maritime and air connectivity is important in deepening linkages between the Association of Southeast Asian Nations (ASEAN) countries. For a region which includes 24,000 islands, spread across 5,200 km east to west and 3,400 km from north to south, modern and well-managed maritime and aviation sectors are crucial to economic progress.
Trends across the port sector
Given the geographical location of the Southeast Asian countries, they are considered to be an important gateway for maritime containerised trade. Singapore enjoys a dominant position in the container market. The Port of Singapore is the second busiest container handling port in the world, behind China’s Shanghai port. The container volumes at the port increased from 33.67 million twentyfoot equivalent units (TEUs) in 2017 to 36.6 million TEUS in 2018, a growth of 8.7 per cent.
Malaysia is emerging as a major competitor in the container market. Port Klang was ranked 12th among the top 50 container ports in the world in 2018. It handled 12.32 million TEUs of container traffic in 2018. In addition, Laem Chabang port, Thailand, and Tanjung Priok, Jakarta, Indonesia, also featured among the top 50 container ports. The two ports were ranked 21st and 22nd, and handled 8.07 million TEUs and 7.64 million TEUs of container traffic, respectively.
The ports in Southeast Asia also cater to the demand and supply requirements of other countries in Asia like India and China by operating as transhipment hubs. Singapore plays an important role in Southeast Asia as one of the world’s leading transhipment hubs. It accounted for a share of about 26 per cent of the global transhipment and facilitating trade traffic that is valued at $5 trillion. The upcoming Tuas port project, when completed, will play a strategic role in helping Singapore handle increasing container traffic, besides further strengthening its position as a leading transhipment hub. The ports of Vietnam, Indonesia and Thailand have also invested in deep-water facilities so as to be able to handle larger vessels.
Port operators across the region are laying increased emphasis on technological deployment and advancements to reduce costs and improve efficiency. In June 2019, Singapore partnered with M1 for the implementation of its 5G trial tech call programme. In addition, the Port of Tanjung Pelepas has signed an agreement with Ramco Systems to upgrade its current enterprise resource planning system.
Apart from investment from China, Japanese investment has also been growing steadily in the region’s port sector. The year 2017 saw a significant increase in the Japan International Cooperation Agency’s investment, which increased from 64.57 billion Japanese yen in 2016 to 142.41 billion Japanese yen in 2017, a growth of more than 120 per cent.
With respect to private participation in ASEAN countries, the Philippines has been the front runner in the public-private partnership (PPP) race. Since 2010, the Philippines’ government has awarded 16 PPP contracts, worth $6.4 billion. Besides the Philippines, Thailand, Vietnam and Malaysia have also been active in the PPP space.
Southeast Asian countries have chalked out major investment plans to improve their port infrastructure. According to Southeast Asia Infrastructure Research, as of August 2019, 151 port projects entailing an investment of more than $76 billion are upcoming (announced, in the bidding stage, awarded and under construction) in the Southeast Asian region. These projects offer ample opportunities for companies to exploit and reap benefits.
Trends across the aviation sector
Airport infrastructure development in Southeast Asia has been booming since the last decade. The region continues to post some of the highest traffic growth rates in the global aviation sector, backed by its strategic geographical location, growing trade, increasing middle-class population, major expansion of low-cost carriers (LCCs), and the emergent tourism industry.
As governments try to capture this demand by continuously expanding the airports, they are also keen on private investments for the same. Countries such as Indonesia and the Philippines are moving towards private investment to develop airport projects. The five regional airport projects in Philippines which have been proposed on PPP basis are operations and maintenance of the Davao, Iloilo, Bacolod, Laguindingan and New Bohol (Panglao) airports. Besides, Clark airport has already been privatised. Other examples include Hanthawaddy International Airport in Myanmar which is being developed on PPP basis and the Siem Reap International Airport in Cambodia where the government signed a $880 million contract with Yunnan Investment Holdings for the project.
The ASEAN Single Aviation Market (ASEAN-SAM) policy introduced an open-sky arrangement in the region with the aim of fully liberalising air travel among its member states.
LCCs continue to grow in this market and the market share in the area of LCCs is now more than 60 per cent. Most major countries in the ASEAN region now have a major LCC and airlines like AirAsia and Vietjet. In addition, subsidiary airlines are also being set up to capture the increasing demand.
To meet growing demand, Southeast Asian countries are expanding the existing capacities of their airports. The Yogyakarta International Airport began operations in April 2019. Constructed at a cost of $500 million, the airport has a terminal area of 130,000 square metres with a capacity of up to 15 million passengers per annum (mppa) and the runway will be 3,250 x 60 metres.
Built at a cost of SGD 1.7 billion, the Jewel Changi Airport was opened in April 2019.
The countries have also announced expansion plans to improve their aviation infrastructure. Thailand plans to undertake major expansion plans in the coming years and increase the overall capacity by 191 mppa. Major projects include expansion of Suvarnabhumi airport and the Don Mueang International Airport. Singapore is also constructing Terminal 5 which is expected to have a capacity of 50 mppa. Combined with the other terminals, the airport is expected to have a capacity of 150 mppa by 2030. Besides, Vietnam has started the land acquisition for the upcoming Long Thanh International Airport. The airport is expected to become a major aviation hub in Vietnam, with Phase 1 capacity of 25 mppa and an overall expected capacity of 100 mppa.
The road ahead
By virtue of their favourable geographical locations, the Southeast Asian countries have tremendous potential for growth. The maritime and aviation industry is likely to witness strong traffic growth in the coming years. Cargo traffic is expected to increase along with a rapid increase in containerised commodities. Air traffic is also bound to increase. Intra-ASEAN air travel is slated to contribute to a third of air traffic by 2036. Besides, ASEAN-China flight routes are also expected to see an upward trend, primarily due to an increased travel demand from China. However, in order to make the best use of the dominant locations and exploit the comparative advantage of each country, there is a need to enlarge markets and increase competitiveness in the region.
