The spread of Covid-19, declared a global pandemic by the World Health Organization in March 2020, brought with it an unprecedented disruption in economic activities worldwide, as countries resorted to lockdowns, implying massive economic costs. As the transmission of the virus continues to swell the number of new cases on a daily basis, the situation continues to unfold dynamically. While some countries have managed to flatten out the growth curve of the number of positive cases, others are still struggling. Until a cure is found, physical distancing has been identified as the best way to contain the situation.
The scenario in the Southeast Asian region is no different. With their supply chains closely integrated with those of China, from where the disease spread, economic activity in the Association of Southeast Asian Nations (ASEAN) region has been hit hard. A number of Southeast Asian nations, such as Singapore, have been slow in responding to the spread of the global pandemic. Some others have opted for an abrupt lockdown as the situation worsened. Infrastructure creation, a major component of the economic build-up, has suffered too as work on many projects has been called off for an indefinite period. The projected growth rate for the entire region has been revised downwards from 4.7 per cent in (as projected in December 2019) to 1 per cent (projected in April 2020).
Cross-country scenario
Brunei: The country registered encouraging economic growth in 2019, which was largely led by exports as major projects in the oil and gas sector came online in 2019. Recently, it also inaugurated one of its critical projects, the cross-sea bridge, which links the capital Bandar Seri Begawan with the Temburong district. The pandemic spread has had a limited impact on the country’s infrastructure development so far as major projects have been recently concluded. That said, higher exports of petroleum products (that were expected on the back of large refinery projects that commenced operations in 2019) are unlikely in the near-medium term because of a fall in demand and subsequent oil price crash. On the financial front, companies including those in the infrastructure sector, have been given a six-month moratorium on their credits lines, which may provide some relief for now.
Cambodia: The tourism-dependent country too is feeling the pressure from the Covid-19 spread. Recently, the Cambodian government allocated a sum of up to $2 billion to address the economic impact of the pandemic while cutting the capital expenditure of all the ministries by 50 per cent. The move will affect fresh infrastructure projects that were planned to be taken up. The country has sizeable investment from China in its infrastructure sector; thus, till the business-as-usual scenario kicks in, the overall infrastructure development works in the country are expected to stay in limbo.
In its latest attempt to address the crisis, the Cambodian government has declared a state of emergency, which has been controversial; it has resulted in some uncertainty regarding how infrastructure development works will be affected in the near future.
Indonesia: As the Indonesian government is diverting funds earmarked for infrastructure development towards containing the pandemic, projects are slated to take a hit. Construction of toll roads and bridges, dams, irrigation works, and mega projects such as the Jakarta-Bandung high speed railway project are most likely to face delays. If the pandemic wanes by the second half of 2020, these projects will be prioritised in 2021.
Besides, improvement in trade will determine the resumption of work as China is the main supplier of capital goods for most projects in Indonesia’s infrastructure sector.
Laos: The Laos government has recently announced that funding of new infrastructure projects approved by the National Assembly will be deferred to 2021. However, work on mega projects such as the 414 km China-Laos railway line has been fully resumed after a short pause. The project, a key component of the China-backed Belt and Road Initiative, holds strategic importance for Laos as well, which is looking to place itself as a land-linked hub.
Malaysia: While the new government that took charge in March 2020 has announced continued implementation of large-scale infrastructure projects announced in Budget 2020, there are good chances that many of these projects will be delayed due to the pandemic. Mega projects such as Mass Rapid Transit Line 3, Kuala Lumpur-Singapore high speed rail and rapid transit system are likely to be delayed. Experts opine that the Movement Control Order, which was extended till June 9, 2020, is likely to lead to the invocation of force majeure in many ongoing infrastructure projects.
Myanmar: With only 85 cases reported as of mid-April, Myanmar has thus far managed to avoid a full-scale pandemic. However, since most infrastructure works in Myanmar are funded by countries such as China, Japan and South Korea, some of the most pandemic-affected nations, infrastructure development works in the country will in all likelihood be affected. Key projects that would be affected include the $1 billion Yangon elevated expressway, the $8-10 billion Dawei special economic zone (SEZ), $137.1 million Dawei-Htee Kee road linking the zone to Ratchaburi in Thailand, the 151 MW power plant in Ahlon township, and the Kyaukphyu deep-sea port. South Korea has stated that it will expedite works in Myanmar once the pandemic wanes out. These projects include the $154 million Yangon-Dala bridge, Dala New City, $125 million Mandalay-Myitkyina railway upgrade, and the South Korea-Myanmar Industrial Complex. However, work on Japan-funded infrastructure projects in segments like urban development, sewerage and power distribution may continue.
Meanwhile, domestically funded projects are likely to draw greater attention once a new government is voted to power in November 2020. By then, it is likely that the pandemic will also be contained.
Philippines: In the Philippines, there are likely to be some delays in the implementation of some mega public-private partnership (PPP) projects, such as the PHP 102-billion upgrade of the Ninoy Aquino International Airport, San Miguel Corporations’s PhP 734 billion New Manila International Airport in Bulacan province, and PhP 550 billion international airport in Sangley Point, Cavite, as the government is prioritising stemming the pandemic spread for now. While projects under the Build, Build, Build programme will also face delay, work is reportedly continuing with stricter health safety measures.
Thailand: Infrastructure development in Thailand too has been affected with reported outbreaks of the pandemic in the construction sites. As the country again extended its “Emergency Decree” (which is still ongoing), the slow paced progress on infrastructure projects (even before the pandemic), is likely to worsen. The impact on the construction industry will mainly be because of the inability to import tools, machines and equipment from China and other neighbouring countries.
Singapore: One of the late introducers of lockdown (in any form), the Singapore government brought in the “circuit breaker” or partial lockdown in early April 2020, after the number of reported cases spiked significantly. Construction of ongoing mega projects such as Terminal 5 at Changi Airport, the Tuas port project, new mass rapid transit stations, and installation of the next-generation electronic road pricing system are expected to take a hit in their schedules as contract labour have reported fresh cases of disease.
Vietnam: In Vietnam, ongoing power and liquefied natural gas (LNG) terminal projects, most of which are dependent on international funding, are likely to be delayed further. According to reports, 47 of 62 power generation projects faced delays even before the pandemic, with some running at least two years behind the original schedule. As of April 2020, developers were awaiting a nod from the government to resume work on projects that are in limbo.
Conclusion
With extended lockdowns, diversion of public funds to address the crisis, and the extension of relief packages to lessen the impact of rampant unemployment, governments in the Southeast Asian region are doing everything possible to fight the pandemic. As governments play the role of a welfare state, infrastructure development will rank very low in the priority list for now. Once the pandemic is contained, governments are likely to depend on infrastructure spending to reboot their economies. For now, the impact of the pandemic on infrastructure development is difficult to assess, but delayed completion and restricted financing from the government for future projects cannot be ruled out.
