Asia infrastructure bonanza unlikely to pay off soon

Analysis

MELBOURNE (Reuters) - Massive infrastructure spending plans announced across Asia and Australia are unlikely to get past the drawing board anytime soon, doing little to arrest economic slumps and leaving construction and building materials companies to languish.

The multibillion dollar plans will probably have to be whittled down as tax revenues fall and debt-laden developers struggle for financing, and could be delayed by government upheavals and squabbling between central governments and local officials.

Worse yet, as private sector developments slow down, competition for government projects is likely to intensify, shrinking profit margins on the work.

Australia, China, Korea, Thailand and Taiwan have flagged they want to spend a total of $660 billion on building new roads, rails, ports, broadband, housing, schools and hospitals to create jobs and help stave off recessions.

"It's nice to promise these things, but actually delivering through to spending it is a different matter," said Brent Mitchell, research manager at Shaw Stockbroking in Melbourne.

He pointed to endless consultations by Australia's Labor government, and states fighting each other for priority, as likely to delay projects.

In Thailand, where the government has flagged 1.6 trillion baht ($45 billion) for infrastructure between 2009 and 2011, political instability has held up projects for years.

"As political uncertainties make government policies incoherent, we don't have any hope that mega projects will happen soon under a new government," said Kavee Chukitkasem, head of research at Kasikom Securities in Bangkok.

In China, the government announced a 4 trillion yuan ($582 billion) stimulus plan last month, targeting earthquake reconstruction, housing, roads, rail and airports, to be spent over the next two years.

Spending the full amount might be tough, as a portion of the money would have to come from local governments, whose revenue from land sales has dropped as property prices slide, said Wang Jun, an analyst at BOCI Securities in Shanghai.

In Australia, the government wants to spend A$41 billion ($26.5 billion), but analysts estimate it might fall A$14 billion short of that target as tax revenue dwindles.

In Korea, analysts said falling tax revenue could trim the final figure on the government's pledge of 4.6 trillion won ($3.1 billion) on infrastructure in 2009.

Doubts about these projects materializing and stretched finances for building groups are hitting share prices of firms which had been most expected to benefit from any infrastructure boom.

STRETCHED THIN

Analysts question whether Korean construction companies will be able to cash in on the bonanza, as banks are curtailing lending to builders due to worries about their financial health.