Infrastructure is the backbone of any economy and is critical to unlocking a country’s growth. Fuelled by rapid urbanisation and population growth, Asia is facing a growing infrastructure deficit between what is needed and what is available.
Estimates by the Asian Development Bank point to a US$459 billion a year(1) financing gap in the region, similar to the GDP of Thailand.(2) And if these needs are not met, this gap, and the inequality it stokes, will only widen.
Currently in Southeast Asia, 50.9% of the population lives in urbanised areas, with the UN expecting this figure to rise to an average of 66.4% by 2050. Aggravating this movement towards cities is Asia’s population growth. By 2050 Asia’s population is expected to increase by 142 million(3) compared to Europe, where the population is expected to shrink by more than 25 million over the same period.
Because of this, throughout Southeast Asia, there has been a tremendous push towards improving infrastructure. Indonesian President Joko Widodo’s government is planning to spend US$327 billion(4) on a pipeline of 265 projects, and Philippine President Rodrigo Duterte has earmarked US$180 billion for railways, roads and airports.(5) Yet with the improvements that need to be made, and the complexity of infrastructure development, regional cooperation through the likes of the Association of Southeast Asian Nations (ASEAN) is key.
“I think ASEAN is definitely making progress in this space, in order to draw together their economies, specifically in infrastructure, and to combine that with the services of infrastructure, such as logistics,” says Jordan Schwartz, World Bank’s director for infrastructure, PPPs and Guarantees.
Through strategies such as the Master Plan on ASEAN Connectivity 2025, countries have been united in a vision towards building a network, and are working together on priority projects such as the ASEAN Highway Network and the Singapore-Kunming Rail Link.
“There are very different priorities across the different markets,” says Mark Rathbone, PwC’s Asia Pacific Capital Projects & Infrastructure Leader. “If you’re looking at a country like Thailand, their big focus is to boost their own manufacturing capabilities and connectivity between the different economic centres. Meanwhile, in Laos or Cambodia it’s a far more basic infrastructure need, around building roads, railways and power stations, as well as housing and healthcare.”
The ability of ASEAN countries to continue growing at their current rates will depend largely on how much infrastructure they can deliver in the coming years. From power generation, clean water, effective utility networks and improvements in transportation networks – these are all essential to ensuring that Southeast Asia is able to fulfil its potential.
With this in mind, there is a necessity for developed countries in the region to contribute according to their strengths and lay important groundwork.
“The primary goal for developed countries is example setting and certain resource mobilisation,” says World Bank’s Schwartz. “I can see the need for a one-stop-shop, where the technical skills can be brought together with the financing, the legal expertise and the economics. That coordination effort can be really important.”
Singapore can play a unique role as a facilitator to infrastructure development in the region, says Kow Juan Tiang, Deputy Executive Director of Infrastructure Asia.
“Singapore has a strong track record of delivering infrastructure projects on the ground, whether it is our sea ports, airports or our entire utility infrastructure,” says Kow. Singapore also has “an entire ecosystem with different expertise required for a complex sector like infrastructure from engineering and technical aspects, to financing and structuring abilities and a robust legal framework.”
For many of these reasons, the World Bank Group chose Singapore as its first and only Infrastructure and Urban Development Hub,(6) employing around 200 people with teams dedicated to energy, water transport, public private partnerships and urban development to name just a few.
Another example of collaboration between Singapore and its neighbours include the 225-megawatt gas fired power plant in Myanmar’s Myingyan, near Mandalay. Singapore-listed energy company Sembcorp will spend around US$300 million building and operating the power plant for 22 years, after which the facility will be transferred to the Myanmar government.
While many tend to think of infrastructure as the physical assets, the World Bank’s Schwartz is keen to highlight that the first step towards cooperation often lies on the negotiating table.
“For the most part, laying cables and paving roads, even putting tracks down, is only the first step of connectivity through infrastructure,” says Schwartz. “The way in which we address the regulations and the policies such as the rules of trade or open skies, these are probably as important, and in some cases, maybe even more important, than the physical infrastructure. Collective action is required.”
More from this series
Ra, Sungsup, and Zhigang Li "Closing the Financing Gap in Asian Infrastructure", ADB South Asia Working Paper Series, no. 57, June, 2018, www.adb.org/sites/default/files/publication/431261/swp-057-financing-gap-asian-infrastructure.pdf
(2) Current GDP, World Bank Group, 2017, www.data.worldbank.org/indicator/ny.gdp.mktp.cd?view=map
(3) Total Population, United Nations, 2017, www.population.un.org/wpp/Download/Standard/Population/
(4) Salna, Karlis "Indonesia Needs $157 Billion for Infrastructure plan", Jan, 2018, www.bloomberg.com/news/articles/2018-01-25/indonesia-seeks-to-plug-157-billion-gap-in-nation-building-plan
(5) Alegado, Siegfrid, "Duterte’s $180 Billion Building Boom May Be Expats' Ticket Home", Jan, 2018, www.bloomberg.com/news/articles/2018-01-23/duterte-s-180-billion-building-boom-may-be-expats-ticket-home
(6) "Singapore, World Bank Group Respond to Global Demand and Establish Major Infrastructure and Urban Development Hub", Oct, 2015, www.worldbank.org/en/news/press-release/2015/10/27/singapore-world-bank-group-agree-to-establish-major-infrastructure-and-urban-development-hub
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