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Understanding infrastructure opportunities in ASEAN

Infrastructure Series Report 1

With the growing need for infrastructure spending in ASEAN, emerging markets are focusing more on core infrastructure like transport and utility, while other aspects like healthcare, education and housing tend to be significantly under provided, resulting in a widening infrastructure gap.

Infrastructure Series Report 1, the first in a three-part series, focuses on the current state of play of infrastructure spending in ASEAN and what is needed in the future. It also looks into the key factors that are responsible for the infrastructure investment gap.

Current infrastructure spending in ASEAN

In the last 5 years, there has been a large disparity (4% - 13%) between the growth rates of infrastructure spending in the six largest ASEAN economies.

Going forward, the huge increase in the demand for infrastructure spending will be driven by factors such as urbanisation, increase in mobility, trade competitiveness and technological breakthroughs.

ADB estimates that Developing Asia will need to invest US$26 trillion from 2016 to 2030 on infrastructure to maintain the current growth rate.

Challenges in addressing the infrastructure gap

The infrastructure deficit across ASEAN is a very well established fact as a result of many factors, such as policy decisions, lack of bankable projects, weak governance and a lack of transparency.

From weak legal and regulation frameworks to inequitable risk allocation and availability of exit options, understanding the key challenges in each phase of the infrastructure project life cycle is important to address the infrastructure gap.

Enablers in a supporting ecosystem

Some of the key measures needed to address the infrastructure gap include having a national model for evaluating and making decisions on the project types; stable legal frameworks; access to financing; risk mitigation instruments; public-sector capacity to create and manage projects; social responsibility practices and strong environmental regulations.

A strong support system of enablers such as Government, Financial institutions and Investors, Advisors, Infrastructure companies and Multilateral Development Banks are key to helping overcome some of the challenges faced at each stage of the project life cycle.

Features of a successful PPP programme

Public-Private-Partnerships (PPPs) play a pivotal role in financing infrastructure projects. The state is able tap on the innovative ability and managerial talent in the private sector through PPPs, helping to free up public resources that can be invested in other infrastructure projects.

However, the challenges of PPPs are that they are often complex and difficult to structure and procure. This results in longer procurement and delivery timeframe than traditional capital investment.

Infrastructure hub: a one-stop shop

An infrastructure hub houses the entire project ecosystem and integrates infrastructure enablers along the entire value chain.

Beyond the presence of an ecosystem, other critical factors for a country to qualify as an infrastructure hub include being located at a strategic location, positive perception from enablers outside the region as well as having a population who speak a global business language such as English.

“Governments in ASEAN have taken great strides in addressing the challenges that occur throughout the lifecycle of infrastructure projects. However, it is important that all players in the ecosystem – regulators, financial institutions, legal, tax and technical advisors, and multilateral institutions – come together to drive the future growth and success of infrastructure projects in the region."

Mark Rathbone, Asia Pacific Capital Projects & Infrastructure Leader, Partner, PwC Singapore

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