ASEAN’S 50th Anniversary Heralds Golden Era For Infrastructure-Backed Trade, Investment Growth

KUALA LUMPUR, Aug 7 (Bernama) -- The Association of South-East Asian Nations’ (ASEAN) Golden Anniversary is shaping up to be the start of a golden age of infrastructure-backed trade and investment growth. The regional grouping marks its 50th anniversary Tuesday, with its biggest economies pledging to double infrastructure investments to over US$700 billion (US$1 = RM4.28) within a span of five years, to enhance trade, tourism and development to drive sustainable economic growth for decades to come. In a statement, HSBC Malaysia Chief Executive Officer, Mukhtar Hussain, said transport initiatives were key focus for budgeted spending in ASEAN economies until 2020. “The annual World Economic Forum Global Competitiveness Report said investments in infrastructure were vital given their crucial role in creating long-term economic strength,” he said. He said the emphasis on building better connections to facilitate trade and investment and the flow of goods and people in and around ASEAN cannot be under-estimated. It would help domestic and international companies maximise opportunities in one of the world’s most populous, fastest-growing and vibrant regions, one with a combined gross domestic product (GDP) of about US$2.8 trillion, said Mukhtar. Mukhtar said ASEAN, ranked seventh the world, was on track to be among top three economies by 2030. “The improving transport links in ASEAN’s supply chain will reduce import costs and was no small thing considering intermediate goods and services and capital goods were now 70 per cent of global trade, as estimated by the World Bank. “ASEAN’s trade volume is forecast to double up to US$2.8 trillion by 2025 from 2014, fuelled by the consumption anticipated from 57 million new middle-class households, set to be created in the coming decade,” he said. He said the massive potential consumer spending power of this substantial, young and increasingly urban population was a key attraction for China’s Belt & Road Initiative (BRI) to upgrade the physical infrastructure, investment and business links that help drive trade. Mukhtar said ASEAN and China shared a goal to double bilateral trade to US$1 trillion by 2020 from around US$500 billion last year, making business opportunities for infrastructure investment and ecosystems growing around major projects particularly compelling. “Malaysia would reap immense benefits from this development. Malaysia’s opportunity is to boost regional and local connectivity and improve efficiency in the economy, creating an integrated transport system and upgrading logistics capacity to enhance its status as a regional hub for international trade. This, is a key focus area under the 11th Malaysia Plan,” he added. Mukhtar said planned infrastructure spending from 2016 to 2020 was US$85 billion, and additional US$50 billion spent between 2011 and 2015. “Railway financing is a key anchor of planned transport spending as demonstrated through the significant investments that have been made in rail projects that are at the forefront of the country’s list of mega projects. These will include upgrading existing mass transit capacity,” said Mukhtar. He said Malaysia would also benefit from China's BRI infrastructure investment drive. “This is evidenced by China’s involvement in major Malaysian rail projects such as the East Coast Rail Link and the Kuala Lumpur-Singapore high-speed rail project,” he said. Meanwhile, a strategic partnership between Melaka and the Chinese province of Guangdong aimed to promote the development of various projects would help establish Melaka as a strategic port and hub along the Belt and Road route, he said. As for other ASEAN countries, Mukhtar said, Indonesia has by far the most significant immediate opportunity, though all of ASEAN’s largest economies have something to offer. Planned infrastructure spending of US$350 billion in Indonesia in the years 2016-2020 was roughly half the total estimated for ASEAN’s five biggest economies combined – and with good reason. ASEAN’s single largest economy has the lowest investment in transport infrastructure stock at just six per cent of GDP, versus 13 per cent in the Philippines, 19 per cent each in Thailand and Malaysia and 31 per cent in Singapore. Thailand is the next biggest infrastructure market with US$120 billion of spending planned, including 56 mega projects worth US$70 billion. The impetus to improve Thailand’s transport links is driven in large part by the fact that manufacturing generates 84 per cent of Thai GDP and almost all manufactured goods are moved by land. The Philippines, as Chair of ASEAN in the organisation’s landmark anniversary year, is similarly making milestone plans to boost competitiveness for decades to come with an ambitious US$144 billion programme of infrastructure investments in the years 2017-2022. Moves to reform the Philippines’ tax system, encourage foreign direct investments and ease restrictions on foreign ownership of companies and projects, opens the door to more private sector investment and Chinese companies have already begun committing to infrastructure deals there. Down south from Malaysia, Singapore’s transport infrastructure is already some of the best in the world – and it’s going to get a whole lot more under a government plan to double the size of the city state’s metro system by 2030. Adding 113 kilometres of track to the network in three new lines should create US$60 billion of new investment between 2016-2020, versus the US$50 billion spent in the years 2011-2015. “All these activities illustrate the emphasis ASEAN economies are putting on to laying the foundations for growth and development for decades into the future,” said Mukhtar. -- BERNAMA