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Seizing greenfield infrastructure opportunities in ASEAN

By PwC


Infrastructure development is crucial to improving connectivity and driving sustainable growth in ASEAN. It is important to identify the changing needs of each of these countries in order to leverage future opportunities and trends in infrastructure investments in the region.

This report is the second in a three-part Infrastructure Series. In the first report, Understanding infrastructure opportunities in ASEAN (2017), we discuss the existence of a widening infrastructure gap in the region, highlight the potential difficulties faced by countries in mobilising infrastructure investments, and examine measures that could potentially address these challenges. In addition, we introduce the future drivers that we believe will further increase infrastructure spending in the region.

In this second report, we take a closer look at how the identified drivers are shaping the pipeline of greenfield infrastructure projects in each ASEAN country. We also assess how the Public Private Partnership (PPP) project pipelines of these countries are shaping up in light of these driving forces.

The subsequent and final report of our Infrastructure Series, which will be published later in 2018, will cover infrastructure funding and financing, including developments in the funding landscape and alternative sources of financing.

We hope that you find our Infrastructure Series a useful resource that addresses some of the key issues that we as infrastructure practitioners grapple with. If you would like to discuss any of the issues raised here, please do get in touch with us.

Chapter 1: Infrastructure in ASEAN

All economies in ASEAN have been focusing their efforts on increasing both private and public sector investments in infrastructure. However, the region’s rapid growth has outpaced its infrastructure development, which has resulted in a huge need for infrastructure investments. The Asian Development Bank (ADB) estimated that ASEAN countries will require US$2.8 trillion in infrastructure investments from 2016 to 2030…


Asia Pacific is forecast to become the largest transport infrastructure market in the world with investments expected to increase from US$669 billion in 2016 to nearly US$1.2 trillion in 2025. Cumulatively, investments in transport infrastructure in Asia Pacific are expected to be almost US$9.0 trillion. This is due to the region’s diverse and difficult geography, rapid economic growth and increasing urbanisation, all of which culminates in an acute need to develop transport infrastructure and services.

Governments get ambitious
Governments in the region have identified transport infrastructure to be of strategic importance for their economic development and trade competitiveness. Given the rapid urbanisation and increasing mobility that many ASEAN countries are seeing, demand for transport infrastructure and more efficient transport networks is on the rise. This has placed pressure on governments to renew a commitment to transport infrastructure spending as part of their national development strategies.

Historically, there has been a focus on roads and bridges. Presently, 65% of projects under construction are roads and bridges. There were a total of 270 road and bridge projects in the past, accounting for more than 52% of the total transport projects. This emphasis is set to continue — of the total number of transport projects in the pipeline, 46% are roads and bridges, and 30% are rail.

Among the ASEAN countries, Indonesia, Vietnam and Philippines have historically had the largest share of transport infrastructure projects. In fact, Vietnam and Indonesia share the top spot with 97 projects each.

In Vietnam, road is the dominant mode of freight transport supporting the country’s development as a regional manufacturing hub. Statistics show that roads served about 77% of all freight transport and 94% of all passengers transported in 2016.

These countries intend to continue their emphasis on transport, as observed from their development plans. Thailand, too, has unveiled infrastructure plans that place emphasis on transport infrastructure.

Joining hands, regionally and cross-regionally
While many ASEAN countries are looking inward at their infrastructure needs, they remain acutely aware of their place in the wider global supply chain. Shifts in global economic power and trade competitiveness are driving regional cooperation and integration initiatives. Global and regional megaprojects arising from this trend, such as China’s BRI and the initiatives announced for the Greater Mekong Subregion (GMS), will boost infrastructure spending, particularly in ASEAN.

Rail attracts attention
With increasing urbanisation and mobility, ASEAN is seeing an increasing emphasis on rail projects, given their efficiencies vis-à-vis road transport. The cumulative railway spending between 2016 and 2025 in the Asia Pacific is expected to amount to US$2.3 trillion — the highest of all regions. Specifically, total investments in subway construction in Asia are projected to reach US$230 billion in the next 15 years…


The rapid economic and population growth of ASEAN is leading to a huge demand for energy — demand that is estimated to grow at a compound annual growth rate (CAGR) of 4% per year from 2014 to 2025.

In other words, the region has to be ready to handle a doubling of electricity demand between 2014 and 2025. Governments are responding accordingly by continuing their focus on power projects with a new focus on renewables.

Focusing on renewables

Climate change and resource scarcity are giving rise to concerns over energy security, which is driving the need for the development of sustainable infrastructure. One sector with high potential for ASEAN governments is renewable power generation, especially since many countries are rich in renewable energy sources.

In order to tap into this renewable energy potential and move towards more sustainable forms of energy, ASEAN is aiming for 23% of its total primary energy supply (TPES) to come from renewable energy by 2025.

This target is a significant, and ambitious, increase — in 2014, renewables only contributed to 9.4% of TPES. To achieve this, each ASEAN government has set out their own renewable energy targets.

In addition to renewable capacity addition targets, the governments in the region have also implemented various policies and regulations to stimulate the development of renewable energy.

In the past, the bulk of the renewable energy generated in ASEAN has come from hydropower projects. These were mainly found in Lao PDR and Vietnam. Geothermal and wind come next, in terms of number of projects, where most of the developments were found in Indonesia, Philippines, Thailand and Vietnam.

However, in the future and as illustrated in each country’s renewable energy targets, we expect an increasing emphasis on solar, wind and biomass power projects. Hydro still leads in the region, but it is worthwhile noting that this sub-sector is primarily led by Lao PDR. The country intends to leverage its hydro potential to transform itself into the “battery of Asia” and export electricity to neighbouring energy-deficit countries….

Chapter 4: What’s next?

The drivers influencing the pipeline of infrastructure projects in ASEAN are rapid economic growth and urbanisation; increasing need for efficient mobility; trade competitiveness; climate change and sustainability; and geopolitics. The influence of these drivers, or a combination of them, has resulted in various initiatives such as:

  • Ambitious infrastructure strategic plans and targets announced by governments in ASEAN;
  • regional and cross-regional initiatives that aim to integrate and improve connectivity within the region while influencing the geopolitical environment; and
  • the push for clean energy by establishing an enabling policy environment and setting aggressive clean energy capacity targets.

This has translated into a strong pipeline of infrastructure projects, particularly in the transport and energy sectors. In transport, we see a continuing shift to rail-based transport over roads given the former’s advantages in transporting people more efficiently in terms of travel time, land take and pollution. In energy, there is clear and significant shift to all forms of renewable energy in a bid to address current and future power generation gaps in the region.

To achieve their ambitious infrastructure investment targets, governments in the region are actively looking to leverage PPPs to mobilise private capital and expertise. Most of the countries in the region have, or intend to, establish a strong PPP ecosystem and this has translated into a long pipeline of PPP projects. We would, however, like to highlight that not all of the projects in the pipeline are 'investor ready' and can be brought to the market in the short term. In ASEAN, there has historically been a tendency for governments to bring projects to the market too early before proper preparation has been done. While this is understandable, given the developer and investor appetite for more projects and the availability of financing, in the long run, it actually slows down the project procurement timeline and governments risk losing credibility in the marketplace.

That said, to overcome these issues, we hope that ASEAN countries will adopt best practices in infrastructure planning and PPP project preparation processes as explained in our first report of this Infrastructure Series, Understanding infrastructure opportunities in ASEAN (2017). A robust planning and preparation process will ensure that the pipeline of projects is bankable. This will go a long way in building confidence with potential investors, and, when coupled with a strong policy environment, will help in attracting infrastructure investments.

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