SEA seen investing $32 billion in transport infrastructure

MANILA, Philippines - A new KPMG study projects that Southeast Asia will invest $32 billion in transport infrastructure over the five years from 2010 to 2014. The study extrapolates existing levels of infrastructure spend in the main ten economies of Southeast Asia, basing those projections on differing growth rates for each of the economies. However, despite this, the relevant countries’ investment needs will likely continue to outstrip expected investment growth.

Cambodia, Laos, Myanmar and Vietnam are projected to witness the highest average annual expenditure growth while the Philippines and Singapore are projected to witness positive but very modest transport expenditure growth at rates below two percent.

“The growth trend for the Philippines will be affected by the investment appetite of current infrastructure investors and by the ability of the government to attract new companies to participate in proposed BOT projects. Also, the priorities of the new administration by 2010 would have an effect on the Philippines’ infrastructure spending trend,” according to Michael Guarin, head of Manabat Sanagustin & Co.’s infrastructure team.

“With such extensive investment needs for the next five years, many governments in the region have not yet built a consensus on how future infrastructure needs will be funded. Private sector investors can be a part of the solution if they are able to demonstrate the value they can bring to the process,” said Julian Vella, ASPAC leader for KPMG’s global infrastructure practice. “This represents a vast scale of opportunity for private sector infrastructure investors and providers with the skills, resources and expertise to develop the right regional strategies.”

The KPMG report identifies four countries – Indonesia, Malaysia, Singapore and Thailand – that will continue to account for 80 percent of investment within the region, despite markets such as Vietnam and Cambodia being predicted to experience the highest growth rates in the region. “This suggests that the big four markets should be a continued focus for private sector investors, but that they may need to refine their strategy to better identify opportunities and deploy resources into other neighboring markets as well, which although smaller have high potential,” added Vella. “Nations such as Vietnam, the Philippines, and Indonesia have usually drawn on international financing institutions and official development assistance to improve their transport infrastructure. However, in recent years, they have been exploring potential for public private partnerships (PPPs).”

If infrastructure projects are being set up through disciplined procedures such as PPPs, this can bring many benefits in terms of better allocation of risks and costs between the parties involved.