Why this is important to Wisconsin businesses: Opportunities for Wisconsin companies to assist with developing transportation, electricity, telecommunications, water and sanitation infrastructure
Significant economic and population growth in the ASEAN region, along with its member states' rapid urbanization and industrialization, have made infrastructure a key component and an accelerant of prosperity in the region. According to the Asian Development Bank's 2015 ASEAN Investment Report on Infrastructure and Connectivity, the region will need $110 billion in infrastructure spending per year until 2025, with the following estimated breakdown.
- Transportation (road, rail, ports, airports): $55 billion
- Electricity (generation, transmission, distribution): $38 billion
- Telecommunications/ICT: $9.2 billion
- Water and sanitation: $7.8 billion
The bulk of the demand is expected to come from the construction of transportation and power infrastructure. For transportation, demand has surged for projects that bring about improved logistical efficiency (e.g., traffic decongestion in metropolitan Manila and airport capacity expansion in Vietnam). ASEAN's six principal members – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – aim to achieve universal energy access by 2020, which will help drive demand.
The projected expenditure for ICT, although relatively smaller, is still sizeable, as ASEAN’s ICT Masterplan 2020 aims to create a digital economy by 2020, including the deployment of next-generation ICT and smart city technologies.
It is worth noting that ASEAN member states are politically, economically and culturally diverse, and have different infrastructure development plans and priorities. Singapore, for example, already has high-quality infrastructure, while most other member states are working to overcome years of underinvestment:
- Thailand and the Philippines are likely to see a big jump in infrastructure spending over the next few years. The government of the Philippines is promising a “golden age of infrastructure,” with $160 billion worth of infrastructure spending from 2016 to 2022, while Thailand is planning to list an infrastructure fund on the stock exchange in 2017.
- Indonesia announced in 2016 a plan to increase public spending on roads, railways and airports. This is Indonesia’s effort to cut the costs of logistics to the economy, from 26 to 19 percent of GDP, according to the Investing in ASEAN 2017 Report.
- Malaysia, which aims to attain developed nation status by 2020, is looking to upgrade existing transport links and build new roads and railways.
- Vietnam also embarked on a new legal framework on public-private partnership investment in 2015 as a move to attract foreign direct investment in its infrastructure projects.
In terms of partner selection among infrastructure projects in the region, multinational companies from developed nations have traditionally been the top choice. However, over time, vendor and contractor selection has become diversified, with companies from China, Hong Kong and South Korea as well as ASEAN members coming into play. China has become a significant player in just a short period of time, and is helping to bridge the infrastructure gap in the region with its proposed “One Belt, One Road” initiative.
Given the current competitive landscape, companies from Wisconsin should bank on their capabilities, as well as the quality of their products and services, to penetrate the ASEAN market. Prime opportunities exist for:
- Companies that operate and maintain infrastructure assets
- Contractors (companies that develop and construct infrastructure assets)
- Suppliers of equipment and related accessories (e.g., construction machinery, turbines and other power equipment, cables for telecommunications, cranes, etc.)
- Solution providers that can comprehensively handle project needs from concept to installation through support (e.g., system solutions for smart cities, smart grids, urban mass transportation, water sanitation, and solid waste management)
- Engineering companies (for design and planning)
- Providers of raw materials and primary energy sources
In terms of the long-term outlook, ASEAN's infrastructure sector is expected to see continued growth as the region’s sustained economic growth is predicted. ASEAN’s combined GDP is forecast to reach $4.7 trillion in 2020 and the region as a whole is expected become the fourth-largest economy in the world by 2030 – after China, the U.S., and the EU.