Southeast Asia Construction Market— The State of Play

DATE:2019/01/17

While China’s growth has begun to taper, Southeast Asia’s impressive growth has been driven by an expanding and continuously up-skilling labour force. To continue growing, the region needs substantial investment in infrastructure that supports trade, industry, digitisation and urbanisation.
 
The region’s construction market is growing: In 2013, the ten largest developers (as determined by the aggregate value of their annual construction projects) in the six main ASEAN countries (Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam) plus Hong Kong accumulated a total building volume of USD 16 billion. Five years later, the value had increased to almost USD 24 billion.

It is a fallacy to believe that Southeast Asia is a homogenous block of economies neatly fitting together under the ASEAN umbrella. While the city states of Singapore and Hong Kong are well and truly first-world markets, Vietnam and Indonesia, for instance, are still in many ways in their developmental stage. It is nonetheless a compelling undertaking to look at the Southeast Asian construction market through a number of prisms, to highlight similarities and differences. Taken together, this exercise paints a picture of a region that, from a construction perspective, is alive and exciting.

Keynesian (demand-side) economic policy is alive and well in virtually all Southeast Asian nations. When global markets are jittery or private demand is weak, governments in Southeast Asia tend to crank their public spending pump. This comes all the more naturally to countries that habitually draft 5-year plans. A good example is the 11th Malaysia Plan, which runs from 2016 to 2020 and includes the development of water treatment plants, power plants, a high-speed rail project connecting Kuala Lumpur and Singapore, and a refinery and petrochemical integrated development in Johor. As a socialist country, Vietnam regularly draws up 5-year Socio-Economic Development Plans. The latest plan guides the country through to 2021 and mandates investments in transport infrastructure, energy, utilities and affordable housing. It prescribes that the dwelling space per capita for the country’s growing population is to increase from 16.7m2 (2015) to 25.0m2 (2020), resulting in the government’s commitment to build one million houses by 2020. The development plan in the Philippines coincides with the 6-year term of the country’s president. In his 10-Point Socioeconomic Agenda, President Duterte has committed the country to public spending on infrastructure projects in the order of USD 160 billion—dwarfing the investments of his predecessors.

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