Construction in Asean region poised to grow by more than 6% annually over next five years
A report by GlobalData, a leading data and analytics company, has found that construction in the member states of the Association of South-East Asian Nations (Asean) is poised to grow by more than 6% annually over the next five years, with the combined value of megaprojects (with a minimum value of $25 million) across the region standing at $2.9 trillion.
This figure includes all projects from the announcement stage through to execution, the report said. An analysis of the pipeline by stage shows that the region provides huge opportunities with regards to a large volume of early stage projects, GlobalData said in a white paper prepared for Intermat Asean 2018 and Concrete Asia 2018, a regional trade show for construction, infrastructure and concrete sectors, which is held in Bangkok from September 6 to 8, 2018.
It added that just under $1.5 trillion of the projects are in the planning and pre-planning stages, which suggests that significant construction spend is to occur for a sustained period of time.
“The South-East Asia region continues to develop at a rapid pace, with economic growth projected to reach an annual average rate of cno5.1% during 2018–2022, the fastest among all global regions, and an acceleration from the healthy rate of 4.8% recorded in the past five years,” noted Danny Richards, GlobalData’s lead economist for Construction Industry.
Much of this growth is driven by investment in new infrastructure, while increasing domestic demand is driving the expansion in construction of buildings across the residential and non-residential sectors, he added.
“Although there are disparities in the pace of growth in construction output among the Asean member states, the region’s construction industry as a whole will grow by 6.1% on an annual average basis in the next five years,” noted Richards.
These projects are marginally behind the project growth of 6.5% in the thriving emerging markets in the Middle East and Africa, but the Asean region presents investors and developers with a lower level of risk of projects being put on hold or cancelled, as per GlobalData’s Construction Risk Index.
Richards added that reforms to encourage Public Private Partnerships (PPPs) were almost universal across the Asean region. The Philippines, Myanmar, Laos and Vietnam having undergone reforms to create more accessible markets for private sector investment in construction through PPPs, he explained. Indonesia has also undergone similar reforms, expanding the construction sectors eligible for PPPs and increasing incentives to invest.
Furthermore, the report added that land reform was another area that was under reform, with acquiring land in Indonesia now much fairer and transparent, while Vietnam has also implemented an initiative where foreign investors are allowed to acquire land and hold a majority stake in a commercial or residential project.