Construction World

Philippine President Duterte’s phrase ‘Build Build Build’ can be aptly used to describe the vast growth potential and opportunities of the Asian construction sector over the next 10 years. And leading the race to build are the so-called Asian Tiger Cubs – Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

Economic growth for the ‘Cub’ countries is recovering robustly from the 2007 global financial crisis, overtaking the growth rates of the mature Asian Tigers of Hong Kong, Singapore, South Korea and Taiwan. And with China’s once-booming economy moderating, the Cubs may also soon be growing faster than the region’s dominant economic powerhouse.

Asias construction boomSouth-East Asian markets, led by the Asian Tiger Cubs, are among the world’s fastest growing. To maintain their current, strong growth trajectory and fulfil their long-term economic potential these countries need to invest heavily in infrastructure such as transportation and utilities like power generation and distribution, water, and sewage networks. While underpinning continuing strong economic expansion, these expected investments will simultaneously boost the living standards of the people of these populous nations.

Across the region, governments are embarking on ambitious infrastructure construction programmes. Until now, the pace of these infrastructure projects has been hampered by significant public finance constraints that have limited the available funding. But reviving growth in the region is set to provide a stronger foundation for increasing infrastructure investment.

At the same time, rising living standards and increasing incomes for the ASEAN region’s 625 million people will fuel demands for better quality housing and public facilities, including for healthcare and education, as these nations see a burgeoning of their better-off middle class.

And even with rising incomes, the region’s growth is also being buoyed by its evolution as a key regional and global manufacturing hub supported by its large supply of still relatively cheap labour. This increasingly powerful trend is attracting a strong flow of inward business investment from both local and multi-national manufacturers. In turn, this is stoking demand for commercial and industrial buildings and improved transport connectivity across each country and the wider region.

With all ASEAN member countries (except already heavily-developed Singapore) still undergoing rapid urbanisation, there are huge requirements for new built structures (beside infrastructure construction) to accommodate the increasing demand.

Under-supply of housing adds to the upward trajectory of regional construction

In terms of residential development, across the ASEAN region there is equally a large under-supply of housing. When combined with the need for commercial real estate and infrastructure to service both sectors, we expect the region’s construction sector to remain on a strongly upward growth path over the next five years.

Annual construction growth in the region, most notably for the Asian Tiger Cub states, is forecast to strengthen to mostly double digits, based on forecasts from the newly launched BIS Oxford Economics Asia Construction Service.

Over the next five years, construction investment in Asia is expected to average USD1,61-trillion per year versus an expected value of USD697-billion in the United States, and USD890-billion in the EU.

With investors and construction firms from the four Asian Tigers (as well as China and Japan) jostling to invest in, and expand into, the ASEAN countries in pursuit of stronger investment returns than those expected in their own slower growth economies, the overall outlook for construction in ASEAN looks buoyant.

China’s ambitious Belt and Road Initiative to fuel Asia-wide construction

Positive prospects for Asian construction are further underpinned by China’s ongoing external investment in construction programmes. Besides exporting its construction technology to the ASEAN region, China is also driving progress of its “One Belt One Road” initiative (OBOR also known as the ‘Belt and Road Initiative’). This will link China to Europe through Central Asia, South-east Asia, South Asia and Africa.

The South-East Asian region is a pivotal element in the OBOR initiative, and China has the financial muscle to develop these projects aggressively while they are keenly embraced by countries in the region lacking the resources to develop such much-needed infrastructure projects. The resulting increased scale of development looks set to prove to be win-win for all in the region.

Although some initial project implementation has been slow, several OBOR-related projects along routes to South-East Asia have recently got underway or are set to commence work. These include the Yunnan-Laos high-speed rail link, a China-Thailand high-speed rail link, Jakarta-Bandung high-speed rail, and the East Coast Rail link in Malaysia.

India’s construction investment to rise by a third as the sub-continent meets pent-up demand

India’s construction sector investment is currently around USD130-billion a year, the third largest in Asia after China and Japan, and matching that of the UK. Over the next five years, India’s annual construction investment is expected to jump by almost a third averaging USD170-billion per year, adding still more impetus to an Asia-wide building boom that looks set to last through the next decade and beyond.


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