Asia-Pacific regional report: Bouncing back

By Helen Wright03 June 2011

17 Liebherr Crawler cranes and an LR1280 lattice boom crawler are being used on Hong Kong’s Central

17 Liebherr Crawler cranes and an LR1280 lattice boom crawler are being used on Hong Kong’s Central Reclamation Phase 3 Project – constructing more than 2600 m of 1.20 m thick diaphragm walls and barr

Many of the economies in the Asia Pacific saw GDP surge back to growth in 2010 after being hit hard by the global recession in 2009. The region's construction sector also has momentum and looks set to benefit from increased investments in infrastructure and housing projects in 2011 and beyond.
Central to growth in the region as a whole are the financial hubs of Singapore and Hong Kong, which are amplifying interregional relationships and are themselves increasingly dependent on the successes of Asian partners as trading expands.
Singapore's construction sector has benefited from increasing private sector investment. Last year alone, construction contracts awarded to private-sector companies doubled in value to
US$ 14 billion as house prices rose and demand for commercial and industrial buildings increased in line with the economic recovery.
This high private sector investment came despite the fact that growth in the construction sector as a whole slowed to 6.1% in 2010 from 17% in 2009 - a decline that the Asian Development Bank (ADB) said was down to the fact that some major public projects were completed in the last two years.
Similarly, large-scale projects are also having an impact on Hong Kong's construction sector. Major public infrastructure projects begun in the past two years, including the Guangzhou-Shenzhen-Hong Kong express rail link and the Hong Kong-Zhuhai-Macao Bridge, will continue contributing to growth in the coming two years.
Indeed, Hong Kong's 2011 budget has increased by nearly +25%, with spending on capital works to hit US$ 7.5 billion this year.
And construction opportunities also abound in some of the smaller economies in the Asia Pacific region. In Vietnam, for example, strong public infrastructure investment pushed overall construction growth up by +10.1% last year.
Loans from the ADB and other development organisations are also helping to drive infrastructure projects forward in Vietnam. In March, for example, the ADB loaned the Vietnamese government US$ 293 million to support a US$ 1 billion metro rail project in the capital, Ha Noi, while the ADB is also providing US$ 1 billion towards a US$ 2.8 billion programme in provide piped water to 3 million households.
Natural resources
Other smaller economies in the region are exploring the development of their lucrative natural resources. Papua New Guinea is a case in point, where the start of a US$ 15 billion liquefied natural gas (LNG) project last year has heralded a surge in imports of construction equipment and helped offset a -4.1% decrease in government expenditure in 2010 (see box story for full details).
Meanwhile construction activity rose by +10.5% in the Philippines in 2010, driven by strong demand for new buildings from the business process outsourcing subsector. And while the 2011 budget reduces infrastructure spending, the sector is expected to stay buoyant due to interest from the
private sector.
Five initial infrastructure projects, including construction of expressways and the privatisation of light railway operations in Manila, are to be put out to tender by mid-year under public-private partnership (PPP) arrangements. Assuming that good progress is made starting such projects, the ADB forecasts that GDP in the Philippines will grow +5% in 2011 and +5.3% in 2012.
In Thailand, 2010's GDP growth of +7.8% would have been much harder to achieve without heavy government spending under the country's THB 1.4 trillion (US$ 46.7 billion) three-year Thai Khem Khaeng (make Thailand strong) stimulus programme.
Introduced in 2009 to support Thailand's recovery amid the global recession, spending under the programme contributed 2.3 percentage points to GDP expansion in 2010.
Funds are being allocated to a number of infrastructure projects including expanding highways, housing projects, improvements to the water network and high-speed train system linking Bangkok and Rayong.
Thailand has strong trade ties with Indonesia, where the government has budgeted for a +30% rise in capital expenditure in 2011 aimed at addressing infrastructure bottlenecks - a persistent problem that contributed to the country's 7% inflation in December 2010.
However, the ADB described Indonesia as suffering from a "chronic weakness" in implementing capital works programs, meaning that the budgeted amount is unlikely to be fully drawn. To address this issue, the government is simplifying budget execution procedures and strengthening procurement capacity in the spending agencies.
Malaysia, meanwhile, has made good progress with infrastructure projects and has also seen construction activity rise on the back of increased demand for residential buildings and expansion in office space.Last year, the country's construction sector grew by +5.2%, while GDP rebounded to +7.2% in 2010, from a contraction of -1.7%
in 2009.
The economies of the Asia Pacific region have proved resilient in the face of the global financial crisis and spending on infrastructure is a firm fixture of both public and private budgets in the coming years. While the full impact of the disaster in Japan (see box story) must be monitored closely, it is also likely to have a positive impact on construction activity in terms of the effort to rebuild. iC

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