Analysis: Public works may cushion blow for SE Asia as exports sag

Sun Sep 2, 2012 5:28pm EDT
 
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By Alan Raybould

BANGKOK (Reuters) - In western Thailand, bulldozers will soon clear land for a highway into Myanmar. In the Philippines, another Manila-area toll road is getting under way. Indonesian leaders promise more railways and airports. Singapore has unveiled plans for a new subway line.

Across Southeast Asia, public works are being expanded by governments needing to counter a slowdown in global demand and sustain an acceleration in growth that has made the region one of the few bright spots in a volatile world economy.

Spending on big infrastructure projects usually spans many years, and a combined figure for how much Southeast Asia is investing this year compared with in 2011 is not available. But anecdotal evidence indicates infrastructure spending is rising.

One key aspect of Southeast Asia being a global bright spot is that some of its governments have strong enough fiscal positions to jack up such spending -- unlike many in the West and elsewhere at present. Indonesia, Southeast Asia's largest economy, says it will raise capital spending by 15 percent in 2013. The Philippines says next year's infrastructure spending will be more than 19 percent above this year's allocation.

The Asian Development Bank (ADB) estimates that Southeast Asia's 10 countries need at least $60 billion a year to fund ambitious infrastructure work. That's a little bigger than the entire gross domestic product of Myanmar, itself embarking on huge infrastructure projects as it emerges from isolation, another boost to the region.

Big spending on public works, combined with strong domestic demand, partly explains the optimism among many economists in Southeast Asia, a region that has often withered during global downturns due to its reliance on exports.

The Manila-based ADB, for instance, forecasts 5.2 percent economic growth this year across Southeast Asia and 5.6 percent next year, up from 4.6 percent in 2011.

"The increase in economic growth in the Asia Pacific region, amid the global economic downturn, must be supported by infrastructure," Indonesian President Susilo Bambang Yudhoyono told a conference in Jakarta last week. "For Indonesia, infrastructure development is the main priority."   Continued...

 
A Bangkok Mass Transit System (BTS) skytrain station is pictured under construction on the outskirts of Bangkok August 28, 2012. Governments across Southeast Asia are expanding public works as a way to counter a global slowdown in demand and sustain the growth that has made the region one of the few bright spots in a volatile world economy. Picture taken August 28, 2012. To match Analysis ASEAN-ECONOMY/INFRASTRUCTURE REUTERS/Sukree Sukplang