ACCOUNT PROFILE

Construction Sector for Economic Recovery

Posted on 05 October 2021

The ASEAN region remains in its position as a focal region and a driving force for world economic dynamism as it is now and for the coming years. For a sustainable growth, each of the ASEAN countries have short- and long-term agenda well in plan for infrastructure development to maintain its competitiveness and efficiency in the global scene. Although there was a disruption of the infrastructure and construction activities last year and early this year due to the pandemic, we can see now that the administration of each country is ramping up the construction sector in reviving and driving the economy back to tracks. 

Indonesia being the country with the largest market size due to the its huge population, has always placed infrastructure as its top agenda for national economic growth. The construction sector resumed positive growth of 4.42% in Q2 2021 yoy for the first time since the pandemic hit the country, with strong government expenditure on the public works and public housing, both getting 30% higher budget allocation from the initial budget. The 2021 Government Action Plan to revive the economy has identified construction sector to be the essential sector to support the national priorities strategy. 9 new industrial estates have been planned mostly in the Sumatra and Kalimantan region in the effort to decentralised industry development outside Jawa-Bali region. Roads, airports and infrastructures will be improved on 10 existing tourist destinations of the country. There are 31 new smelters to be constructed mostly on the island of Sulawesi which has large deposits of nickel ore.  Construction of various new road and rail projects are underway stretching from the west part to the east part of the Jawa-Bali region to improve the connectivity within and between the region’s major cities. The plan for a new capital city for Indonesia in Kalimantan will be realised soon when infrastructure projects for this initiative are completed in 2024, if everything goes as planned.  

Malaysia has made consistently good and steady progress in expanding and modernising its infrastructure under each for its 5-year Malaysia Plan. The construction sector is expected to expand in 2021, as mega infrastructures and affordable housing projects are revived and accelerated after a long restriction on the activities. The sector registered a positive growth of 40.3% in Q2 2021 yoy after the restarted of several large infrastructure projects like the East Coast Rail Link project, Light Rail Transit 3, Mass Rail Transit 2, Electrified Double Track Gemas-Johor Bahru, Klang Valley Double Track Phase 2, Central Spine Road, Pan Borneo Highway and Coastal Highway in Sarawak. Beside these mega projects, positive growth is expected to sustain for year 2021 with the increasing of specialised activities and civil engineering, for example, from one of the solar power project Jalinan Digital Negara (JENDELA) and many other smaller scale projects. 

The Philippines “Build, Build, Build” programme 2016 to 2022, focused on the basic transportation, airports, ports, energy and utilities infrastructure, has driven the economy by posting a remarkable growth in the construction sector by 9.7% in 2019. In 2020, the construction sector posted a double-digit contraction 25.7% due to the lockdown during the pandemic.  On the road to recovery, the construction sector is expected set a positive growth in 2021 from the revival of the “Build Build Build” programme back on track. Beside easing congestion in the urban cities of Metro Manila, Metro Davao and Metro Cebu, the objective of the programme is also to seek a more balanced and responsive regional/ countryside development for the country. The New Clark City is one of the developments aims to disperse the economic activities that are skewed towards Metro Manila. More property developers are investing outside Luzon and building megacities in the region of Visayas and Mindanao.

Singapore construction sector grew by 106% in Q2 2021 from a low base effect of the pandemic. Upon recovery, the industry is still facing challenges ahead, especially on the foreign worker issue. The government is pushing the industry with a strong pipeline of public residential and civil engineering projects. The public sector will contribute about 65% of the overall construction demand for 2021, coming mainly from the Jurong Region Line, Cross Island Line and Phase 2 Deep Tunnel Sewerage System (Tuas Treatment Plant). Meanwhile, the private sector is seen improving slower as its demand has just picked up alongside with the slow global economic recovery. There will be new hotels, commercial buildings and private properties in the pipeline for the private sector to regain back its momentum as before. To lower the reliance of the foreign workers, the government continue to encourage Design for Manufacturing and Assembly (DfMA) as well as Integrated Digital Delivery (IDD) in projects.

Thailand construction sector growth hovers around 4.9 – 5.2% in Q2 2021, softer pace compared to the 2-digit growth registered in previous quarter, as a result of government spending on the ongoing infrastructure projects on road & rail transport across the country as well as irrigation infrastructure. Private sector construction continues to decline for 3 consecutive quarters to Q2 2021 due to sluggish demand for private properties especially demand in condominiums. Continuous strong public spending on the Eastern Economic Corridors EEC will be the major contributor for the 2021 construction growth. The Laem Chabang Deep Seaport is undergoing a Phase 3 upgrading. The EEC initiative will see the developing of U-Tapao as an International Airport and Aerospace Hub. 3 Hi Speed Rail linking 2 Bangkok airports at Don Mueang and Suvarnabhumi with U-Tapao International Airport are currently under construction. Expansion of the existing Mab Ta Phut Industrial Deep Seaport has started to cater for higher capacity of shipment. 

Vietnam has the best performing construction industry in this ASEAN region. Last year while the pandemic had downed the construction industry to negative growth in all of its neighbouring countries, Vietnam managed to maintain a comfortable growth of about 5.0%. This year Vietnam plans to accelerate its expenditure on infrastructure projects that focus on improving regional connectivity through the development of rail, road and air transport infrastructure. The construction of My Thuan, CanTho Highway and Trung Luong- My Thuan - Can Tho Expressway (the last expressway project of the North - South Vietnam Expressway) have just started recently to improve the connectivity of major cities. A new international airport Long Thanh will be built near to the country economic hub Ho Chi Minh City. Beside this, the capital city of Hanoi and Ho Chi Minh City are building its transit system to ease the worsening congestion in the cities. 
The construction sector is vital and is an important driver to a developing region like ASEAN for its growth and prosperity. Construction sector as a whole builds the region with extensive infrastructure and connectivity to support continuous investment in each of its country. With all the planned and ongoing infrastructure mega projects, the ASEAN region is well prepared and in sync for another era of dynamic growth when the pandemic is put to rest.  
To understand more about the Construction Industry in the ASEAN region, join us in the upcoming 2021 SEAISI Sustainability and Construction Fortnight in November.  Stay tuned for more details.

Wong Wah Sum

Source : SEAISI