881 Billion USD is invested annually in Asia-Pacific region infrastructure on a large variety of projects in energy, bridges and roads, high speed rail, airports and more. The Asian Infrastructure Investment Bank (AIIB) alone represents 9 Billion USD invested in almost 50 projects, as Jocelyn Oh of TMF Group details in Mondaq.
In this report from Asia Law Portal, leading infrastructure lawyers from Indonesia, Singapore, Hong Kong, Vietnam, Malaysia, India and Japan predict the most significant developments in Asia-Pacific region infrastructure in 2020.
“In 2020, we expect that infrastructure investments in the Asia-Pacific region will continue to grow despite the global economic slowdown. As many mega projects within the region (including those under the Belt and Road Initiatives) have reached or are reaching completion coupled with the political uncertainties and changing climate, we also expect a high level of infrastructure dispute in the region in the coming year.
As projects continue to grow in scale and complexity and involving parties from different jurisdictions and background, we expect that international arbitration will continue to be the forum for resolution of infrastructure disputes within the Asia Pacific region.”
“Infrastructure investment has been growing within the Asia-Pacific region and has been a key driver of the construction industry. Countries such as Thailand, Vietnam and Myanmar have opened their markets to foreign investors and are likely to witness an increase in infrastructure investments.
The most significant development anticipated is the continuing developments with China’s expansion on overseas infrastructure financing with the establishment of the Asian Infrastructure Investment Bank and China’s One Belt, One Road Initiative. With the One Belt, One Road Initiative spanning across the continents of Asia, Africa and Europe, there will be multiple opportunities knocking on the doors of developers and contractors and with these opportunities continuing to present themselves for future developments, there will be no shortage of local and/or foreign infrastructure investments.
The construction industry in Malaysia is also expected to benefit in 2020 from several infrastructure projects. These projects include the now-revived East Coast Rail Link, Mass Rapid Transit Line 2, Light Rail Transit Line, Central Spine Road, Pan Borneo Highway and the Coastal Highway. These projects will play a fundamental role in infrastructure investment in Malaysia. Furthermore, the country’s Annual Budget 2020 has allocated allowances for the development and maintenance of infrastructure and social amenities.
Other significant developments anticipated in 2020 within the Asia-Pacific region can be seen in increasing projects in the Power and Green Energy infrastructure sector. Inevitably, this would also attract foreign investments as countries in the region seek to develop more green energy projects.”
“The further development of the renewable energy market across the region, with an emphasis on wind (especially offshore in Taiwan, Japan, Korea and Vietnam) plus solar projects (in Bangladesh, Vietnam and in many other ASEAN jurisdictions). That will trigger related infrastructure opportunities in ports, related supply chain manufacturing and transportation. Transaction sizes will be smaller than the market has been used to (but possibly greater volume) requiring greater innovation from all market participants. There may also be greater competition from Chinese players. Margins and IRRs will remain under pressure but still be sufficient to see reasonable deal flow.”
“The most significant development in [Vietnam in] 2020 would be [the] North South Expressway, Long Thành Airport, LNG power plants and wind power plant developments. This will depend upon the adoption of the new PPP Law in June 2020 and establishment of ECA.”
“By 2020, the total aviation market in Vietnam is forecasted to reach 86.8 million passengers, an increase of 10.8% compared to 2019 while the current infrastructure for aviation in Vietnam is reaching its limit. The new law on PPP expected to be adopted In June 2020 would be a push for the development for aviation infrastructure in Vietnam.
The need for use of electricity in Vietnam increases by 10% each year while the electricity generated does not keep up with this demand. In order to inherit the incentive mechanism under Decision 11/2017/QD-TTg and 02/2019/QD-TTg, the Government may provide other mechanisms to encourage the development of solar power in Vietnam (especially the rooftop photovoltaic projects).”
“The infrastructure space in the Asia-Pacific region will continue to undergo a rapid and an unprecedented period of growth in 2020 and beyond as Governments continue to kick start and/or stimulate their economies in particular in developing markets where the constant need for major pieces of infrastructure become more critical to cater for the ever increasing population growth. Whilst Governments will continue to focus on the influx of the more traditional type of social and economic related infrastructure and construction projects in the coming 2 to 5 years (with a long and healthy pipeline of projects across a number of sectors such as residential, healthcare, education and transport), there will continue to be increased investment by Governments (with significant participation by the private sector) into the procurement of digital related infrastructure as more and more of the general population become more reliant on digital communication and connectivity, devices and software and related services in the short to medium term. For example, it is expected that data centre infrastructure and hubs are set to grow exponentially over the next couple of years to cater for this increased reliance on digital connectivity and the embracing of new technologies and architectures.”
“The infrastructure outlook for Asia Pacific remains positive, with the surging middle class creating opportunities in Indonesia, Vietnam and across South East Asia. While confidence is being hampered by ongoing uncertainty around trade, the underlying demographics of the region favour greater investment in infrastructure.”
“For Indonesia, as in the second round of his presidency, Mr. Jokowi Widodo remains committed to continuing the Government’s infrastructure development program until 2024, we can expect the development of road, railway lines, airports and ports, as well as power plants in different areas of Indonesia in the coming years. The completion of the fiber optic development (Palapa Ring) program will also be one of the major targets of the Indonesian Government. The development of fiber optic cables for around 36,000 KM throughout Indonesia which will integrate the telecommunications network in Indonesia will play an important role in boosting the growth of the Indonesian digital economy. Renewable energy, especially waste energy projects will likely also be among those which attract foreign investment in Indonesia in 2020. All these projects may be well supported by the plan of the Government to revise the Investment Negative List that would give more room for foreign investment in various sectors. The omnibus law that will replace many existing laws is also one of the Government’s efforts to support ease doing business in Indonesia.”
“Given the vast needs of India towards enhancing its infrastructure, the Government of India (GoI) had allocated a budget of INR 5.97 trillion for the financial year 2018-19. In contrast, the expenditure actually incurred was approximately INR 3.6 trillion. According to the Union Budget for 2019-20, the GoI intends to invest INR 100 trillion in the infrastructure sector over the next five years. Just by way of example we highlight the following:
- The Indian Railways will award bids for 150 passenger trains to private operators (including global operators) by the end of 2020. The private operators will be entitled to determine the fares subject to an independent regulator to be set up to fix the maximum fares permissible and settle the disputes that may arise.
- GoI has modified the existing Toll Operate Transfer (TOT) model to attract investors for operating 75 operational highways that have already generated toll for one year after completion.
- GoI plans to set up its first offshore wind energy farm with a capacity of around 1000 MW off the coast of Gujarat.”
Bree Miechel, Partner, Reed Smith, Singapore
“With strong GDP growth in many parts of the region, and increasing urbanization, we will continue to see growth in roads, rail and other transport infrastructure, hospitals, power, water and waste projects along with industrial, commercial and residential buildings and facilities. High capex and publicly procured and tendered projects will however continue to face delays that won’t impact pure private developments in the same manner. With funds and other investors eager to access infrastructure opportunities in the region, we expect high M&A volumes to also continue into 2020.”
“2020 will be a very special year in the history of the Japanese infrastructure market. Firstly, Japan will have the (second) Tokyo Olympic games in 2020. After the Olympics, the newly-built main stadium and some other facilities will be operated by private operators who will be selected by bidding based on the PPP/concession scheme. This will open a new chapter for the infrastructure market in Japan.
Secondly, the Japanese government will start the first ever public bidding to select developers to construct and operate offshore wind power plants in certain offshore areas. Japan, being surrounded by oceans, is said to have a huge potential in introducing offshore wind power, which could provide an epoch-making solution to reduce Japan’s notorious dependency on carbon and nuclear power.”