ASEAN stands tall amid turmoil, has infrastructure spending worth $9.97 trillion
JAKARTA – A combination of sustained economic growth, young population and infrastructure spending estimated at US$7 trillion (S$9.97 trillion) over the next 15 years makes ASEAN an attractive investment destination amid the turmoil in emerging markets.
Maybank group head of global banking Amirul Feisal Wan Zahir said that during his recent visit to New York, the conversation of global portfolio managers in their efforts to re-balance the portfolio in emerging markets, was to identify regions that had sustainable high growth.
“Sustainable was the key operative word. This is where ASEAN, as a single economic bloc, becomes more exciting to global investors,” he said at the Invest ASEAN Indonesia 2015 conference held here yesterday.
Towards this end, Amirul Feisal said that ASEAN as an economic bloc is expected to grow at an average rate of 5.6 per cent from 2013 to 2018, and its economic growth volatility index was at 1.5.
A higher economic volatility figure indicates more unpredictable economic growth. For instance, Russia has an index of 4.2, indicating the volatility in the growth of its economy.
As for infrastructure spending in the region, Amirul Feisal said that based on Maybank Kim Eng’s research, ASEAN was at a capital expenditure inflection point and the formation of the ASEAN Economic Community had the potential to drive growth in the region over a multi-year period.
“Urbanisation is on the rise. The infrastructure in ASEAN’s cities is in need of upgrading.
“It is estimated that US$7 trillion will be required by ASEAN economies between 2014 and 2030 to fund infrastructure needs,” said Amirul Feisal.
The countries in ASEAN that are dependent on commodities such as Indonesia and Malaysia are expected to embark on an expansionary budget to fuel the slowing economy.
Indonesia, the biggest economy in ASEAN with a population of 255 million, has pledged to increase infrastructure spending by 8 per cent in its 2016 budget to improve accessibility and connectivity in the nation of 17,000 islands.
Among the mega-projects that the country is expected to embark on next year is the construction of the Trans-Java high-speed rail stretching between Jakarta and Bandung that is estimated to cost US$6billion. The other major project is a Trans-Sumatra highway cutting across the island that houses much of Indonesia’s natural resources. The cost of the 2,700km highway project is estimated at US$28billion.
Malaysia’s Prime Minister Datuk Seri Najib Tun Razak, who will table Budget 2016 on Oct 23, is also expected to unveil an expansionary plan, while at the same time keeping the deficit at below 3 per cent of gross domestic product.
The additional funding for development is expected to come from the proceeds of the goods and services tax that some research houses have estimated at reaching RM31billion (S$10.24 billion) per year over the next five years.
The third factor going for ASEAN is the population demographics, where some 60 per cent of the people are below 40 years of age compared with Europe, where the similar age group of people forms less than 40 per cent of the population.
Amirul Feisal said that the median age in ASEAN was 28 years old and that the millennials made up 60 per cent of the population in the region and Indonesia.
“Income levels are rising and the prime savers group is expected to increase to 26 per cent from 14 per cent in 1990, meaning that the propensity to save and invest is high in ASEAN,” he said.
Invest ASEAN Indonesia 2015 is the last of the series of investor conferences held by Maybank Kim Eng covering five other countries. Apart from Malaysia, it was held in Singapore, Vietnam, the Philippines and Thailand. It drew 4,000 participants, 150 companies with a market value of nearly US$400billion and investors with some US$10 trillion in assets under management.
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