The last two years has seen unprecedented activity in the uptake of solar and wind projects, with Vietnam emerging as a regional renewables powerhouse within the South East Asia region. Favourable tariff policies and tax incentives to encourage investment coupled with a natural endowment of solar power had driven Vietnam to surpass Malaysia and Thailand to reach the largest installed capacity of solar panels in Southeast Asia.
Making cities smarter
A growing number of smart city projects are developing in the region. Construction of a new capital city from the ground up in Indonesia, Nagara Rimba Nusa, is set to commence this year. The Japanese government announced plans at the end of 2020 to provide USD 2.4bn of funding to Japanese companies to develop smart city projects in 26 cities across Southeast Asia. The Government of India has pledged to create 100 new Smart Cities in the country. And China currently has roughly 800 smart city pilot programmes under way, which is more than half of the world total.
Open for business
While many countries across the region have historically had relatively stringent FDI rules surrounding foreign ownership, particularly regarding infrastructure sectors of strategic importance, many nations have begun to loosen their stance. Governments across the region have recognised the need to bring in new policies to lower barriers to entry, particularly in the energy sector, and to encourage greater private sector participation in projects. Countries including the Philippines, Malaysia, Indonesia and Vietnam are all slowly unwinding FDI rules and streamlining processes to make investment in infrastructure more attractive to foreign investors.
Not all governments are moving at the same speed, or the same direction. Australia recently announced changes to its FDI law, meaning foreign investors will face greater scrutiny when bidding for sensitive assets.
Japanese and Korean investors will continue to play a large role in infrastructure investment in the Philippines, Singapore and Vietnam, where they have been active in the past. China, meanwhile, furthers its influence in the region through its Belt and Road Initiative (BRI) projects. With a renewed focus on digital and greener projects, Chinese investment through the BRI will be critical in helping the APAC region overcome its infrastructure gaps.
Click here to view the interactive country highlights for Asia-Pacific
“There’s only so much local capital can do. The natural way forward is to allow for more foreign capital to be invested in these economies.”
