Asia Pacific: Securing digital transformation leadership

Express train

Investment in digital infrastructure is on a general upswing in the Asia Pacific region, with countries such as Singapore and South Korea leading the way.  

 Asia & Pacific countries ranked
#16South Korea
#17Hong Kong

Regional leaders, such as Japan, China, South Korea and Singapore, are vying for supremacy in the communications sector. The numerous digital infrastructure investment opportunities are backed-up by strong regulatory frameworks and swift development capabilities in these countries.  

Whilst China, Japan, South Korea and Singapore are among the global 5G frontrunners, some other Asian countries are still struggling with their 4G rollouts.

Belt and Road Initiative forging ahead?

A multibillion-dollar network of projects launched in October 2013 by Chinese president Xi Jinping, the China-backed Belt and Road Initiative (BRI) aims to build comprehensive terrestrial, maritime and digital routes, connecting the East with the West.

Perceived as the playground of China’s state-owned enterprises, due to some high-risk large infrastructure projects, the BRI has driven substantial investment in the APAC region. 

The increasing emphasis on greening the BRI is contributing to the success of several renewable energy projects, as APAC investors are keen to tout their ESG credentials. 

Multiple solar and wind generation schemes are already operational under the BRI, such as Pakistan’s 1GW Quaid-e-Azam solar park, 99MW Jhimpir wind farm and 49.5MW Dawood wind project in Pakistan, with more expected to come to the market over the next few years.

Renewables are a game changer for Asian-Pacific economies

Renewables auctions, tax incentives and feed-in tariffs are increasingly being deployed across the region. The promising development prospects of offshore wind projects in Taiwan enabled global investors, such as Macquarie, JERA and Ørsted, to take projects like the 128MW Formosa 1 and 376MW Formosa 2 plants to financial close in 2018.  

Floating wind and solar are also prominent draws for investors in the region, with Korea’s 200MW Donghae floating windfarm project to be developed by Equinor, Korea National Oil Corporation and Korea East-West Power by 2024.

Country summaries

#3 Singapore 

One of the world’s most competitive economies as well as a thriving financial hub, Singapore jumps up three places from the 2017 CMS Infrastructure Index to third, overtaking Australia, Canada and the United Kingdom. 

In addition to the highly favourable tax environment, robust political framework and macroeconomic landscape, Singapore has become Asia’s data centre hotspot, thanks to an unprecedented growth in the digital infrastructure sector, including 5G, broadband, IoT and cloud computing. 

On 26 June 2019, Singapore’s Ministry of Communications and Information announced the opening of Digital Industry Singapore, an entity set up to guide investments in digital infrastructure, allowing close collaboration with the private sector through PPP models. 

An upcoming pipeline of approximately 178MW of new data centres is expected between 2019 and 2021. Demand is mainly driven by record requirements from large technology and cloud companies. 

Some of the most noteworthy traditional infrastructure projects in the pipeline are the USD 11bn Singapore - Kuala Lumpur high speed rail line and the second phase of the deep tunnel sewerage system, which has its centralised collection and treatment points in Changi, Kranji and Tuas and is expected to cost approximately USD 9.6bn. 

Another mega project is the USD 10bn Changi International Airport Terminal 5, which is also the biggest expansion of the airport to date. Completion of the project is scheduled for the 2030s. 

Singapore Tuas mega-port also represents a bold investment. The first phase – whose total costs are estimated at USD 1.8 billion – expected to become operational in 2021. Another three phases will be necessary to develop the port, which will be fully operational from 2040. 

#4 Australia

Ranked 4th globally, Australia is home to some of the world’s largest infrastructure and energy investors, such as Macquarie and AMP Capital. 

The Australian government continues to offer unwavering support and announced in 2019 that it will invest at least AUD100bn in the transport infrastructure sector over the next 10 years. 

#14 Japan

Japan is well-equipped to become a global prototype for infrastructure quality, already leading the way in deploying disaster and climate-resilient assets, including early warning systems.

The country kicked off the privatisation of multiple airports during the first half of 2018, with more opportunities to come to market in 2019, including the Hiroshima International Airport, Kitakyushu, Kagoshima and Nagasaki.

#16 South Korea

Eager to invest in infrastructure and energy, South Korea is ranked 4th in the APAC region and 16th globally. A leading digital infrastructure market, the country deployed the world’s first nationwide 5G network in April 2019. 

South Korea is set to invest USD 26.2bn in sectors such as autonomous driving, smart cities and a digitalized healthcare system between 2019 and 2022, as announced by president Moon Jae-in in April 2019. 

Considering the country’s ambitious plans in the digital infrastructure sector and its strong performance in 2019, there is no surprise that South Korea has advanced in the ranks from 23rd in 2017 to 16th in 2019.

#17 Hong Kong

Ranked 5th in the APAC region and 17th globally, Hong Kong remains an attractive destination for investors, despite political tensions with Beijing. One of the most heated sector debates is over the 1,000 hectares of land to be created off Lantau island, as a solution to tackle the territory’s housing crisis. The artificial island is valued at HKUSD 624bn.

#18 China

Only ranked 6th in the APAC region, China has ramped up investment in infrastructure in 2019, after a significant slowdown in late 2018. The country is expected to become Asia’s infrastructure driving force and to continue its rise in rankings in the next few years. 

In comparison to the 2017 CMS Infrastructure Index, the 2019 version sees China’s score increase substantially from 57.27 to 69.21, due to the improvement of private participation in the sector, as well as increasingly favorable tax environment. 

On 5 March 2019, the government committed to investing CNY800bn in railway construction and CNY1.8trn in roads and waterway projects.

China is not only the leading and fastest growing 5G hub due to major corporations such as Huawei and ZTE, but also one of the largest consumer markets worldwide. Substantial investment is expected in the sector, with provincial authorities such as the Shenzhen city government already announcing plans to pay operators CNY 10,000bn for each standalone 5G base station.

While the China-US trade war escalates, a number of private foreign investors could benefit from the dispute, as the Chinese authorities reiterate their commitment to open the infrastructure and energy markets to foreign private capital.

For instance, a USD 35bn US-based private equity company, General Atlantic, announced in September 2019 that 10% of its current portfolio is comprised of Chinese assets, including an investment in Hebei-based Asia Medical, a hospital operator and privately-owned healthcare services provider.

#25 Malaysia

Malaysia’s secondary market is flourishing, with the country’s score also improving slightly from roughly 59.50% in 2017 to 63.30% in 2019. One of the most noteworthy transactions of the year was the acquisition of the country’s biggest toll expressway firm, PLUS Malaysia Bhd, by Asian private equity group RRJ Capital for USD 716.4million. 

The country’s most ambitious infrastructure project, the Kuala Lumpur-Singapore High Speed Rail project was once again put on hold, for the next two years, according to Malaysian public authorities. 

#29 India

On 25 September 2019, the Indian prime minister Narendra Modi announced the government’s intention to spend USD 1.3trn on infrastructure over the next few years. Public authorities officially acknowledged the importance of private capital being invested in projects, with more privatisations expected. 

Considering the increase in popularity of PPPs and the positive evolution of this financing model in India, opportunities for private capital deployment are expected in a number of sectors, not only railways, but also toll roads and airports, among other assets.

The country’s score for ease of doing business leapt from 47.64% in 2017 to 72.92% in 2019, while private participation also went from 53.75% in 2017 to 93.53% this time round, as India’s opening up strategy pays off, the country has already attracted well-versed investors such as Vinci and Ardian. 

#30 Thailand

Thailand is readying for swift deployment of EV charging infrastructure, as major automotive companies such as Toyota and Nissan eye the country’s e-mobility market. The latter has already signed a contract with Taiwan-based manufacturer Delta Electronics to deploy charging systems for both home and public stations. 

On 23 September 2019, the government of Thailand announced it will invest USD 557.3m into the Eastern Economic Corridor (EEC) in 2020 to speed up its development. The EEC is Thailand’s most iconic mega project, aiming to develop the country’s eastern provinces into a core ASEAN economic zone. 

#33 Indonesia

The country’s scores for political stability, ease of doing business and private participation significantly improved between 2017 and 2019. The improvement backed up by the country’s ability to attract institutional investors, including pension funds. In September 2019, Canada Pension Plan Investment Board made its first infrastructure investment in Indonesia, acquiring a 45% stake in toll road operator Cikopo-Palimanan, also known as Cipali.

In May 2019, the Indonesian government committed to an ambitious infrastructure plan, worth USD 412bn,  including 25 new airports as well as new power plants. Roughly 40% of the total sum required will be provided by the government, with 25% coming from state-owned companies and the rest from the private sector. The transport infrastructure sector will be the beneficiary of 60% of the total investment.  

#37 Kazakhstan

Kazakhstan claims 37th place in 2019, due to a pivot towards greening its energy and transport sectors. In October 2019, the European Bank for Reconstruction and Development stated it will provide additional funds of up to USD 328m to support the deployment of renewable energy projects in the country. 

In addition, in August 2019 100 new electric buses were acquired to serve capital Nur-Sultan. In September 2018, Eurabus opened its e-bus manufacturing facility in Kazakhstan, the company expecting orders of 500 units in 2019

#40 Philippines

Bidding for a Chinese-funded railway project in the Philippines, under the Build, Build, Build infrastructure initiative will start in October 2019. The estimated project cost is USD 960m for the 71km Subic-Clark railway to be completed by 2022. The Philippines dropped from its 36th place in 2017 to 40th in 2019, due to a substantial decrease in the country’s ease of doing business score. 

Multiple infrastructure projects have seen major delays, with the Subic-Clark railway no exception as one of the three shortlisted companies were disqualified by the Philippines government while bidding laws in the country require three bidders. 

#44 Vietnam

In October 2019, ADB announced it will finance Vietnam’s first large-scale floating solar project, offering a USD 37m loan to Vietnam’s  Da Nhim-Ham Thuan-Da Mi (DHD), a subsidiary of national utility EVN. 
The project will be built in southern Vietnam, where DHD already operates its 175MW Da Mi hydropower plant. 

#47 Cambodia

A sewerage infrastructure project in Phnom Penh received a USD 26m grant from the Japanese government in October 2019. The funds will help build a wastewater treatment station, aiming to tackle some of the shortcomings of the country’s current sewerage system and process water before its release into Choeung Ek lake. 

#48 Bangladesh

UAE-based investors committed USD 10bn towards the development of infrastructure in Bangladesh. According to the Asian Infrastructure Investment Bank, the country requires approximately USD 24bn of infrastructure investment to achieve its Vision 2021.

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