MORE INVESTMENTS in infrastructure Assets are needed to achieve faster growth rates for emerging Asian economies such as the Philippines, S&P Global said.
“A marked improvement in infrastructure and logistics will support the next phase of growth for Asia’s emerging markets,” the report said.
“Economies can achieve higher growth rates through accelerated investments in infrastructure assets on top of infrastructure EFFice gain.”
S&P Global said that effGood and improved infrastructure will support robust growth in the emerging Asia-Paci regionFic, excluding China.
If infrastructure projects are accelerated, according to the Asia-PaciFThe region could nearly double its economy to $11.4 trillion by 2033 from $6.6 trillion in 2023.
“This translates into an annual real growth rate of approximately 5.5%. Our baseline forecast includes improved infrastructure as a cornerstone supporting these strong growth results,” S&P Global said.
In the region, several governments such as the Philippines, Indonesia, India, Malaysia and Vietnam are prioritizing infrastructure development in their policies and reforms.
“The National Economic and Development Authority (NEDA) is coordinating flagship infrastructure projects such as a new airport in Manila, a heavy rail project connecting ports in Subic, Manila and Batangas, and several highway projects,” the report said.
Infrastructure is one of the Marcos government’s priority investment areas. The NEDA Board has so far approved 185 infrastructure flagship projects with a total value of €9.5 trillion.
The flagship projects include physical and digital connectivity, water resources, agriculture, healthcare and energy.
The government aims to spend 5-6% of gross domestic product (GDP) on infrastructure annually.
The latest data from the budget department shows that infrastructure spending increased by 18.2% to 335.7 billion euros at the end of April.
Meanwhile, S&P Global said the public sector tends to undertake more infrastructure projects because returns on investments are spread over two or more decades, “which means duration risk for the private sector is high.”
Infrastructure operators can do that too find the differenceIt’s hard to become a professionalFto focus on these projects, placing more pressure on the public sector.
“This does not rule out a role for the private sector. The private sector favors the outcome and is therefore better at innovating and can usually operate faster and more efficientlyffIT.”
“Private capital can ease capital expenditure for cash-strapped governments that have already committed to broad spending priorities. Yet the durations, regulated returns and other project risks ensure that the public sector dominates the space.”
S&P Global noted that the region’s public assets relative to economic size “have not increased significantlyFicant.”
That’s what the public said Ffixed investment assets are “relatively low” in the Philippines and Indonesia.
“However, in the Philippines and Indonesia, capital expenditures in public-private partnerships (PPP) are higher than global averages. In the Philippines they represent about 6.7% of GDP; in Indonesia it is about 4.2% of GDP, which would add to available total public assets,” it added.
The government has also pushed for more PPP projects. In December, President Ferdinand R. Marcos Jr. signed the PPP Code, which aims to streamline the framework for PPPs.
S&P Global said the logistics sector has shown improvements in recent years.
“India and the Philippines have seen the biggest improvement since 2014, while Vietnam, Thailand and Malaysia saw more modest improvements. In Indonesia, the logistics performance score decreased marginally.”
Antonio A. Ligon, a law and business professor at De La Salle University in Manila, noted that the government is “doing its best” to implement necessary reforms to attract infrastructure investment.
“However, the implementation of these measures needs to be strengthened. For example, efficient implementation of ease of doing business (and) eFeffective marketing that shows areas where infrastructure development can be done,” he said in a Viber message.
Nigel Paul C. Villarete, senior advisor on PPP at technical advisory group Libra Konsult, Inc., said local government units (LGUs) should increase support for fast-track infrastructure projects.
“Often, the National Government (NG) machinery is somewhat cumbersome in executing our projects,” he said in a Viber message. “Many of the upcoming projects can be accomplished through PPP with the LGUs. This will also give the NG the freedom to deal with the big issues alone.”
Terry L. Ridon, public investment analyst and chairman of think tank InfraWatch PH, said infrastructure investments “have always provided a backdrop for economic growth in other parts of the economy.”
“New routes will have faster travel times, and economic efficiencies, such as lower fuel costs, can translate into lower commodity prices,” he said by email.
“Resolving the traffic gridlock, whether through better and more railways or more efficient transportation systems, will allow commuters to spend more time on other productive or economically impactful activities instead of being stuck in traffic,” he added.
CURRENT
In a separate report, S&P Global also noted the need to increase investment in the energy sector amid expectations of higher demand.
“Energy demand will grow by 5-7% in India, Indonesia and the Philippines, (and) by around 3% in Singapore, Malaysia and Thailand over 2024-2025.”
S&P Global said increasing investments for the energy transition “will keep capital expenditures and leverage high.”
“Moderation in fuel costs provides some relief for lagging generation and distribution Firms,” it added.
In his State of the Nation address on Monday, Mr. Marcos said he expects the country’s power supply to “increase at a steady pace to meet our growing demand in the coming years.”
“Nonetheless, we are continuously diagnosing and addressing power shortages, as well as the systemic causes of power outages in unserved and underserved areas,” he added.
The government aims to increase the share of renewable energy in the country’s energy mix to 35% by 2030 and 50% by 2040. Luisa Maria Jacinta C. Jocson with input by Beatriz Marie D. Cruz