Managing Asia’s demand for infrastructure

19 January 2017

Transport and energy infrastructure will be a key determinant of Asian countries’ ability to fulfil their economic potential. But can projects deliver?

As Asia grows rapidly, so too does its demand for new and replacement infrastructure.

The region has one ‘developed world’ economy in Japan. It has the rising economic superpowers of China and India. Thailand, Malaysia, South Korea, Indonesia and other countries are also enjoying significant growth. 

To keep pace with burgeoning population growth, mobility and urbanisation, governments face pressure to develop infrastructure. 

The Asian Infrastructure Investment Bank notes that “infrastructure investment paves the way for long-term development. Inadequate infrastructure and limited connectivity have long been bottlenecks to growth in Asia.”

Some $8 trillion will be committed to infrastructure projects this decade to remedy historical underinvestment and address demand, according to McKinsey. 

Demand drivers

Demand for infrastructure in Asia is likely to be largely driven by urbanisation in developing markets, and the need for infrastructure upgrades in more developed economies. That’s according to Stephen Boddington, Regional Construction Managing Director for JLT Asia.

The region is expected to have 4.8 billion inhabitants by 2050, with approximately 3.3 billion of them living in cities, according to the 2015 UN Development Programme’s Asia Pacific Human Development report.

Boddington says: “Relentless expansion generates demand for more sustainable solutions, which can transport large populations across a city many times larger than those in the US and Europe.”

The world’s eight largest cities are all in Asia. China alone will have an estimated 221 cities of more than one million people by 2025, while India expects 150 such conglomerations. This creates demand not only for transport infrastructure, but also for power and water. 

Boddington explains: “Population centres are growing in resource-poor regions – notably north China, Java and northern India. Infrastructure is necessary to transport power and water to these resource-hungry cities. An example is the South-North Water Transfer Project in China.”

Transport challenges 

Follow China’s lead, many Asian cities will massively increase the scale of their metro systems, including light rail in locations where tunnelling is too costly.

Countries with many megacities also need connections between them. This has led to an expansion of high-speed rail projects in Asia – such as the Singapore to Kuala Lumpar line in Indonesia – many of which are financed by Chinese investors. 

Meanwhile, in the developed economies of Japan, Hong Kong and Singapore, governments are overhauling infrastructure from previous decades. They’re also filling in gaps, through projects such as the bridge from Chek Lap Kok in Hong Kong to Macao.

Such major transport projects are relatively recent developments, however. The main focus for governments faced with urbanisation pressures is population control and mobility. 

“This has led to very inefficient and environmentally unfriendly city designs such as Beijing, Jakarta and Karachi,” says Boddington. “Such places are over-reliant on highway building and private transportation solutions.”

Renewables opportunities

Things are starting to change, with a huge increase in green energy opportunities and grid decentralisation. Infrastructure for resources is becoming increasingly important, as many areas have abundant untapped energy generation and water resource reserves. Examples include the Mekong River, and geothermal energy in the Pacific Ring.

“JLT has a renewable energy facility for wind, solar and hydro projects, which is attracting a good deal of interest,” Boddington points out. 

The Philippines is a good example, he continues. “The country aims to increase its renewable energy capacity to an estimated 15,304 MW by the year 2030. That’s almost triple the 2010 level.”

Asia’s opportunities attract strong interest from international contractors and developers, and should ensure pipelines of construction work for decades to come.

For more information contact Stephen Boddington, Regional Construction Managing Director at JLT Asia on +852 2864 5565