Posted on 19 Feb 2021
Introduction
The ASEAN economy was badly hit in 2020 due to the COVID-19 outbreak. The construction sector in some countries have been shut down in line with the imposed lockdowns such as Philippines, Singapore and Thailand. Some have to delay their construction projects as they needed to divert funds into the healthcare sector, to contain the pandemic. However, many sources forecasted that the construction industry in ASEAN should recover in 2021 since it is the main sector that the Government in each country uses to boost the economy.
Indonesia
Indonesia’s construction sector was moderately hit by the COVID-19 outbreak. The growth rate remained positive, from the earlier predicted growth of 5.72% to 0.2% in 2020. It is expected that the construction growth rate will increase by 5.1% y-o-y in 2021.
The Government expects to kick off the delayed projects in 2021 and to also add on 2021 budget for around IDR 414 trillion (USD 29.4 billion), which is higher by 47% compared to the 2020 budget to maintain consumption and boost economic growth after the pandemic. More than a third of this IDR 414 trillion budget will be administered by the Ministry of Public Works and Housing.
In late November 2020, the Ministry of Public Works and Housing was already processing 1,900 infrastructure procurement packages out of 4,900 planned packages for 2021 through the electronic procurement system. The Government had set a target of wrapping up the bidding process for 30 percent of the total projects by as early as January next year.
In the meantime, state owned enterprises such as PT Adhi Karya, PT Waskita Karya have reported an increase in book orders end 2020 / early 2021 as a result of the increased number of infrastructure development projects in Indonesia.
While disbursement of funds has been slow in Indonesia, there is no doubt that Government is making extraordinary efforts
towards national economic recovery.
Malaysia
In 2020, the Malaysian construction sector was the sector that contracted most, at 18.7% when compared to other sectors due to the pandemic. However, the Ministry of Finance announced that it is expected that construction sector will grow the most, at around 13.9% in 2021, with many infrastructure projects planned as indicated in the Malaysia 2021 Budget. The RM7.35 billion allocation for the Works Ministry under the 2021 Budget will see the construction industry serve as a catalyst towards Malaysia’s economic recovery.
The focus of larger contractors in 2021 will be on the completion of existing ongoing megaprojects such as MRT2, LRT3, the Gemas-Johor Bahru Electrified Double Tracking and the West Coast Expressway. Beyond that, the industry is looking forward more mega projects such as the Mass Rapid Transit Line 3 (MRT3), the Johor Bahru-Singapore Rapid Transport System and whatever remnants of the High-Speed Rail (HSR) project. The HSR project, initially meant to connect Kuala Lumpur and Singapore, was terminated in January 2021. Other than these, there are also other smaller infrastructure projects being planned, which will benefit the small and medium contractors around the country.
However, the rapidly surging new COVID-19 cases, hitting record highs of above 3,000 cases a day has led the Government to impose another round of Movement Control Order (MCO) in the 6 top states, which contribute to about 72% of the country’s GDP (Selangor, Federal Territory, Sarawak, Johor, Penang and Sabah). The country is also in a state of emergency, set to avoid a general election, in the name of controlling the pandemic.
The construction industry will also be affected as the Government is working on minimizing the outbreak at workers’ dormitories as well as at construction sites. Those states under MCO have ordered construction sites to close, with exceptions. The MCO is expected to last a minimum of 1 to 3 months, depending on the progress of COVID-19 control. As such, recovery for the construction industry is likely to start towards the second half of 2021.
Philippines
The Philippines’ construction industry declined significantly by 9.2% in 2020 due to one of ASEAN’s more severe lockdown to contain the pandemic. However, it is expected that the construction industry in the country will bounce back with a growth rate of 8.3% from 2021 till 2024.
The expected economic rebound in 2021 will be supported by massive infrastructure investments through more flood control and water facilities as well as additional digital and health projects. The P1.17 trillion (USD 24.4 billion) earmarked for infrastructure expenditures for 2021 is expected to generate 1.7 million jobs to reduce last year’s high unemployment rate and to help the country get back to a positive growth in early 2021.
The Government has been reviewing the Build, Build, Build program and still targets to complete the infrastructure projects despite the COVID-19 pandemic. The Duterte administration recently identified about 104 priority projects, higher than the 75 projects earlier announced. Among these, an allocation of Php 158.2 billion is for 16 infrastructure projects.
The biggest projects in the 2021 budget is the North-South Commuter Railway System. The second largest project for 2021 is Phase 1 of the Metro Manila Subway and followed by the project of the Ambal-Simuay River and Rio Grande de Mindanao River Flood Control Project. Most of the projects (Railway and subway) are funded and operated by Japan while project on flood controlling is funded by China Government.
However, the continued quarantine restrictions and impact of typhoons remain some of the challenges affecting the implementation of the various projects.
Singapore
In Singapore, the construction sector has been hardest-hit industry due to the pandemic, and it is expected to contract 33.7% for the full year of 2020. This comes after a 61% year-on-year contraction in Q2 2020, a 46.2% contraction in Q3 2020 and a 28.5% contraction in Q4 2020. The improvement in Q4 came with the resumption of construction activities after COVID-19 pandemic came under control.
For a start, at the end of November 2020, the Government has awarded SGD 676 million (USD million) package of the SGD 2.4 billion (USD 1.8 billion) Johor Bahru – Singapore Rapid Transport System project to a Japanese contractor. The project will connect Singapore with Malaysian city of Johor Bahru through a 4 km rail system.
With more construction projects expected to come up and with the easing of restrictions on foreign manpower, the construction industry will soon be on a growth path. Many major projects have been suspended or postponed in 2020 but these may again come back onstream this year. More details are expected to be announced at the upcoming 2021 Budget in February 2021.
Thailand
Thailand’s overall macroeconomic indicators showed recovery signs in the construction sector in the third quarter of 2020 (+10.5% y-o-y growth) compared to the second quarter of the same year (+7.4% y-o-y growth).
The recovery of the first pandemic in the country has a great impact on construction sector, which found accelerated year on year, while other economic sectors found negative growth but at a slower pace than the preceding quarter.
It is expected that spending on public construction projects will rise by 2-3% in 2021, according to Krungsri Bank Forecast. Meanwhile, Krungsri Bank predicted that the construction in private sector would grow by only 0-1% y-o-y. This is due to the weaker spending power at home and the sharp economic slowdown.
In details, the Government will push hard to ensure that six key infrastructure projects begins in 2021. The six projects encompass the high-speed train route linking Suvarnabhumi, Dong Mueng and U-Tapao airports; a centre to handle the maintenance, repair and overhaul of planes; the third phases of Map Ta phut port; the third phase of Laem Chabang port and the development of Digital park Thailand.
In addition to that, the Government has promised to continue infrastructure and electric rail development projects in Bangkok and adjacent provinces covering a total of 559 kilometers with 336 stations by 2029.
Vietnam
Vietnam’s economy grew 2.9% in 2020, and this is one of the fastest growing economies in the world during the COVID-19 pandemic. Among the main drivers behind the positive growth rate is public investment, with a range of public-funded infrastructure projects playing a major role in boosting demand, supporting enterprise development, and creating jobs.
Anticipating the severity of the pandemic, the Vietnamese Government stepped up the disbursement of public investment funds since early 2020. Disbursement accelerated in the second half of 2020 to reach 91.1% of the full-year target of VND 466.6 trillion (US$20.2 billion), up by 34.5% from 2019. Significant funds were spent on major infrastructure projects, such as north-south expressway: Mai Son-National Highway 45, Vinh Hao-Phan Thiet and Phan Thiet-Dau Giay, whose construction started in the third quarter.
Aggressive measures to accelerate public investment in the final months of 2020 further helped Vietnam achieve a strong recovery in the fourth quarter, when the economy expanded by 4.48%, far exceeding the previous three quarters. The final result was an impressive 6.76% growth rate in construction sector, leading the way towards economic recovery for the nation.
Vietnam’s 2021-2025 Medium-Term Public Investment Plan is scheduled to be approved by the National Assembly in July 2021. The Government will focus on the more effective use of funds and the acceleration of key projects, which includes several urgent projects that are key to domestic economic recovery. Public investment is mainly concentrated on key socio-economic infrastructure projects, especially in transport, water resources, education, healthcare and agriculture.
For a start, Vietnam will begin the construction of a new international airport at Ho Chi Minh City. The first phase of the airport project will cost USD 4.7 billion and will serve 25 million passengers. The entire project will cost USD 16 billion and the airport will eventually serve 100 million passengers.
Government
Apart from Government’s infrastructure projects, construction of industrial projects is also one of the main driving factors for the sector. This includes the expansion of the existing factories as well as the new investment. According to Houselink Data, a total of 111 projects are in the finishing and completion stage in 2020, which is a total value of USD 2.1 billion, up 22% in quantity and 34% in value. There are estimated more than 300 projects planned for expansion and new construction.
In Summary
In short, most of the ASEAN-6 economies are working on accelerating public infrastructure projects to get their economies back on recovery. However, challenges remain as Governments continue to battle the resurgence of COVID-19 as they open up their economies. There are hopes that vaccination will help protect the people and that will allow the economies to open without fear of more outbreaks. The construction sector is expected to improve in 2021, but growth is going to be uneven across the region.
Source:SEAISI
