Timetric has published its latest range of national economic reports. Looking at the smaller construction markets of Asia (when compared with the giants of India and China) the economists analyse industry performance and future indicators to give an idea of growth to guide investors over the next few years.
Hong Kong
Infrastructure construction was the largest market in Hong Kong’s construction industry in 2013, accounting for 47.0 per cent of the total industry value. It grew steadily to reach a value of HKD 82.6 bn (USD 10.7 bn) in 2013. Growth will be supported by the need to invest in the water infrastructure network, to reduce dependency on China for water resources. The market is therefore expected to hit a CAGR of 9.56 per cent and reach a value of HKD 130.4 bn (USD 16.8 bn) in 2018.
Aside from water, rail is a significant factor. In the 2013-2014 budget, the government included plans to extend Hong Kong’s rail network to Kennedy Town and Sai Ying Pun in 2014, with extension to Ap Lei Chau Hang and Wong Chuk, and Ho Man Tin and Whampoain in 2015. Construction of a rail line from Shatin to Central Link is expected to be completed in phases in 2018 and 2020. The category is therefore expected to record a CAGR of 9.64 per cent to value HKD 21.2 bn (USD 2.7 bn) by 2018. The road construction industry is dominated by the Hong Kong-Zhuhai-Macau Bridge is one of the main infrastructure projects: worth HKD 83.3 bn (USD 10.7 bn), its construction started in 2009 and is scheduled to complete in 2016. The category is expected to enjoy a CAGR of 9.71 per cent, reaching a value of HKD 33.0 bn (USD 4.3 bn) by 2018.
Indonesia
Owing to high investment, the construction industry posted a review- period compound annual growth rate (CAGR) of 27.11 per cent to value IDR 2.6 quadrillion (USD 254.5 bn) in 2013.
Industry growth is expected to remain strong over the forecast period (2014-2018), as a result of the government’s focus on infrastructure and industrial construction, and the implementation of the multiyear Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI). Consequently, industry output is expected to rise at a forecast-period CAGR of 15.90 per cent to value IDR 5.5 quadrillion (USD 436.5 bn) in 2018.
The infrastructure construction market valued IDR 1.6 quadrillion (USD 156.7 bn) in 2013. The CAGR of 29.94 per cent can be attributed to signi_ cant government investments and the participation of the private sector through publicprivate partnerships (PPPs) in infrastructure developments. The market is expected to have a CAGR of 17.79 per cent to value IDR 3.7 quadrillion (USD 291.5 bn) in 2018.
Road infrastructure was the largest category in the infrastructure construction market in 2013, accounting for 47.5 per cent and valuing IDR 773.1 trillion (USD 74.5 bn). The category recorded a CAGR of 29.54 per cent during the review period, driven by the government’s encouragement for road infrastructure construction as the number of vehicles continues to rise. The category is expected to register a forecast-period CAGR of 17.73 per cent to value IDR 1.7 quadrillion (USD 138.2 bn) in 2018 based on government encouragement for road-building projects in the wake of double-_ gure percentage growth new vehicle sales.
The rail infrastructure category recorded a review-period CAGR of 26.66 per cent to value IDR 109.3 trillion (USD 10.5 bn) in 2013. The long-term plan to improve the country’s rail network has led to the need for rail infrastructure upgrades. Consequently, the category is expected to grow at a forecast period CAGR of 17.72 per cent to value IDR 247.2 trillion (USD 19.5 bn) in 2018.
Energy and communications infrastructure was the third largest category in the infrastructure construction market in 2013, with a 14.3 per cent share of the market’s value. The category recorded a review-period CAGR of 28.60 per cent to value IDR 233.2 trillion (USD 22.5 bn) in 2013. According to the Ministry of Energy and Mineral Resources (MEMR), electricity demand in the country is projected to increase by 10.1 per cent annually.
The category is expected to grow at a forecast-period CAGR of 18.88 per cent to value IDR 553.7 trillion (USD 43.8 bn) in 2018.
Japan
After coming to power in 2012, the government announced an emergency stimulus package of JPY 10 trillion (USD 110 bn) in January 2013, with a primary focus on public work infrastructure. Public work subsidies increased to JPY 5.3 trillion (USD 0.1 trillion) in 2013. The package focuses on reconstruction projects including repairs and the construction of earthquake-resistant roads, bridges and tunnels.
The Japanese construction industry recorded a compound annual growth rate (CAGR) of 0.14 per cent during the review period (2009-2013) and valued JPY 54.1 trillion (USD 558.8 bn) in 2013. The country’s economy contracted following an earthquake, subsequent tsunami and nuclear disaster in 2011.
In a bid to reconstruct and revitalize the economy during the review period, the government introduced economic reforms, such as an increase in subsidies and tax breaks for companies that invest in factories.
The construction industry outlook is favorable, as a result of the government’s focus on reconstruction activities. According to the Ministry of Economy, Trade and Industry (MEIT), indices of construction activity increased from 87.5 in the fourth quarter of 2012 to 99.4 in the fourth quarter of 2013, registering growth of 13.6 per cent. The construction industry’s output is expected to increase at a CAGR of 3.19 per cent over the forecast period (2013-2018), to reach a value of JPY 63.4 trillion (USD 682.1 bn) by 2018.
The infrastructure construction market was the largest in the Japanese construction industry in 2013; it accounted for a 47.4 per cent share of the industry’s output and valued JPY 25.7 trillion (USD 264.8 bn).
It was also the fastest-growing market during the review period, registering a CAGR of 0.24 per cent. The market is expected to register a forecast-period CAGR of 4.05 per cent to reach a value of JPY 31.3 trillion (USD 337 bn) in 2018, driven by investments in public infrastructure, such as the construction of a maglev train line, and developments in transport and energy infrastructure.
Road infrastructure accounted for a 25.3 per cent share of the market value in 2013, equal to JPY 6.5 trillion (USD 83.3 bn) and representative of a review-period CAGR of -0.45 per cent. The earthquake in Tohoku in 2011 damaged the majority of the region’s road infrastructure, creating the need for road works, and the collapse of the Sasago tunnel in December 2012 demonstrated the infrastructure’s aging condition. In order to fund reconstruction activities in the country, the budget framework was increased from JPY 19 trillion to JPY 25 trillion over 2011-2015. The government has also proposed, in its 2014 budget, an increase in spending on public works by JPY 680 bn (USD 8.5 bn) to reach JPY 5.9 trillion (USD 0.1 trillion). The road infrastructure category is anticipated to post a forecast-period CAGR of 3.74 per cent to value JPY 7.8 bn (USD 83.8 bn) in 2018.
The rail infrastructure category accounted for a 16.2 per cent share of the infrastructure construction market in 2013 and valued at JPY 4.2 trillion (USD 43 bn), representative of a review-period CAGR of -3.93 per cent.
The category is expected to record a forecast-period CAGR of 4.20 per cent to value JPY 5.1 trillion (USD 55.1 bn) in 2018.
Singapore
The infrastructure construction market valued SGD 6.5 bn (USD 5.2 bn) in 2013. The Singapore government has invested heavily in rail and road infrastructure, and has a strong pipeline of various rail transit projects nationwide. Moreover, 80 per cent of the country’s total electricity is generated using natural gas fuels.
According to the Energy Market Authority (EMA), the government is expected to add 3GW to the country’s total power capacity through natural gas by 2017. Increased investments in energy infrastructure in order to meet rising energy demand, and transport infrastructure to enhance the country’s connectivity will also support the market’s expansion. The market is therefore expected to record a CAGR of 4.96 per cent to value SGD 8.3 bn (USD 6.5 bn) by 2018.
The Ministry of Transport (MoT) launched a new Land Transport Master Plan (LTMP) in 2013, which replaced the LTMP 2008. The MoT plans to expand the country’s rail network with the construction of two new rail lines, and extensions of three more. The length of the rail network is expected to double from the present 178km to 360km by 2030.
South Korea
Infrastructure construction is the largest market in the South Korean construction industry. The market posted a review-period CAGR of 1.20 per cent, to value KRW 68.4 trillion (USD 62.4 bn) in 2013. The market is projected to continue expanding until at least 2018, driven by investments in road, rail, and energy infrastructure. The government has placed a high emphasis on infrastructure construction, and KRW 124 trillion (USD 108.6 bn) worth of infrastructure projects are in the pipeline. The market is consequently expected to record a forecast-period CAGR of 4.04 per cent, to value KRW 83.4 trillion (USD 80.3 bn) in 2018.
This is a result of increased government investment and participation of the private sector through public-private partnerships (PPPs), which will support infrastructure construction activity over the forecast period.
The long-term plan to improve the country’s rail network has led to the need for rail infrastructure upgrades.
Consequently, forecast-period growth in the category will be supported by various rail construction projects, such as the Wonju-Gangneung high-speed rail project, the Kimpo rapid transit project, the Jinjeop metropolitan rail line 4 extension project and the Daegok-Sosa metropolitan rail line expansion project.
The category’s value is expected to increase from KRW 7.2 trillion (USD 6.6 bn) in 2013 to KRW 9.1 trillion (USD 8.8 bn) in 2018, at a forecast-period CAGR of 4.81 per cent.
