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Poor infra still a big concern in emerging Asia

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Poor infra still a big concern in emerging Asia

/ 12:06 AM January 16, 2017

Infrastructure lack will drag growth across emerging Asia except in the Philippines and Thailand amid plans by their governments to ramp up spending in the sector, London-based Capital Economics said.

“The quality of existing infrastructure varies considerably across emerging Asia. While Hong Kong and Singapore have some of the best infrastructure in the world, the quality of infrastructure in countries such as Vietnam, the Philippines and most of South Asia is poor, not just compared with the rest of Asia, but also with other emerging economies,” Capital Economics said in a report titled “Poor infrastructure to remain a drag on growth.”

“In the Philippines and Indonesia, inadequate ports and gridlocked roads make transporting goods both slow and expensive, weighing on growth,” it added.

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“With rapidly growing populations in the Philippines, Vietnam, Indonesia as well as South Asia set to put increased pressure on existing infrastructure over the coming years, the World Bank has estimated that these countries will need to spend the equivalent of 5.5 percent of its GDP (gross domestic product) a year to ensure that inadequate infrastructure doesn’t become a major drag on development,” Capital Economics noted.

In this regard, Capital Economics said the Philippines and Thailand were seen to become “rare bright spots” amid plans to significantly hike infrastructure expenditures in the medium term.

“In the Philippines, for example, the government’s 2017 budget projections envisage infrastructure expenditure rising to nearly 6 percent of GDP. President Duterte has stated that he plans eventually to increase this to 7 percent of GDP,” it noted.

“The Philippines and Thailand are the only two countries [in addition to China] that are likely to meet the World Bank’s spending target. Elsewhere, weak fiscal positons will keep spending low. Accordingly, poor infrastructure looks set to remain a constraint on growth across the region for the foreseeable future,” according to Oxford Economics.

Under the 2017 national budget, the Duterte administration plans to spend P860.7 billion or 5.4 percent of the GDP on hard infrastructure, en route to bringing the infrastructure spending-to-GDP ratio to 7.2 percent by 2022.

“It is by far the most aggressive push for infrastructure in our history. In 30 years, infra spending did not even go beyond 3 percent of our GDP,” Budget Secretary Benjamin E. Diokno had said. —BEN O. DE VERA

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TAGS: Asia, Business, Capital Economics, economy, Growth, infra, Infrastructure
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