Hanoi after some street lights were turned off on May 30 to save electricity as demand for air conditioning soars. Vietnam, which relies on hydropower for almost half its energy needs, has struggled with a series of heatwaves since early Mayas rivers and reservoirs at hydroelectric power plants dried up. Photo: AFP
Southeast Asia’s infrastructure is one area of focus for foreign businesses. According to surveys, international investors see efficient logistics and infrastructure connectivity as among the most important measures to facilitate more investment in Asean – along with policy measures like streamlined investment procedures and visa support for expatriates.
Recent power cuts caused by a heatwave in Vietnam, for example, have exposed the capacity limits of the electric grid, which badly requires an upgrade, and the need for electricity market reform. This has alarmed foreign businesses and disappointed expectations of Vietnam becoming a regional leader in renewable energy.
Congestion is another headache for businesses in the region’s metropolises, although most are working to build or improve public transit infrastructure. Longer distance intercity logistics are also daunting in this region of islands and archipelagos.
To boost connectivity, more inter-regional cooperation is needed. Construction of a rail link to connect Laos with Thailand and Kunming is under way with support from China. Singapore and Malaysia are also reportedly considering reviving a cancelled high-speed railway project between their respective capitals. The potential economic benefits are considerable, though experience suggests more needs to be done to ensure such infrastructure projects have environmental and social sustainability as a top priority.
Innovation can also go some way to solving the infrastructure challenges. In Indonesia, entrepreneurs are working to digitise the trucking industry to improve efficiency. Artificial intelligence can increasingly be incorporated into logistics to cut costs and improve sustainability.
Where will the funding come from? While Asean has long relied on financing from abroad, intra-Asean investment could assume a bigger role in funding infrastructure.
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At the Asean Summit in May, Indonesian President Joko Widodo said Indonesia wants to play a role in the development of Cambodia’s infrastructure. Cambodia wants to leverage its location in the Gulf of Thailand and overland connections to three other Southeast Asian countries to become a logistics hub for the region.
Asia-based multinationals, such as Japan’s Aeon, see the emerging economy as a potential logistics hub. But this will require better infrastructure and lower costs.
Indonesia can help while also using infrastructure financing to highlight its emergence as a rising regional economic power able to chart a neutral course amid US-China tensions.
