PhyDi infrastructure leads the path to sustainable growth in ASEAN
By Sachin Patwardhan, Head of Project and Export Finance, ASEAN and Australia, Standard Chartered Bank
Asia, led by China, has been one of the first regions in the world to experience an economic rebound following the setbacks caused by the COVID-19 pandemic. That quick recovery means Asia is forecast to deliver stronger performance than any region in 2021, with real GDP estimated to rise 7.7% this year.1
To support this post-pandemic growth, governments of ASEAN and other developing economies are getting ready to launch a new round of infrastructure investment, and for good reason. As well as creating jobs and bolstering productivity, prudent infrastructure investment has a powerful multiplier effect, boosting economic growth by as much as 2.7 times2, based on data from developed economies like the US. Higher quality infrastructure also positively impacts health, education and wealth outcomes.3
It’s no wonder then that ASEAN governments have made infrastructure an integral part of their economic recovery strategies. In its recently announced budget, the Singapore Government revealed plans to finance major, long-term infrastructure spending, including for new Mass Rapid Transit (MRT) lines as part of the country’s rail system for transporting passengers.4 Meanwhile, Vietnam has declared a number of major transport projects, including the USD5 billion North-South Expressway.5 It also introduced a new law on public-private partnerships at the start of the year to spur investment.6
While there is bound to be a lot of focus on physical infrastructure such as road, rail and ports, for ASEAN to really capture the opportunities from this building boom it must deliver projects that combine physical infrastructure with digital infrastructure. Physical and digital buildouts, or what I call “PhyDi” infrastructure, is the key to creating a strong and sustainable future.
Meeting the demand for digital infrastructure
One of the interesting outcomes of the pandemic was the exponential growth of digital technology in our everyday life – ASEAN added 40 million new internet users in 2020.7And according to a study by Google, Temasek, and Bain & Company, the region’s internet economy, which includes e-commerce, could triple to exceed USD300 billion by 2025.8
The impact of that accelerated digitalisation has been felt both at home and at work. Before COVID-19 the norm was for in-person, face-to-face meetings, but as travel and social interactions were restricted, the focus has shifted to virtual meetings and livestreamed conferences.
In addition, many companies, including Standard Chartered, are offering employees the option to work more days from home. As more large institutions embrace workplace flexibility and working habits change, the demand for internet usage will only increase, requiring a bigger investment in digital infrastructure.
This trend is already evident with the region seeing strong demand for digital infrastructure assets such as data centres and telecommunication towers that support, enable and power a large proportion of the digital economy. This demand will be boosted further by the roll-out of 5G technology, which is expected to happen gradually across ASEAN over the next four to five years.
Nevertheless, to realise the maximum benefit from physical and digital infrastructure investments, the two aspects will have to be seamlessly interwoven into future projects. For example, data centres that consume large amounts of power can be planned and developed together with renewable energy sources such as solar or wind power. This will be an exciting new development as traditionally these schemes would have been funded as two separate projects. However, by embracing a PhyDi approach, green data centres can be delivered as a single project in the future.
So rather than treating physical and digital infrastructure as separate, the best strategies will seek to synergise digital infrastructure with physical buildouts to enhance the efficiency and performance of these projects.
Sustainability is the bedrock of growth
As the above example also illustrates, PhyDi infrastructure investment will increasingly have sustainability at its core as ASEAN nations work towards meeting their targets under the United Nation’s Sustainable Development Goals (SDG). It also makes good economic sense, with investments in green infrastructure estimated to create more the 30 million jobs in ASEAN by 2030, according to the Asian Development Bank.9
To support this transition, Standard Chartered has committed to fund and facilitate at least USD75 billion to SDG projects including USD40 billion towards project financing services for infrastructure that promotes sustainable development.
Increasingly, governments and businesses will need to work together and prioritise initiatives that support the region’s sustainability goals. After all, the future of infrastructure development lies in our concerted ability to leverage emerging technologies that enhance the efficiency and sustainability of physical buildouts.
As governments, businesses and communities start mapping out plans for the future, the successful development of PhyDi infrastructure will support economic growth, create new opportunities and ensure ASEAN creates a sustainable future.
1 https://research.sc.com/research/api/application/protected/rp/api/data/render/195086
5 https://www.vietnam-briefing.com/news/why-vietnams-public-investment-plan-matters-for-investors.html
6 https://law.asia/new-investment-landscape-in-vietnam
7 https://economysea.withgoogle.com/flight-to-digital
8 https://storage.googleapis.com/gweb-economy-sea.appspot.com/assets/pdf/e-Conomy_SEA_2020_Report.pdf