Asean infra-backed growth boom for Malaysia, says HSBC
Mukhtar Hussain

According to its CEO, railway financing is the key anchor of planned transport spending

By DASHVEENJIT KAUR / Pic by TMR

Malaysia can reap the benefits from the numerous infrastructure-backed growth projects in Asean, said HSBC Bank Malaysia Bhd.

CEO Mukhtar Hussain said Malaysia’s big transport opportunity is to boost regional and local connectivity, while improving efficiency in the economy by creating an integrated transport system.

“It will also result in upgraded logistics capacity to enhance the country’s status as a regional hub for international trade. This is a key focus area for the country under the government’s 11th Malaysia Plan,” he said in a statement yesterday.

Mukhtar said planned infrastructure spending for the country from 2016 to 2020 is estimated at US$85 billion (RM364.65 billion), up from the US$50 billion spent from 2011 to 2015.

He added that railway financing is the key anchor of planned transport spending, as seen by the significant investments that have been made in rail projects that are at the forefront of the country’s list of mega projects.

“This will include upgrading existing mass transit capacity,” he added. Malaysia also stands to benefit from China’s Belt and Road Initiative (BRI) infrastructure investment drive. This can be seen by China’s involvement in major Malaysian rail projects such as the East Coast Rail Link and Kuala Lumpur-Singapore high-speed rail project, he said.

At the same time, a strategic partnership between Melaka and the Chinese province of Guangdong aims to promote the development of various projects that will help establish the former as a strategic port and hub along the Belt and Road route, Mukhtar said.

• Asean marks its 50th anniversary with its biggest economies pledging to double infrastructure investments to more than US$700 billion in a five-year span.

Mukhtar said infrastructure-backed growth will enhance the development of trade and tourism to drive sustainable economic growth for decades to come.

Transport initiatives are a key focus for budgeted spending in the 10-member economies of Asean till 2020, he added.

Mukhtar said the massive potential consumer spending power of a substantial, young and increasingly urban population is a key attraction for China under its BRI to upgrade the physical infrastructure, investment and business links that help drive trade.

According to the annual World Economic Forum Global Competitiveness Report, such investments are vital — given the infrastructure’s crucial role in creating long-term economic strength.

“The emphasis on building better connections to facilitate trade and investment, flow of goods and people in and around Asean cannot be underestimated. It will help domestic and international companies maximise opportunities inside one of the world’s most populous, fastest-growing and vibrant regions,” Mukhtar said.

Asean holds a combined gross domestic product of about US$2.8 trillion, and is already ranked as the world’s seventh largest economies on track to be in the top three by 2030.

Mukhtar said the World Bank data noted that improving transport links in the Asean supply chain will bring down import costs, which is a big achievement given that 70% of global trade is now in intermediate goods, services and capital goods.

“No small feat, considering that Asean trade volume is forecast to roughly double to US$2.8 trillion by 2025 from 2014,” he added.

Mukhtar said the increase in trade volume will be fuelled by consumption anticipated from 57 million new middle-class households being created in the coming decade,” he said.

Asean and China share a goal to double their bilateral trade to US$1 trillion by 2020 from around US$500 billion last year, “which makes business opportunities for infrastructure investment and the ecosystems that grow around major projects particularly compelling”, Mukhtar said.