May 08 ,2014 | by Hari Sri

Growth in Asia boosts demand for infrastructure

Asian economies are growing fast and now they need the infrastructure to support their expansion.

Many of the world’s fastest-growing economies are located in Asia-Pacific. But as the region undergoes rapid development, demand for infrastructure to support continued expansion is reaching new heights.

These are the views of Ram Charan, an independent business adviser, who recently told Bloomberg that China will be home to at least 400 airports, while India will need a minimum of 100 additional facilities as growth continues.

 

Economic growth in other key economies dotted throughout Southeast Asia such as Vietnam, Thailand and Indonesia will also mean new facilities are required elsewhere.

With the added need for investment in effective, well-maintained road networks, railways and other civil engineering projects that come with a booming economy, it is fair to say that companies will be spoilt for choice when it comes to investing in infrastructure projects.

“The long-term unstoppable trend is clear, that the largest amount of growth is going to be in this part of the world,” Mr Charan told the news source, though he warned that there is likely to be some volatility as these emerging markets take the global stage.

 

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So far, infrastructure development has not managed to keep up with the rate of change in fast-growing economies. It is easy to see why considering the fact that in many nations, the task is simply huge – logistically, huge geographical areas like India and China can be extremely tough to negotiate, while Indonesia’s sprawling chain of islands can make supply chains difficult to set up.

Though arguably this hasn’t held these emerging economies back too much, it does beg the question of how fast growth could have been if there had been more infrastructure in place to enable expansion.

In the next few years additional investment is likely to come in as funding opportunities increase. For example, the Asia Infrastructure Bank will act as a lender specifically for these kind of projects when it eventually gets off the ground. Although it is still some way from getting up and running, it has the potential to give fresh impetus to investment in these vital projects.

A growing middle class in emerging economies has seen a spike in domestic consumption across many countries, meaning logistics and supply chains for retail and other industries are becoming ever more important. Infrastructure is set to play an even bigger role in shaping the direction of future growth.

Hari Sri

Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.

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