ASEAN Connectivity: Challenges and

Opportunities in Infrastructure Development

Fauziah Zen
The 3rd ASEAN Connectivity Forum
ASEAN-Korea Centre & The Federation of Korean Industries
Seoul, 22 October 2015
 Physical Connectivity
- Intra ASEAN
- There are still many underdeveloped connections: roads, railways,
waterways, airlines.
- Domestic connectivity is still big issues in many AMS with Singapore
and perhaps Brunei as exception.
- Archipelagic countries have serious challenges in maritime
connectivity.
- ASEAN-Korea Connectivity
- Korea Japan (Sea lines)
- Korea through road and railway: via North Korea and China Mekong
Region (Vietnam, Laos, Myanmar)
- Sea lines and Air lines: South East Asia

2
Growing markets, huge opportunity
Infrastructure as key of growth

Challenges Opportunities

Source: World Economic Forum Report 2013-2014

4
Financing Infrastructure

5
 Infrastructure Investment Needs
as % of GDP (est.), 2010-2020

Source: Bhattacharyay (2010)

Characteristics of investment aspects in
ASEAN economies
Investment is capital intensive with high sunk-costs
Investment is highly leveraged
Capital investment is long-term
Revenue streams are stable and generally indexed to inflation
Output has low price elasticity
Debt servicing obligations are matched to project cash flows
Lender security is generally limited to the bundle of contracts
that make up the investment agreement
The relationship between the parties is usually regulated by
contract.
 Public Private Partnership (PPP)
Demand for infrastructure:
Asia needs US$8 trillion (2010-2020) under estimated figure
62.6% of the investment shall occur in the energy and transport
sector
Countries need to spend 7-8% of GDP
Average spending is at 3-4% of GDP
Realization of Master Plan of ASEAN Connectivity (MPAC)
Filling the gap: call for private participation

PPP is one of financing modalities, offers some benefits, but

requires several prerequisites, inter alia, business friendly
environment; government leadership commitment and
competency; sufficient regulatory and institutional framework.
ASEAN Infrastructure: Financing Problem?

YES. But its not on the lack of supply per se. Instead there are
quite abundant potential financial resources that can be
utilized.
More serious issues are:
regulatory framework, legal poor preparation, lacking
certainty, appropriate competent human
incentives. resources, low fund
allocated for Project
Development Facility (PDF),
lacking communication to
international community.

Lacking investor Lacking properly

friendly prepared
environment projects
9
 Beyond Financing Issues

Dealing with
Ease of Doing Starting a Construction Getting Registering
Economy Business Rank Business Permits Electricity Property
Singapore 1 1 2 2 2
Malaysia 18 3 8 9 10
Thailand 26 9 3 3 3
Vietnam 78 14 7 22 5
Philippines 95 22 20 6 16
Brunei Darussalam 101 23 11 12 21
Indonesia 114 20 23 16 17
Cambodia 135 24 25 23 15
Lao PDR 148 19 18 21 11
Myanmar 177 25 21 19 19

Source: World Bank Doing Business 2015.

Rank: 1-189
 Ease of Doing Business (2015)

Source: World Bank, 2015

 PPP Regulatory Framework
Certainty

Philippines.
Malaysia,
Indonesia,
Singapore
Thailand
Specific Unspecific
Law Law

Brunei,
Vietnam Cambodia,
Laos,
Myanmar

Uncertainty
 PPP Institutional Setting
Country Leading Unit Concurrent tasks Fragmented tasks
Malaysia UKAS (P3U
PPP Unit)
Philippines PPP Centre Line Dept.
Indonesia MOF Bappenas, CMEA, BKPM
Singapore MOF PPP Advisory Council
Thailand State Enterprise Policy Office, MOF
Brunei Department of Economic Planning
and Development, Brunei Econ.
Dev. Board and MOF
Cambodia MEF, Council for Dev. of
Cambodia, Min. of
Commerce
Lao PDR Min. of Planning and
Investment, MOF
Myanmar MNPED, Myanmar Inv.
Commission
 Procedures
Country Streamline Process Main Challenges
Malaysia ++
Philippines ++ Needs multi-agency approval, risk allocation
problems
Indonesia + Timeline, land clearing
Singapore +++
Thailand + Unclear proj. valuation, support, definition,
timeline
Brunei ? No example
Vietnam ? Macroeconomic challenges, policy changes
Cambodia ? Specific favorable sector (energy), unclear
proc., no govt support
Lao PDR ? Incomplete guides (underdevelopment), no
govt support.
Myanmar ? Timeline, unclear proc., no govt support
 Cross-border Projects
Large scale projects Dealing with multi
Supported by authorities
international Complex
org./development
banks
Growing future markets

Advantages Challenges

Opportunities Caveat

Needs international Very long process

experience
Showcase
Prospective Infrastructure Subsector in ASEAN
Turning Challenges into Opportunities

Korean experience in PFI

Finding the right technology/sectors, the right
approach/offers, and the right competitors.
Direct and indirect perspectives
Maintaining good relation with host countries.
 Thank you for your attention

email: fauziah.zen@eria.org
http://www.eria.org/publications/key_reports/asean-ppp-guidelines.html
http://www.eria.org/publications/research_project_reports/FY2013/No.15.html

18
 Foreign Ownership for Lands and Buildings
Country Foreign Ownership
Malaysia No restriction for foreigners, except for: Malay Reserve Land, Real estate< RM500,000 per unit,
Low cost houses, Real estate reserved by state authority for bumiputera interest.
Philippines The 1987 Constitution: Corporations (>60% of whose capital is owned by citizens) may acquire
private lands, cannot own public land and can only hold the same by way of lease.
Indonesia Right to own land is limited to citizens and certain legal entities. Foreign & domestic companies
may hold the Right to Build (HGB); Land Cultivation Rights Title (HGU); and, Right to Use (HP).
Most foreign companies hold HGB to construct & own buildings on land for max 80 years, and
could be sold, transferred, or encumbered by a mortgage.
Singapore Two types of land tenure: freehold, leasehold. The freehold under GFS is absolute title whereas
SLG is subject to the terms under States Act. The leasehold is mainly 30, 60, 99 and 999 years
period and is under the agreement with landlord or the State.
Private sector in some of the PPP projects, obtains land through sub-lease contract with a
government body with a head lease between the body and the Singapore Land Authority
Thailand "Thai citizens are allowed to own immovable assets while foreigners are able to obtain ownership
for land and buildings under conditions specify in the Land Law, Private, Commonly-owned
Housing Act, Investment Promotion Act and Industrial Estate Authority of Thailand Act.
The Land Code generally prohibits the ownership of land by foreigners in Thailand, except that
they are authorized by the Board of Investment (BOI). However, the Condominium Act allows
some foreigners to own condominium if they meet one of five criteria: 1) Foreigner who hold a
residence permit, 2) Foreigner who bring the entire purchase price from aboard in a foreign
currency, 3) Foreigner permitted to enter Thailand under the Investment Promotion Act, 4) Juristic
person having some land rights as foreigners as provided in the Land Code, 5) Juristic person
having BOI privileges in Thailand."
 Foreign Ownership for Lands and Buildings
Brunei Land ownership only for citizens. Locally incorporated/registered companies may be a lessee of up
to 60 years over an industrial/commercial property, and may obtain temporary occupation permit
of state land for industrial or agricultural purposes.
Cambodia Land ownership for QIP (Qualified Investment Project) Cambodian citizens and entities only. The
use of land shall be permitted to investor, including concessions, unlimited long-term leases and
limited renewable short-term leases.
Lao PDR Ownership of land belongs exclusively to the nation and is not granted even to the citizens.
Foreign investors are entitled to buy land use rights from the Government according to a certain
limit and procedure. Investors who wish to use government-owned land must apply for a
concession and then obtain approval by the prime minister or the Council of Ministers.
Myanmar Foreign investors not allowed to purchase land, may obtain usufruct rights by leasing from the
government or by forming a joint venture with a government agency. Under the New Investment
Law investors may lease lands both from private entity/person as well as the government with
permission of the MIC. Lease term can be 50 years and application for 10-year extension may be
granted twice (70 years in total) to the foreign investors.
Vietnam Land is public property. The State will allocate or lease land to individual or organization. Holding
the Certificate of Land Use Right (CLUR) is the evidence of registration of the Land Use Right.
Assets attached to land is acknowledged in the CLUR and the owner registers its ownership of
assets in accordance with the provisions of the laws on registration of immovable assets and is
issued Certificate of Ownership of Construction Works (COCW). Ministry of Natural Resources and
Environment is the body to issue the CLUR. Foreign invested organizations established under the
laws of Vietnam are entitled to be issued CLUR and COCW. Foreign organizations established
under foreign laws are not given the CLUR and COCW.

Source: ERIA, 2014