Asia Construction Outlook - 2013 - Final2 - Small

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STRUCTIO
OUTLOO
About AECOM
ASIA
CONSTRUCTION
OUTLOOK 2013
Foreword
Welcome to the rst biannual edition of the Asia Construction
Outlook (ACO) published by AECOM and Davis Langdon KPK,
an AECOM company.
Introduction
As we all know, it has been an interesting yet exciting year

for our industry.
Executive Summary
Asia continues to be the growth engine of the world, with

construction spend accounting for a staggering US$2.8
trillion in 2012.
Asia Overview
Construction Market Overview
Of course, some regions and asset classes have performed

better than others, and as more money ows in and out of
Asia, volatility is here to stay. So, it is with this edition of
ACO 2013 that we use our over 40 years of on the ground
experience to provide our clients and partners with an
industry overview of activity levels in 2012 and with longer
term forecasts by region, county and city. Our analysis is
based on a combination of sector statistics together with
the results of an in-house market sentiment survey by our
senior leadership.
I hope you all enjoy this edition of ACO 2013 and look
forward to enhancing our relationships.
Dato Sri Kandan
Chairman
Davis Langdon KPK, An AECOM Company
Country Overview & Outlook
14
China Overview
16
India Overview
18
Indonesia Overview
20
Hong Kong Overview
22
Malaysia Overview
24
Philippines Overview
26
Singapore Overview
28
Thailand Overview
30
Vietnam Overview
33
Asia Outlook
34
Introduction
Asia is the most populated
continent in the world, but many
people are still without their own
residential accommodation
This paper provides an overview of the construction

market in Asia midway through 2013. It reviews
industry activity levels in 2012 and provides near
and longer term forecasts for construction activity
by region, country and city. The ndings are based
on analysis of sector statistics combined with the
results of an in-house market sentiment survey.
Note:
All data throughout this document are expressed
in US dollars ($):
- Market size = US $billion at constant 2010 prices;
and
- Market growth = per annum
[average annual growth rates].
2 Asia Construction Outlook Introduction
AECOM and Davis Langdon KPK, an AECOM company

undertake a construction market sentiment survey
in Asia twice a year. We send questionnaires to our
construction experts across the region and the
results provide very valuable information on the most
important future trends in construction activity, over
the short, medium and longer term. Opinion surveys
offer essential insights into economic activity
and when repeated regularly, they can provide an
in-depth understanding of the direction in which
markets are moving.
Here, we look at the results of our May 2013 survey,
based on 41 respondents in nine Asian countries.
For further information on our methodology or other
matters, please contact us at any of our ofces or by
emailing: askasia@aecom.com.
Asia
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Executive Summary
Asia is tipped to be the worlds fastest growing region
between now and 2020. Until the end of the present
decade alone, the region is forecast to grow at a rate
of around 7 percent a year.
Accordingly, the Asian construction market is set to
be one of the busiest on the planet. In this review, we
highlight the key opportunities, trends and challenges
in this vibrant region.
India offers a signicant level of opportunity because

despite having a population comparable in size to
that of China, its construction sector is only about
one-third the size of the Chinese market. However,
with the public purse constrained, growth will
depend on Indias ability to attract private nance.
While Western economies have slowed, Asia has

maintained growth, albeit at lower levels than in
previous years. As a result, today Asia is the largest
regional construction market worldwide, accounting
for some 40 percent of global construction spending
in 2012.
Indonesia emerges in our review as a particularly

interesting market. Construction spending in the
worlds fourth most populous country accounted
for more than a quarter of the nations GDP in
2012 with around half of this expenditure funding
infrastructure projects.
Asia has become increasingly dependent on domestic

demand in recent years. Burgeoning afuence and
urbanization, a headline trend forecast for the region
over the coming decades, will strengthen that demand
going forward, further fueling construction activity.
Our research also found that the Indonesian capital

Jakarta is viewed as the number one city in the
region for potential market growth and protability.
Interestingly, expectations for growth and
protability in Chinese cities are relatively poor.
This key trend will also steer construction in a new

direction: Activity will shift away from non-residential
structures and instead move towards infrastructure,
and then in the longer term to residential projects.
Funding models will also evolve in Asia, with
growing use of private nance, including publicprivate partnerships.
Vietnam, despite being one of the smaller

construction markets in Asia, is set to see rapid
growth in spending on residential, non-residential
and infrastructure projects over the next ve years.
In the shorter term, the property market is suffering
from a downturn but this is expected to be overcome
in the longer term.
Our review shows that China is the standout market,

based on both its huge size and growth potential.
The country accounts for some 41 percent of the Asia
Pacic total construction spend, with expenditure
of US$1.25 trillion last year. China was also top in our
research in terms of protability expectations for
rms working in the market.
Although Japan is the regions second largest market

by size, the present spike in construction activity is
forecast to be relatively short-lived. This is largely
because much of the work is being driven by rebuilding required following the earthquake and
tsunami in March 2011.
In terms of market size, China is followed by Japan,

India, Korea and Indonesia. However, the strongest
4 Asia Construction Outlook Executive Summary
growth in construction spending will be seen in

China, India, Indonesia and Vietnam.
Overall, the review shows that Asias construction

market offers excellent prospects for growth and
protability over the short-, medium-, and long-term.
Asia Construction Outlook Executive Summary
Asia Overview
Despite economic turmoil in most of the rest of the
regions of the world, the economic fundamentals
in Asia remain robust, if slightly muted compared
to the recent past. GDP growth is forecast to be
around 7 percent per annum (pa) through to the end
of the decade and Asia is expected to be the fastest
growing region in the world through to 2020.
Given some of the concerns in Asias primary export
markets, Western Europe and North America, future
economic growth is expected to be led largely by
domestic demand. With diminished reliance on
exports, countries will focus increasingly on trade
and investment in their home markets.
This will be facilitated by relatively easy access

to nance and a robust local labor market. Over
the longer term, the trend will strengthen because
domestic demand will be fueled further by the
growing middle class and rising real income rates.
We expect these socio-economic changes to impact
Asian construction markets signicantly. Principally,
construction activity will steer away from nonresidential structures and towards infrastructure in
the near term and residential buildings in the longer
term. Below, we examine the resulting outlook for the
construction market in the region.
Central-Wan Chai Bypass, Hong Kong, China
6 Asia Construction Outlook Asia Overview
Asia Construction Outlook Asia Overview 7
Examining construction spending in individual

countries (Figure 4.1) shows that China is the
largest market, followed by Japan, India, Korea
and Indonesia. The gures demonstrate how China
dwarfs the other markets. For example, Indonesias
construction spend is less than a tenth of Chinas.
Construction
Market Overview
2012 was yet another difcult year for the
construction industry in most parts of the
globe, with Asia the only real bright spot. The
Asian construction market is now the single
largest regional market in the world, accounting
for approximately 40 percent of total global

construction spending in 2012. Future regional
growth prospects are also exceptional compared to
the other major regional markets.
Figure 4.1: Asia Construction spending by country 2012 (US $ billion)
1.245
Figure 4.2: Asia Construction spending growth 2013-18 (%pa)
Trillion
China
.6%
7
China
222bn
Korea
Japan
Pakistan
16 bn
Bangladesh
26 bn
Growth prospects are encouraging (Figure 4.2).

Construction spending is forecast to grow at rates
above average in Bangladesh, China, India, Japan
and Vietnam over the next ve years. China, India and
Japan stand out in particular based on the market
size combined with growth prospects.
Hong Kong
14 bn
Taiwan
Thailand
487
Billion
4.3%
.1
477
Billion
2.5%
Bangladesh
Vietnam
India
Philippines
.9%
Singapore
Indonesia
184 bn
Source: IHS Global Insight (2012)
8 Asia Construction Outlook Construction Market Overview
3.2%
3.4%
13 bn
20bn
Taiwan
Thailand
19 bn
Malaysia
Japan
.6%
Hong Kong
Vietnam
18 bn
Korea
2.2%
Pakistan
43 bn
30 bn
India
In the longer term, both China and India are set to

see high levels of growth in construction spending,
if at slightly lower levels than in the recent past.
However, growth in Japan is expected to be relatively
short-lived. Japan is expected to see sizeable
growth in construction spending through to 2018 as
the earthquake and tsunami reconstruction effort
gathers pace, but after this, spike construction
activity is likely to return to trend later in the decade.
4.5%
6.7%
Malaysia
Philippines
2.6%
Singapore
3.5%
Indonesia
4.5%
Asia Construction Outlook Construction Market Overview 9
Figure 4.3 highlights the importance of the

infrastructure sector, which accounted for almost
38 percent of total construction spending in Asia
in 2012. Spending on both residential and nonresidential structures was about equal, accounting
for around 31 percent a piece.
Figure 4.3: Asia Share of construction spending by sector

2012 (%)
Non-residential
30.5%
31
Asia
China
30
Residential
31
.6%
37.9%
33
31.4%
33.8%
31
37
The Asian construction market will remain large

and it will continue growing at a healthy rate:
Agree
Asia will become a substantial exporter of
construction materials and services: %
Strongly agree
Strongly agree
Not sure
China
Residential
34.8%
Infrastructure
33.8%
Strongly agree
33%
17%
Agree
Not sure
Strongly disagree
0%
Strongly
agree
Not sure
The
country
with the most profitable construction market in Asia will be:
33
3%%
23%
Disagree
Strongly disagree
230%%
3%
0%
64%
Agree
5%55%
64%
Disagree
Agree
55
33%
Not sure
34.8%
Infrastructure
17
Agree
Residential
Residential
Residential
(72 percent) support the assertion that Asia will
Longer term outlook for Asia
.6%
.8% the Infrastructure
become a substantial exporter of construction
The survey respondents generally support
Infrastructure
materials
and services, some respondents were not as
view.8%
that looking ahead by around ten years, the
.9%
Strongly
convinced. It
will beagree
interesting to observe any changes
prospects for the size and growth of the Asian
in these sentiments over time.
construction market are positive, with 97 percent
%
in agreement. However, while the majority
34
Non-residential
Asia
China
Disagree
5%
Strongly disagree
0%
commentary on China, Indonesia is the top-rated

country for expected market growth in the near
term, followed closely by China. However, in terms
of perceived profitability, China is the top country by
some distance, followed by India and Indonesia.
The country with the fastest growing construction market in Asia will be:
Below we examine the outlook for construction in

Asia based on the results of our most recent opinion
survey. We start by briefly assessing broad longNon-residential
Non-residential
term trends for the region and then we consider
medium-term
.5%
.4% trends by individual country and
metropolitan area, before focusing on countryInfrastructure
specific, short-term trends.
31
Near-term outlook for Asia

For the nearer term, the survey respondents
highlighted
a number of construction trends they
Non-residential
expect to see during the next three years. At the
.4%
country level, rather surprisingly given widespread
Disagree
0%
Not sure
3%
64%
Strongly disagree
0%
Disagree
0%
Strongly disagree
0%
The city or metropolitan region with the most protable construction market in Asia will be:
1Huadong
Shanghai
Delhi
1 Hong Kong
1 Mumbai
Kuala Lumpur
Colombo
16
Jakarta
The city or metropolitan region with the fastest growing construction market in Asia will be:
1 Beijing
1Huadong
Gujarat 1
At the city or metropolitan level, again perhaps
surprisingly, Jakarta is the top-rated city in terms
of both perceived market growth and protability.
Notably, cities in China score relatively poorly
on growth and protability expectations when
compared with other cities in the region and in
particular Jakarta.
Shanghai
Delhi
DLeedon, Singapore
In summary, in the near term, Indonesia, and in

particular Jakarta, is a key market for our experts.
The important position of China, especially in
terms of perceived protability, is also clear. A nal
signicant conclusion is that India and the cities
within India score relatively poorly in terms of both
perceived market growth and protability. Below
we examine the construction outlook for individual
countries in more detail.
3
1Mumbai
Hong Kong
Kuala Lumpur
Singapore
6 Jakarta
Country Overview
& Outlook
Our review of construction in Asia in 2012
and the outlook for 2013 and beyond
concentrates on nine Asian countries: China,
India, Indonesia, Hong Kong, Malaysia, the
Philippines, Singapore, Thailand and Vietnam.
14 Asia Construction Outlook Country Overview & Outlook
Asia
As
Asi
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Cons
Cons
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Outlook
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Country
ountry Overview
Overrview
w & Outl
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Outlook
utlook
utl
ook
15
5
CHINA overview
China is the worlds largest construction market,
accounting for 41 percent of the Asia Pacic total
construction spend in 2012. This makes it almost
three times the size of the Japanese construction
market. With a construction spend of US$1.25 trillion
in 2012, the Chinese construction sector makes
up 19 percent of the countrys GDP. Furthermore,
construction spending is forecast to grow at
8 percent pa over the next ve years, which is well
above the average for the region as a whole.
Chinas construction industry has been a driving force
behind the nations rapid economic growth ever since
the government deemed it one of the cornerstones of
the national modernization agenda in the 1980s.
Figure 5.1a shows how the countrys construction
market breaks down: The residential, infrastructure
and non-residential sectors each accounted for
approximately one-third of total construction
expenditure in 2012.
Geographically, the picture is less balanced. The
more developed coastal region in East and South
China constituted 55 percent of total construction
spending in 2011, according to the government, and
this part of the country is expected to remain the
primary focus in the near future.
Figure 5.1a: China Share of construction spending by

sector 2012 (%)
Chinas sustained demand for new residential

buildings, non-residential structures and
infrastructure has generated a multitude of
construction projects. For instance, the everexpanding national and regional transportation
network offers huge potential, particularly in
railway construction. The governments 12th Five
Year Plan for 2011-2015 allocated RMB 3.5 trillion
(US$526 billion) for railway construction. The
government plans to complete 90,000 kilometers of
operational railway track, with investment in urban
rail transit expected to surpass RMB 700 billion
(US$108 billion). Chinas Ministry of Railways has said
construction will focus on refurbishing existing rail
lines and building the high-speed network.
Longer term outlook
Figure 5.1b presents forecast construction spending
growth by sector over the longer term through
to 2018. Construction spending growth in the
residential sector (7 percent pa) is expected to
remain relatively stable following the containment
of the recent property bubble. Growth in nonresidential structures (7 percent pa) is slowing as
export markets for Chinese manufactured products
continue to contract. Meanwhile, infrastructure
spending (9 percent pa) is expected to grow the
fastest over the period and is thought likely to remain
the fastest growing sector well into the next decade.
Figure 5.1b: China Market size and growth prospects by
major construction sector
Construction output
2012 ($bn)
Non-residential
31
.4%
Growth
2013-18 (%pa)
Residential
433.2
7.4%
Infrastructure
China
$
Residential
Infrastructure
33.8%
34
8.6%
421.3
Non-residential
.8%
$
.7%
390
.8
$ 1,245.3 Total
However, with increasing urbanization, residential

spending growth is likely to gather momentum
towards the end of the decade once the current
property surplus has diminished. Rapid population
growth is expected in mega cities Beijing, Chongqing,
Guangzhou, Shanghai and Shenzen, along with
several second tier cities, through to 2020. This
will spark signicant increases in residential
construction spending over the longer term.
Infrastructure construction spending will be a key
trend over the near to medium term. Growth in
transport infrastructure spending is likely to remain
signicant, led by inter-city high-speed rail and
highway construction, as well as the new airport in
Beijing. In addition, energy supply constraints mean
there is a push to develop power infrastructure:
China is increasing its nuclear power capacity and
investigating the potential of renewable energy.
Geographically, the focus of infrastructure
construction spending is shifting from the coastal
cities to the central-northern and western provinces,
which are less developed.
The size of the

construction market will be:
Near-term outlook
A number of important short-term trends were
indicated by our survey. Respondents cited the
following expectations for the coming 12 months.
The results suggest that while growth in China
remains robust and the attractiveness of the
construction market to foreign suppliers is expected
to increase in the short-term, protability is
decreasing. This is largely thought to be the result of
the strong fundamentals in the construction market
in China and the widespread declines in many foreign
suppliers domestic or more traditional markets
along with increased competition among suppliers
within China.
When comparing sub-sector performance in China
over the short-term, the respondents suggest
that both infrastructure and non-residential
structures will be the fastest growing sectors,
with infrastructure also expected to be the most
protable. However, according to respondents,
the sector most open to foreign suppliers of
construction services is the non-residential sector.
Increasing
50
Unchanged
50
Decreasing
0%
The profitability of the

0%
33%
67%
The openness of the construction market to

foreign suppliers of construction services will be:
0%
100%
0%
The attractiveness of the construction market to

foreign suppliers of construction service will be:
60%
40%
0%
Infrastructure
Non-residential
Residential
50%
50%
0%
50%
33%
17%
0%
83%
17%
The fastest growing

construction sub-sector will be:
The most profitable
The construction sub-sector most open to
7.6%
Asia Construction Outlook Country Overview & Outlook
17
INDIA overview
Whilst the construction market in India was large,
at US$477 billion in 2012, which was 22 percent
of Indias GDP, it was only a third of the size of
the construction market in China, despite similar
population levels. This suggests that Indias built
environment market offers a signicant opportunity.
Indeed, construction spending growth in India is
forecast to be the fastest in the world at 9 percent
pa through to 2018. However, given the current
constraints on public nances, India is seeking
to increase private funding for much of the new
infrastructure needed.
Figure 5.2a highlights the signicance of the nonresidential sector in India. It accounted for almost
half of total construction spending in 2012 and was
more than twice the size of the residential sector.
In contrast, infrastructure spending accounted for
almost one third of total construction spending.
Private investment in infrastructure development
will increase to 50 percent in the next ve years
compared to 30 percent in the recent past, according
to the Indian government. Much of the focus is on the
major industrial hotspots, such as the Delhi Mumbai
Industrial Corridor and the Chennai Bangalore
Industrial Corridor. Here, increased construction
activity is expected to create new industrial zones
and cities. One such development is the new city of
Dholera in Gujarat.
Figure 5.2a: India Share of construction spending by
sector 2012 (%)
Countries like India,

which traditionally
had abundant labor,
are today facing a
severe shortage of
skilled workers
Along with the industrial corridors, other rapidly
growing cities such as NCR, Mumbai and second
tier cities, including Kochi and Pune are set to see
increased demand for residential developments over
the medium term.
Longer term outlook
The Indian construction market is emerging from a
period of relatively weak growth compared to that
witnessed in the recent past. Over the medium term,
infrastructure is forecast to be one of the key drivers
of construction spending rises through to 2018 with
8 percent spending growth per year forecast for the
period (Figure 5.2b). A particular driver is the need
to address energy supply constraints, with nuclear
power generation seen as a major future power
source. In addition, non-residential spending is also
forecast to grow robustly (9 percent pa) through to
47.3%
Growth
2013-18 (%pa)
Residential
102
.1
.9%
Infrastructure
India
Infrastructure
31.3%
149.5
In the longer term, residential construction spending

is expected to gather momentum as increasing
urbanization continues to drive the demand for new
homes in Indias major cities. Indeed, residential
spending is forecast to be the fastest growing
construction sector in India through to 2018,
at 10 percent pa. It should be noted that this is
from a relatively low base. However, this ags a
signicant market opportunity: The populations of
mega cities Delhi, Mumbai and Kolkata, along with
several second tier cities, are likely to see huge rises
through to 2020. This will spur signicant increases
in residential construction spending.
Near-term outlook
Our survey respondents cited the following shortterm trends for India over the next 12 months.
Geographically, the focus remains on the major cities

of Delhi, Mumbai, Kolkata, Chennai and Bengaluru.
In addition, the North East (particularly Assam) has
All respondents expect the construction market

in India to grow in the short-term with protability
remaining largely unchanged. However, the
perceived openness and attractiveness of the
Indian construction market to foreign suppliers of
construction services is expected to improve in the
near term.
Our respondents suggest that the infrastructure
sector will be the fastest growing sub-sector over the
short term, as well as the most protable and open to
foreign suppliers.
Increasing
Unchanged
Decreasing
100%
0%
0%
20%
80%
0%

100%
0%
0%

60%
40%
0%
Infrastructure
Non-residential
Residential
The size of the

The fastest growing

60
20
20%
The most profitable

80%
0%
20%

60%
20%
20%
8.0%
Non-residential
Residential
21.4%
been identied by the Indian government as a region

where construction spending will be boosted.
Figure 5.2b: India Market size and growth prospects by

Construction output
2012 ($bn)
Non-residential
2018, led largely by increases in ofce and retail

construction spending.
225.8
$ 477.4 Total
9.0%
8.9%
19
INDONESIA overview
Construction spending in Indonesia accounted for
more than a quarter of the countrys GDP in 2012 at
US$183.8 billion. The Indonesian construction market
is signicant in both size and growth prospects
for the next ve years (5 percent pa). As the fourth
most populous country in the world, Indonesias
construction sector is an important future
component of the countrys wider economy.
Indonesia, and in
particular Jakarta, is
a key market for our
survey respondents
Figure 5.3a demonstrates the importance of the

infrastructure sector in Indonesia, which accounted
for almost one half of total construction spending
and was almost three times the size of the residential
sector in 2012.
of concerted action by the government. The GDP

growth rate could even be considerably higher if
infrastructure development and economic reforms
are accelerated. On the other hand, if infrastructure
development proves weak this could undermine
future rates of economic growth.
Indonesia is undergoing rapid transformation

and growth. The government is focusing on major
infrastructure projects in Jakarta and other major
cities. Among the key projects is an MRT system for
Jakarta to address severe road trafc congestion.
The Japanese-funded program is well overdue but
now progressing. Jakartas airport is also being
expanded in a project that may include a city rail link
if this proves viable.
There are considerable opportunities in Indonesia

for infrastructure investment and private sector
participation. As a result of the upcoming presidential
election in 2014 there may be some slowdown in
federal-driven projects. However, because many of
the initiatives in Jakarta are led by the city itself, the
elections are not expected to have a major impact on
either infrastructure or wider development activities
in the capital.
GDP growth is forecast to be around 6 percent

for 2013-2017, based on a relatively stable
macroeconomic picture and the ability of the
economy to maintain steady growth despite a lack
Longer term outlook

While the rate of growth of construction spending
in Indonesia has slowed, as in much of the rest of
Asia, relatively strong growth is forecast through
Figure 5.3a: Indonesia Share of construction spending by

sector 2012 (%)
Figure 5.3b: Indonesia Market size and growth prospects

by major construction sector
Construction output
2012 ($bn)
Non-residential
38.1%
Growth
2013-18 (%pa)
Residential
25.4
3.9%
Infrastructure
Indonesia
.2%
88.3
Residential
Infrastructure
48
13.8%
Infrastructure
development in
Indonesia will
depend on the
availability of
private nance
to 2018. The fastest growing sub-sector is likely
to be non-residential construction spending
(5 percent pa), followed by infrastructure
(4 percent pa). The residential sector has the lowest
growth prospects and is the smallest sector by
some margin (Figure 5.3b).
The Indonesian government has said infrastructure
improvement will be a priority over the medium
term, particularly transport, including highways,
ports and airports. While the public sector is
expected to provide some of the investment needed,
much of the future investment in construction is
likely to be via public-private partnerships (PPP).
70.2
$ 183.8 Total
5
4.5%
Geographically, the focus is shifting from the West

to the Eastern provinces, although with the bulk of
Indonesias population in the West of the country,
construction spending growth is likely to remain
robust in Java.
Near-term outlook
For the immediate future of the construction market
in Indonesia, the respondents forecast the following
short-term trends (next 12 months).
The results show our experts feel very positive about
the outlook for the construction market in Indonesia.
All respondents expect the market to grow in both size
and protability. In addition, both the openness and
attractiveness of the market to foreign suppliers of
construction services is expected to increase over the
next 12 months.
The respondents see infrastructure as the key sector
to watch. They expect it to be the fastest growing and
most protable sector, as well as the most open to
foreign suppliers.
Increasing
The size of the construction market will be:
Decreasing
0%
100%
0%
0%
The openness of the construction market

to foreign suppliers of construction services will be:
75%
25%
0%
The attractiveness of the construction market

to foreign suppliers of construction service will be:
75%
25%
0%
The profitability of the construction market will be:
100
Unchanged
%
Non-residential
.1%
Indeed, the Indonesian government has implemented

new regulations and guarantees to attract both local
and foreign investors to participate in the program.
Over a hundred major projects for PPP delivery are
planned, including toll roads, power, water, drainage,
airport and seaport projects.
Infrastructure
Non-residential
Residential
The fastest growing construction sub-sector will be:
75%
25%
0%
The most profitable construction sub-sector will be:
75%
0%
25%
100%
0%
0%
The construction sub-sector most open to foreign

suppliers of construction services will be:
21
HONG KONG overview

Construction spending in Hong Kong was
US$14.1 billion in 2012 and spending is forecast to
grow by 2.5 percent pa over the next ve years.
Figure 5.4a suggests that both residential and nonresidential spending represented a similar market
share, with both approximately one-third of the total,
while infrastructure spending is somewhat smaller.
In a key policy move, the Hong Kong government
plans to increase land released for residential
development. This is aimed at addressing both
the signicant undersupply of housing units
particularly small apartments and the overheating
of the property market, which together have caused
much housing to become unaffordable.
New Development Areas and Hung Shui Kiu New

Development Areas, which are moving into the
planning and engineering study phases, with a
view to completing the initial stages of the projects
by 2021.
Longer term outlook
Looking further ahead, infrastructure spending
is forecast to be the fastest growing sector
over the next ve years at around 3 percent pa
(Figure 5.4b). Much infrastructure investment will
be focused on improving transport links, both rail
and road, between Hong Kong, the New Territories
and mainland China.
The land policy is set to provide a solid base for the

residential construction market in the coming years,
with plans to increase the supply of both publicand private-sector housing. Among the key current
housing projects are North East New Territories
Many of the major infrastructure projects announced

in the governments Policy Address in 2007-2008
are now well into the construction stage. These
include the West Kowloon Terminus, South Island
Line, Sha Tin to Central Link, Tuen Mun-Chek Lap
Kok Link, Guangzhou-Shenzhen-Hong Kong Express
Rail Link (Hong Kong Section), Hong Kong-Zhuhai-
Figure 5.4a: Hong Kong Share of construction

spending by sector 2012 (%)
Figure 5.4b: Hong Kong Market size and growth prospects

Non-residential
Growth
2013-18 (%pa)
Construction output
2012 ($bn)
34.4%
Residential
5.4
2.4%
Residential
27.3%
This shows that our respondents feel reasonably

positive about the growth prospects for the
construction market in Hong Kong over the short
term. However, most expect both the protability and
openness to foreign suppliers of construction services
to remain largely unchanged over the next 12 months.
Near-term outlook
In terms of the immediate future for the construction
market in Hong Kong, the respondents to our survey
highlighted the following short-term trends
(next 12 months).
Over the short-term, the focus will be on the

infrastructure sector. The respondents anticipate
this being the sector that will see the fastest growth,
best levels of protability and the highest degree of
openness to foreign suppliers over the next 12 months.
Increasing
Unchanged
Decreasing
67%
33%
0%

33%
67%
0%

33%
67%
0%

33%
33%
33%
Infrastructure
Non-residential
Residential
The size of the

The fastest growing

100
0%
The most profitable

100%
0%
0%

100%
0%
0%
Infrastructure
Hong kong
Infrastructure
Macao Bridge, Lok Ma Chau Loop as well as the West

Kowloon Cultural District and Kai Tak Development.
Once complete these major infrastructure projects
are expected to precipitate a shift in the market to
residential and commercial developments in the
longer term.
38.3%
3.9
Non-residential
4.8
$ 14.1 Total
3.1%
2.1%
2.5%
23
MALAYSIA overview
In 2012, US$17.6 billion was spent on construction
in Malaysia and spending is forecast to grow by
4.5 percent pa over the next ve years.
Figure 5.5a highlights the importance of the nonresidential sector in Malaysia, followed by residential
developments. In comparison, construction spending
on infrastructure is considerably smaller.
However, in future, infrastructure will play a larger
role. The Malaysian construction industry is expected
to sustain growth driven partly by long-term
infrastructure projects, as well as mass affordable
housing schemes and economic development corridor
programmes in peninsular and east Malaysia.
Johor, which will be enhanced by the RTS transit link

between Woodlands in Singapore and Johor Bahru.
Development corridors such as Iskandar and the
Sarawak Corridor of Renewable Energy (SCORE)
are continuing to attract strong investment inows
despite the challenging global economic climate.
SCORE is capitalising on renewable energy and cheap
power to attract investors. Construction plans for
SCORE include hydro dams, seaports, transmission
systems and sub-station works. Iskandar, which
has the strategic benet of geographic proximity to
Singapore, has attracted both domestic and foreign
investments during the last few quarters, which
has precipitated signicant residential and nonresidential construction.
Following the the 13th general election, which saw the

existing government retain power, the construction
sector is set for strong growth spurred by the
Economic Transformation Program (ETP). The policy
aims to make Malaysia a high-income nation by 2020
with annual GDP growth of at least 6 percent. Highprole ETP projects include the Klang Valley Mass
Rapid Transit system, Light Rail Transit extensions,
Petronas RAPID complex, Kuala Lumpur River of
Life and the major Iskandar development region in
These major infrastructure developments will in turn

trigger notable commercial and residential projects.
However, over the coming years, the impact of the
works on the construction market will need to be
monitored, particularly in terms of how increased
activity affects the availability of engineering and
construction companies and resources, as well as
the availability and prices of materials and labor.
Figure 5.5a: Malaysia Share of construction

Figure 5.5b: Malaysia Market size and growth prospects

Construction output
2012 ($bn)
Non-residential
44.6%
Growth
2013-18 (%pa)
Residential
4.7%
.8
Infrastructure
Malaysia
$
Residential
Infrastructure
16
.5%
38
2.9
Longer term outlook

Over the longer term, infrastructure is forecast to
see the fastest growth in construction spending of
any sector though to 2018, at around 5 percent pa
(Figure 5.5b), closely followed by residential
construction. Much of the forecast increase
in infrastructure spending is to be delivered in
partnership with the private sector via PPP projects.
The focus through to the end of the decade is on
improvements to transport infrastructure both in
peninsular Malaysia, with several large projects in
Kuala Lumpur, and outlying provinces.
Near-term outlook
Our respondents expect to see the following trends
over the next 12 months.
Our experts anticipate growth in Malaysia to remain
robust. The respondents were also broadly positive
regarding the openness and attractiveness of
the construction market to foreign suppliers of
services over the next 12 months. On a slightly less
positive note, they expect protability to remain
largely unchanged.
The focus will be on the infrastructure sector in the
short-term, our respondents believe. They see this
sector as the fastest growing, most protable and
most open to foreign suppliers.
The size of the

Increasing
100
Unchanged
Decreasing
0%

33%
67%
0%

50%
50%
0%

67%
33%
0%
Infrastructure
Non-residential
Residential
The fastest growing

The most profitable
100
0%
83%
0%
17%
100%
0%
0%
5.0%
Non-residential
.8%
$
7.9
4.0%
$ 17.6 Total
4.5%
25
PHILIPPINES overview
Some US$13.1 billion was spent on construction in
the Philippines in 2012, with spending forecast to rise
by 2.5 percent pa over the next ve years.
A shortage of both
technical and
professional labour
is increasing the
cost of delivery
Figure 5.6a highlights the relative magnitude of the

residential sector in the Philippines, which accounted
for more than half of all construction expenditure
in 2012, followed by the infrastructure sector. In
contrast, the non-residential sector made up less
than a tenth of total construction spending in 2012.
Following many years of relative stagnation in the
construction market, the present government is
now driving growth through a major infrastructure
programme and promoting delivery by public-private
partnerships. The transport system in Manila
requires considerable improvement and initiatives
to further develop the existing transit systems and
highways are progressing. The water companies in
Manila, which were privatized more than 10 years
ago, have also been investing heavily in new water
and wastewater systems. Other cities such as Cebu
and Davao are seeing investment in infrastructure
and a number of regional airports are being improved.
In addition, mining activity has continued to expand
in the south of the country.
Figure 5.6a: Philippines Share of construction
Longer term outlook

Over the next ve years, infrastructure is forecast
to see the fastest rise in spending of all sectors
through to 2018 at 4 percent pa, followed by
residential developments (Figure 5.6b). The Philippine
government has earmarked transport as a key area
of development, with particular plans to improve
rail, roads and airports. A signicant proportion of
the investment required is expected to be delivered
through PPP projects.
Geographically, much future investment will focus
on the main island of Luzon and in particular the
Metro Manila district, particularly Makati City and
Bonefacio Global City.
Figure 5.6b: Philippines Market size and growth prospects
Construction output
2012 ($bn)
Non-residential
9.5%
Near-term outlook
Our survey revealed the following trends for the next
12 months.
Our experts take a very positive view of the near-term
outlook for the Philippines construction market. All
expect the market to grow in size and protability.
However, both the openness and attractiveness
of the market to foreign suppliers of construction
The size of the

services is expected to remain largely unchanged

over the next 12 months.
Our experts believe the focus will be on the
residential sector, which they perceive as the
fastest growing and most protable sector in the
short-term. However, they see the infrastructure
sector as the most open to foreign suppliers of
construction services.
Increasing
Unchanged
Decreasing
0%
100%
0%
0%

33%
67%
0%

33%
67%
0%
Infrastructure
Non-residential
Residential

The fastest growing

100
33
67%
The most profitable

33%
0%
67%

67%
0%
33%
Growth
2013-18 (%pa)
Residential
1.9%
7.0
Infrastructure
Philippines
$
Residential
Infrastructure
37
53
.4%
4.8
4.1%
Non-residential
1.3
0.5%
$ 13.1 Total
2.6%
27
SINGAPORE overview
Construction expenditure in Singapore was
US$20.4 billion in 2012 and spending is forecast to
increase by 3.5 percent pa over the next ve years.
However, spending growth is gradually slowing down
because much of the built stock is already in place.
Figure 5.7a indicates the equal importance of both
the residential and non-residential sectors, while
infrastructure is comparatively less important.
Currently, much of the construction work in
Singapore comprises public housing, healthcare
projects and major infrastructure works. The
latter include the Thomson Mass Rapid Transit
Line, Kallang-Paya Lebar Expressway, Tampines
Expressway Interchange and Woodleigh Waterworks
Redevelopment as well as port and berth facilities.
The next three years are expected to be a critical
period of transition for Singapores construction
industry. Attempts to curb the hiring of unskilled
foreign workers while also improving productivity
are set to lead gradually to a tighter labor supply
amid efforts to shed inefcient work methods,

including labor-centric processes.
In the coming months the construction industry
will see a move to mechanization, automation and
re-engineering throughout the supply chain. This
will be encouraged by increases in the minimum
buildability and constructability scores for new
projects in mid 2013 and again in mid 2014. These
new legal requirements will discourage laborintensive methods and encourage prefabrication
of components off-site, with a view to shortening
on-site delivery times.
Longer term outlook
Infrastructure is forecast to see the fastest
growth in spending of all sectors in Singapore
over the next ve years at around 6 percent pa
(Figure 5.7b) Meanwhile both residential and
non-residential construction are expected to be
somewhat more subdued compared to the recent
past, through to 2016.
Near-term outlook
Our experts forecast the following trends for
Singapores construction market in the next
12 months.
The respondents have a relatively negative view on
the short-term outlook for construction. They are
broadly pessimistic regarding both the likely future
growth of the market and protability. Despite this,
our experts were more optimistic about both the
openness and perceived attractiveness of the market
to foreign suppliers of construction services.
Over the short-term, the focus in Singapore will be on
the infrastructure sector. Our respondents believe
the sector will be the fastest growing, most protable
and most open to foreign suppliers of services over
the next 12 months.
The size of the

Table 5.7b: Singapore Market size and growth prospects by

Growth
2013-18 (%pa)
Construction output
2012 ($bn)
Non-residential
41
.1%
Residential
8.3
2.5%
Singapore
$
Residential
Infrastructure
18.3%
40.5%
6.4%
3.7
Non-residential
.1%
.4
$ 20.4 Total
Decreasing
0%
63%
37%

63%
37%
0%

50%
25%
25%
Infrastructure
Non-residential
Residential
100%
0%
0%
The most profitable

100%
0%
0%

100%
0%
0%
38
Unchanged
12%
The fastest growing

Infrastructure
Increasing

Figure 5.7a: Singapore Share of construction
Low labor
costs mean few
construction
rms invest
in technology
to improve
construction
50
3.5%
29
THAILAND overview
Construction spending in Thailand was
US$30.3 billion in 2012 and is forecast to grow
by 3.4 percent pa over the next ve years. In the
short-term, the industry is likely to be boosted by
reconstruction following the oods of 2011.
There are signicant

opportunities in
greeneld markets
like Myanmar,
which are relatively
untapped at the
moment but could
prove very fruitful in
the medium-term
The precedence of infrastructure construction in

Thailand is clear from Figure 5.8a, which shows
the sector accounted for half of all construction
spending in 2012. This is followed by residential
structures with spending on non-residential
structures considerably smaller.
Demand in the Thai property market remains
resilient and we expect to see sustainable
growth in this sector. Housing demand will
increase, driven by private developer-built housing,
upcoming mass transit extension lines and market
opportunities upcountry.
In Bangkok there are currently four mass transit lines
(the two BTS Skytrain lines, the MRT and airport
link). Together these cover, just 80 kilometers, so
the Thai government plans to add ten lines covering
an additional 400 kilometers. Construction on the
rst 160 kilometers is already underway and due to
complete between 2015 and 2017. The expansion
of mass transit lines is likely to generate new
residential demand in neighbouring townships like
Nonthaburi, Pathumthani and Samut Prakarn.
The commercial development sector will meanwhile

be boosted as retail companies prepare for an
expected increase in foreign tourists as a result of the
ASEAN Economic Community (AEC) integration in 2015.
For example, two local retail giants, The Mall Group
and Siam Piwat, plan to develop at least ve new mega
retail and mixed-use developments between them
while also improving their existing malls.
Figure 5.8a: Thailand Share of construction

Figure 5.8b: Thailand Market size and growth prospects by

Construction output
2012 ($bn)
Non-residential
18.8%
Growth
2013-18 (%pa)
Residential
9.4
3.5%
Two new risk factors loom on the horizon for the Thai
construction industry however. These are recent
changes in the Bangkok Metropolitan Administration
building codes in May 2013 and anticipated labor
shortages arising from the AEC integration.
Longer term outlook
All major sectors are forecast to grow at similar rates
over the next ve years, of around 3.5 percent pa
(Figure 5.8b). The Thai government plans to boost
spending on infrastructure over the longer term,
particularly transport, energy and water projects.
Geographically, construction spending is likely to
be concentrated in major population centres within
the central provinces, including Bangkok and the
immediate surrounding area.
Near-term outlook
The survey respondents highlighted the following
trends in the Thai construction the market for the
next 12 months.
Our experts feel very positive about the near-term
outlook. The majority expect the construction market
to grow in both size and protability. Despite this,
both the openness and attractiveness of the market
to foreign suppliers of construction services is
expected to remain largely unchanged over the next
12 months.
The respondents believe that the fastest growing
sector over the next 12 months will be residential
structures. The most protable will be the
infrastructure sector, which is also expected to
be the sector most open to foreign suppliers of
construction services.
Increasing
Unchanged
Decreasing
80%
20%
0%

60%
40%
0%

40%
60%
0%

40%
60%
0%
Infrastructure
Non-residential
Residential
The size of the

The fastest growing

40
60%
The most profitable

60%
20%
20%

60%
20%
20%
Infrastructure
Thailand
15.2
3.2%
$
Residential
Infrastructure
50.1%
31.2%
Non-residential
5.7
$ 30.3 Total
3.8%
3.4%
31
VIETNAM overview
The construction market in Vietnam, while of limited
size, is set for above average growth rates through
to the end of the decade. Construction spending in
2012 was some US$18.6 billion, which accounted for
roughly 20 percent of the countrys GDP. Spending
is forecast to grow by close to 7 percent pa over the
next ve years.
Figure 5.9a indicates that the residential sector
was the largest market in 2012, accounting for over
half of total construction spending, followed by the
infrastructure sector. The non-residential sector
accounted for just one tenth of total construction
spending in 2012.
The property market in Vietnam is currently subdued,
Challenging market conditions including a lack of
capital resources have resulted in developers being
unable to complete projects, while buyers are nding
it difcult to afford property because of a lack of
access to loans. There are also signs of distressed
property assets throughout the country.
at relatively high prices and are unwilling to sell at

a loss during the current downturn. To address the
over-supply problem, adjustments to the apartment
size and level of development are essential.
Longer term outlook
All major sectors are forecast to grow over the next
ve years at similar rates, of around 7 percent pa.
However, it should be noted that growth in the nonresidential sector is from a very low base (Figure 5.9b).
Infrastructure investment, particularly transport
infrastructure, such as highways, rail and ports,
will be a major growth area through to the end
of the decade. However, the government is likely
to have limited capacity for funding much of this
because it is likely to be constrained by public
debt levels. As a result Vietnam is set to offer
signicant opportunities through privately nanced
infrastructure projects, with the funding likely to
take the form of foreign direct investment or PPP
joint ventures.
There is currently a mismatch between demand and

supply in the Vietnamese property market. Demand
persists for affordable housing but developers of
mid to high end properties are struggling to attract
buyers. Meanwhile it was estimated that the total
value of inventory in housing development projects as
of May 2013 was at more than VND125 trillion
(US$6 billion) in 55 cities and provinces. A further
problem is high land prices, which have increased due
to speculative activities at the peak of the market. As
a result developers are holding on to land purchased
Geographically, much of the investment will be

focused on the cities of Ho Chi Minh and Hanoi and
the North-South corridor in between.
Figure 5.9a: Vietnam Share of construction

Figure 5.9b: Vietnam Market size and growth

prospects by major construction sector
Near-term outlook
We received only limited responses to our survey
from Vietnam, so we are unable to present
meaningful results for the countrys near-term
outlook this time around. However, we are hopeful
that we will be able to provide more in subsequent
editions of this publication.
10
.3%
Residential
Infrastructure
$
Residential
Infrastructure
37.2%
6.7%
9.7
Vietnam
Growth
2013-18 (%pa)
Construction output
2012 ($bn)
Non-residential
52.6%
6.8%
6.9
Non-residential
6.7%
$ .9
$ 18.5 Total
6.7%
33
Asia Outlook
Our review shows that future prospects are bright
for the construction market in Asia. Construction
spending in the region is increasing from a share of
31 percent of the global market in 2005 to a forecast
share of 46 percent by 2020. This shift is largely at the
expense of declines in both the Western European
and North American markets (Figure 6.1a & 6.1b).
Over the near and longer term, the strongest

construction spending growth will be in China, India,
Indonesia and Vietnam. In addition, reconstruction
spending in Japan will provide a temporary stimulus
to construction in that country.
Chinas market is substantial in size with growth

prospects that are above average in the region.
Despite the relatively moderate growth levels
compared to the recent past, forecast construction
spending in China over the next few years, the
absolute size of the market and the resulting
opportunities will continue to make this one of the
most attractive construction markets in the world.
Similarly, in India the construction market is
substantial in size with above average growth
prospects. However, the upcoming general election
due mid 2014 is likely to put a temporary break on
economic growth generally and public construction
specifically. Also, while there has been progress in
reforming some of the bureaucracy in India, more
remains to be done to tackle issues such as market
openness and a lack of institutional reform.
Figure 6.1a: Share of construction spending by region 2005
Figure 6.1b: Share of construction spending by region 2020
34 Asia Construction Outlook Asia Outlook
Currently, much of the growth in the region is based

on infrastructure spending. However, the focus is
likely to switch to residential structures as incomes
improve, domestic consumption increases and the
middle classes develop.
Indeed, with increasing urbanization, residential
spending growth is likely to gather momentum
towards the end of the decade. Mega cities
throughout the region are likely to see rapid
population rises through to 2020 and this is
expected to drive significant increases in residential
construction spending in the longer term.
Furthermore, the inability of India, Indonesia,
Malaysia the Philippines and Vietnam to provide
sufficient public finance to fund much of the
infrastructure needed is likely to lead to significant
opportunities via private finance and PPPs in
the region.
Asia Construction Outlook Asia 35
Acknowledgements
We are very grateful to the survey respondents who took the time to
complete the questionnaire that informed this review. This document
was produced with contributions from:
Andy North, Kuala Lumpur

Clarence Tan, Bangkok
Daniel Shih, Shanghai
Dato Sri Kandan, Kuala Lumpur
David Crosthwaite, London
Didi Redoble, Manila
Eugenie Lip, Singapore
Gar Ti Wei, Kuala Lumpur
Jason Lau, Hong Kong
Jonathan Miller, Hong Kong
Martin ONeill, Jakarta
Meenakshi Sundaram Ramanathan, Chennai
Minda Xu, Shanghai
Phan Lay Eng, Singapore
Rebecca Yan, Hong Kong
Ronald Acio, Manila
Shima A, Singapore
Soh Chye Hian, Singapore
Tony Au, Singapore
AECOM has compiled the information in this document from a number of sources. AECOM
has not veried that such information is correct, accurate or complete. Whilst every care
has been taken in the preparation of this document, AECOM makes no representation or
warranty as to the accuracy or completeness of any statement in it, including, without
limitation, any forecasts. Historical trends are not necessarily a reliable indicator for
actual future performance. AECOM accepts no liability or responsibility to any party in
respect of this document. This document has been prepared for the purpose of providing
general information, without taking account of any particular persons objectives,
situation or needs. You should seek professional advice having regard to your own
objectives, situation and needs before taking any action.

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AECOM is a global provider of professional technical and management support

services to a broad range of markets, including transportation, facilities,

As we all know, it has been an interesting yet exciting year

Asia continues to be the growth engine of the world, with

Construction Market Overview

Of course, some regions and asset classes have performed

Country Overview & Outlook

Hong Kong Overview

This paper provides an overview of the construction

2 Asia Construction Outlook Introduction

AECOM and Davis Langdon KPK, an AECOM company

India offers a signicant level of opportunity because

While Western economies have slowed, Asia has

Indonesia emerges in our review as a particularly

Asia has become increasingly dependent on domestic

Our research also found that the Indonesian capital

This key trend will also steer construction in a new

Vietnam, despite being one of the smaller

Our review shows that China is the standout market,

Although Japan is the regions second largest market

In terms of market size, China is followed by Japan,

growth in construction spending will be seen in

Overall, the review shows that Asias construction

This will be facilitated by relatively easy access

Central-Wan Chai Bypass, Hong Kong, China

6 Asia Construction Outlook Asia Overview

Asia Construction Outlook Asia Overview 7

Examining construction spending in individual

for approximately 40 percent of total global

Figure 4.1: Asia Construction spending by country 2012 (US $ billion)

Figure 4.2: Asia Construction spending growth 2013-18 (%pa)

Growth prospects are encouraging (Figure 4.2).

Source: IHS Global Insight (2012)

8 Asia Construction Outlook Construction Market Overview

In the longer term, both China and India are set to

Source: IHS Global Insight (2012)

Asia Construction Outlook Construction Market Overview 9

Figure 4.3 highlights the importance of the

Figure 4.3: Asia Share of construction spending by sector

The Asian construction market will remain large

10 Asia Construction Outlook Construction Market Overview

Source: IHS Global Insight (2012)

commentary on China, Indonesia is the top-rated

Below we examine the outlook for construction in

Near-term outlook for Asia

Asia Construction Outlook Construction Market Overview 11

In summary, in the near term, Indonesia, and in

Asia Construction Outlook Construction Market Overview 13

14 Asia Construction Outlook Country Overview & Outlook

Figure 5.1a: China Share of construction spending by

Chinas sustained demand for new residential

Source: IHS Global Insight (2012)

16 Asia Construction Outlook Country Overview & Outlook

However, with increasing urbanization, residential

The size of the

The profitability of the

The openness of the construction market to

The attractiveness of the construction market to

The fastest growing

Source: IHS Global Insight (2012)

Asia Construction Outlook Country Overview & Outlook

Countries like India,

Source: IHS Global Insight (2012)