ASEAN’s acceleration towards greater physical connectivity

In Part 1 of our series on ASEAN connectivity, we look at improvements in ASEAN’s physical connectivity through major infrastructure projects.

Enhancing ASEAN connectivity will undoubtedly bring about a more integrated ASEAN that will in turn promote competitiveness, inclusiveness, and a greater sense of community. To do this, there is a need to deepen three key aspects: physical connectivity, trade connectivity, as well as investment and financial connectivity.

Paving the way forward – with better roads

When it comes to supporting physical connectivity, ASEAN countries have made consistent progress on major infrastructure projects. In 2022, Indonesia recorded a larger improvement in road infrastructure as compared with other countries.

The Indonesian Government, specifically, has increased its focus on enhancing the local value chain by strengthening the country’s infrastructure. This comprised a massive road construction within Java and west Indonesia, as well as plans to extend similar developments to the eastern region, especially in Sulawesi, Maluku, and Papua (Sulampua).

Compared with its ASEAN peers, in terms of total paved-roads’ length, Indonesia ranked third behind Thailand and Vietnam. Better road infrastructure and thus better connectivity would be the key catalyst for driving higher productivity of industries, reducing intra-regional disparity, and attracting higher investment.

Figure 1: ASEAN’s length of road. Source: ASEAN statistics, UOB Global Economics & Markets Research

ASEAN’s improved productivity will help to maintain the steady growth momentum in the region, aided by a younger demographic that is seen as more favourable to its growth. As such, the longer-term benefits from an expanding workforce, with better productivity, will support more sustainable growth.

To that, ASEAN is committed to strengthening physical connectivity through several initiatives, including implementing ASEAN Free Trade Area (AFTA) agreements in all ASEAN regions and to hold the Regional Comprehensive Economic Partnership (RCEP) meeting – an annual affair to discuss and fix economic issues in the region.

Air and seaports

Physical interconnectivity has also been beefed up as evident from the higher number of international ports (both sea and air) to support logistical activities. In 2021, there were 639 international ports in ASEAN, which is 25 per cent more than the previous five years.

This significant increase was underpinned by massive international standard port developments in the Philippines and Indonesia. However, other countries such as Brunei Darussalam, Cambodia, Malaysia, and Thailand remain relatively stagnant.

Figure 2: ASEAN’s international ports. Source: ASEAN statistics, UOB Global Economics & Markets Research

It is observed that the various demographic characteristics between regions, are the main factors that caused the disparity in the availability of international ports across ASEAN.

Enhancing and building interconnectivity, especially through seaports in archipelagic countries (Indonesia and the Philippines), remains critical in supporting trade activities in the region.

This is an excerpt from ASEAN: Deepening trade and financial inter-connectivity for sustainable growth that was first published on 8 June 2023 by UOB Global Economics & Markets Research. View Part 2 and Part 3 here.

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