1、Contents HYPERLINK l _TOC_250024 Executivesummary3 HYPERLINK l _TOC_250023 Recap of the Belt andRoadInitiative7 HYPERLINK l _TOC_250022 Do B&R countries in South/SE Asia have sufficient infrastructure?. 8 HYPERLINK l _TOC_250021 Existinginfrastructure:insufficientconnectivityoflandtransport8 HYPERLI

2、NK l _TOC_250020 Benefitsfromadvancedinfrastructureinvestment9 HYPERLINK l _TOC_250019 Futureinvestmentplans:US$1.5trninfiveyears11 HYPERLINK l _TOC_250018 Infrastructure investment outlookbycountry16 HYPERLINK l _TOC_250017 Where would infrastructure fundingcomefrom?23 HYPERLINK l _TOC_250016 Is do

3、mesticfundingsufficient?23 HYPERLINK l _TOC_250015 JapanandKoreaparticipationviaODA26 HYPERLINK l _TOC_250014 The real forcebehindBRI29 HYPERLINK l _TOC_250013 Who will benefit from infrastructure spending growth?40 HYPERLINK l _TOC_250012 Construction40 HYPERLINK l _TOC_250011 Commodities46 HYPERLI

4、NK l _TOC_250010 Machinery48 HYPERLINK l _TOC_250009 Power andrenewableenergy49 HYPERLINK l _TOC_250008 Appendix51 HYPERLINK l _TOC_250007 InfrastructuredevelopmentinSouth&SEAsia51 HYPERLINK l _TOC_250006 Countrystudy:India55 HYPERLINK l _TOC_250005 Countrystudy:Indonesia59 HYPERLINK l _TOC_250004 C

5、ountrystudy:Thailand66 HYPERLINK l _TOC_250003 Countrystudy:Malaysia71 HYPERLINK l _TOC_250002 Countrystudy:Philippines75 HYPERLINK l _TOC_250001 Countrystudy:Pakistan84 HYPERLINK l _TOC_250000 Countrystudy:Vietnam93Executive summarySincetheintroductionofChinasBeltandRoadInitiative(BRI)inSeptember20

6、13, themarkethasbeenaskinghowBRIwillpromotemutualeconomicdevelopment andwhowillbethemajorbeneficiaries.AsstatedinourglobalconstructionQ- Series,inasynchronisedslowdownofglobalconstructionactivityin2019/20E,we expectinfrastructurespendingtobethebrightspot,ledbyChina.However,we thinkthereisalackofadeq

7、uateinfrastructureresearchonSouthandSoutheast Asia(South/SEAsia).Weattempttoanswerthesequestionsfromtheperspective of infrastructure investment in the seven largest South/SE Asian countries as measuredbyGDPIndia,Indonesia,Thailand,Malaysia,Philippines,Pakistan,and Vietnam.We first identify infrastru

8、cture investment demand in the seven countries, leveraging on UBS sector analysts and economists in these countries. Our proprietaryanalysisindicatesthatSouth/SEAsiancountriesstillprovidesubstantial investment opportunities in infrastructure, particularly in road and railway connectivity, water supp

9、ly and ICT (information and communication technology) coverage,beforeachievingtheaveragelevelofdevelopedeconomies.Weestimate thiscouldresultinUS$1.2-1.9trninfrastructurespendingin2020-24,withIndia andIndonesiaaccountingfor46%and23%ofthetotal,respectively.North KoreaSouth KoreaJapanIslamabadBeijingEx

10、pectedinfrastructureinvestmentinthe largest7South&SEAsiancountries: US$1.5trnPakistanDelhiNepalKathmanduChinaIndiaMumbaiDhakaBangladeshMyanmarLaosHanoiYangonVientianeThailandVietnamBangkok CambodiaPhnom PenhManilaPhilippinesSri LankaCircles are sized so that the relative areas represent the relative

11、sizeoftheinfrastructureinvestmentforecastsinUS$.BlueNorth KoreaSouth KoreaJapanIslamabadBeijingExpectedinfrastructureinvestmentinthe largest7South&SEAsiancountries: US$1.5trnPakistanDelhiNepalKathmanduChinaIndiaMumbaiDhakaBangladeshMyanmarLaosHanoiYangonVientianeThailandVietnamBangkok CambodiaPhnom

12、PenhManilaPhilippinesSri LankaCircles are sized so that the relative areas represent the relativesizeoftheinfrastructureinvestmentforecastsinUS$.BluecirclesrepresenttotalinvestmentsizePurplecirclesrepresentannualinvestmentpercapitaMalaysiaKuala LumpurSingaporeBruneiPapuaNew GuineaUS$500US$500bnIndon

13、esiaUS$100US$100bnJakartaNote: Borders are indicative, not definitive. Source: World Bank, UBS estimatesSummarising our analysis of infrastructure development plans and financial capabilityofthesesevencountries,wecomeupwiththefollowinginfrastructuredevelopment scorecard HYPERLINK l _bookmark0 (Figur

14、e 2). It indicates that Philippines, Indonesia and Thailand are relatively balanced between willingness and ability to promote infrastructure, while Pakistan is the least balanced due to a weak domestic financialsystem.Whilealreadypossessingthemostadvancedinfrastructureofthe seven countries, we beli

15、eve Thailand and Malaysia have sufficient financial capabilitytoself-fundtheirinvestmentandweexpectsignificantupsidetoour five-year infrastructure spendingforecasts.With the most advanced infrastructure facilities among the major seven South/SE Asiancountries,wethinkMalaysiasoverallscoreisunderstate

16、d.Webaseour infrastructureFAIestimatesforThailandandMalaysiaonlyonmegaprojects, implying significantupside.(Scale from 1 to 5; 5 is the best)ScoreIndiaIndonesia ThailandMalaysia Philippines (Scale from 1 to 5; 5 is the best)ScoreIndiaIndonesia ThailandMalaysia Philippines PakistanViet Demand for inf

17、rastructure development *3331554Total infrastructure FAI in 2020-24E5311221Estimated infrastructure FAI per capita1424513Savings as % of GDP4554414Current account balance as % of GDP2254214Overall score3.2Note:*5meansthatinfrastructureisleastdevelopedandwiththehighestdemandforimprovement. Source: Wo

18、rldEconomicForum(WEF),Haver,UBSestimatesOur forecasts are more conservative than ADBs aggressive expectation of US$423bnandUS$210bnannualinfrastructureinvestmentneedsinSouth/SEAsia, respectively, because we: 1) use a bottom-up approach; 2) do not make adjustmentsforclimatechangeimpact;and3)haveamore

19、conservativeview aboutinfrastructureinvestmentinIndiathanADB.Figure 3: Philippines, Indonesia and Malaysia will spend most on infrastructure per capita300Philippines,$299Annual infrastructure investment per capita (USD)Annual infrastructure investment per capita (USD)Indonesia, $248Malaysia, $231200

20、Viet Nam, $187150Pakistan, $113Thailand, $1501005560India, $101707580InfrastructurescoreassessedbyWEFin2018 Source: WEF, World Bank, UBS estimatesWethinkthemarketisscepticalaboutfundingevenifinfrastructureavailabilityis lowformanycountriesinSouth/SEAsia.Therefore,wethenlookedintothemajor fundingsour

21、cesthedomesticfinancialsystem,internationalsupportsuchas multilateralsandofficialdevelopmentassistance(ODA),andBRI-relatedfinancing. The domestic financial system is the most important source, and we believe Thailandisbestpositionedtoself-funditsinfrastructurespending.ThenetODAto SouthandSEAsiancoun

22、triesover2013-17ofUS$17bnperyearonaveragewas far belowdemand.Figure 4: Savings versus investment funding gaps (current account balance)Figure 5: The biggest funders of BRI by a significant margin are CDB and EXIM Bank (Rmb bn, 2018)SGHKITMYAUTWBDTHJPVNKOCHPTPKSAUSMXBRCLPHTK HNINIDCurrentAccountbalan

23、ceSGHKITMYAUTWBDTHJPVNKOCHPTPKSAUSMXBRCLPHTK HNINID151050-5-10515253545-CDBEXIMBankSilk RoadFund Total B&R funding(LHS)60%50%40%30%20%10%0%Savings(2019,%ofGDP) B&Rfundingasa%oftotalassets(RHS)Source:Haver,IMFestimates,UBSSource: CompanydataRegarding funding of BRI-related projects, we think the real

24、 force behind BRI currentlyaretwoofthethreemajorpolicybanksinChinaChinaDevelopment Bank(CDB)andExportImportBankofChina(EXIMBank)togethercontributing Rmb2trn. Moreover, we believe large commercial banks in China as well as multilaterals such as Asian Infrastructure Investment Bank (AIIB) and New Deve

25、lopmentBank(NDB)couldplayanincreasinglyimportantroleifChinais keentopromoteBRI.Inaddition,wethinktheprevailingnegativeinterestrate environmentintheEUandJapanmayhelpeasefundingforinfrastructure developmentinthesevencountries.WefurtherbreakdownourUS$1.5trninfrastructurespendingforecastbysector and thi

26、s suggests most of the revenue will flow to the construction sector, followedbyprovidersofrawmaterialsandequipment.Figure 6: Breakdown of US$1.5trn to countries & industriesUS$ bnIndiaIndonesiaThailandMalaysiaPhilippinesPakistanVietnamInfra FAI 2020-24E (base case)615246433011311170Implied revenue b

27、y sector- E&C contractors308 - 369123 - 17226 - 3018 - 2168 - 7966 - 7742 - 49- Raw material providers77 - 12943 - 776 - 115 - 717 - 2817 - 2710 - 17- Equipment providers92 - 1545 - 1013 - 179 - 1210 - 2010 - 196 - 12- Banks (interests)43 - 4815 - 220.9 - 1.10.7 - 1.07 - 910 - 123 - 4Aggregate520 -

28、700191 - 28746 - 5932 - 41109 - 144110 - 14466 - 88Source: UBS estimatesWe view the construction, construction machinery, and cement sectors as major potential beneficiaries of infrastructure development in Asia. Other sectors suchasrailwayequipment,powerequipment,steelandrenewableenergycould alsobe

29、positivelyimpacted.In HYPERLINK l _bookmark1 Figure7welistourstockpreferencesontheBRI theme.Figure 7: Stock implicationsReutersMarket capLastUpsideCompanycodeCountry(US$bn)RatingPT(LC)(LC)(%)CommentsConstructionConstructionCRCC1186.HKChina15.2Buy12.308.7640% New chairmans aggressive overseas expansi

30、on strategy CCCC1800.HKChina12.5Buy9.706.0760% Largest Chinese overseas contractor among peers WijayaKaryaWIKA.JKIndonesia1.3Buy2,8502,10036% Largest outstanding order books among IndonesiapeersWaskitaKaryaWSKT.JKIndonesia1.6Buy2,4101,62049% Highest exposure to Indonesia toll road construction and i

31、nvestmentSino-ThaiE&CSTEC.BKThailand0.8Buy24.0016.8043% Potential beneficiary of Thailands renewed push on infrastructureinvestment in Eastern Economic Corridor (EEC) and urban railDMCIHoldingsDMC.PSPhilippines2.2Buy14.008.2769% Exposure to major ODA-funded projects, particularly rail, through joint

32、venturesKajima1812.TJapan7.2Neutral1,3601,505-10% Has an exposure in South East Asia through its subsidiary KajimaOverseas AsiaIJMCorpIJMS.KLMalaysia1.9Sell1.452.17-33% well-positioned to participate in Eastern Coast Rail Link (ECRL) worksand ports and can benefit through higher volumesLarsen&Toubro

33、LART.BOIndia29.1Sell1,4011,475-5% Moderating infra spending and subdued private capex outlook in India HyundaiE&C000720.KS Korea4.0Sell40,00043,000-7% Potential JV/subcontractor for Belt & Road projects givenHDECsstrength in infrastructure/plant works as well as its track record overseasMachinerySan

34、y Heavy Industry600031.SSChina16.6Buy15.8613.9114% Running Indian production base, ranked Top 3 in terms of excavatorsales volume in IndiaHengli Hydraulic601100.SSChina4.9Neutral32.0238.84-18% Announced setting up Indian production base in Sep 2019 (to beginoperations in 2020)XCMG000425.SZChina5.1Bu

35、y6.004.6030% Running trading subsidiary in India and IndonesiaChint Electrics601877.SSChina6.9Buy30.0022.72Involvedinthedevelopmentofsolarfarmsandexportofsolarmodules 32% in B&R countries, and it could benefit from solar in SEA countriesapproaching grid parityMaterialMaterialAnhui Conch-A600585.SSCh

36、ina31.5Buy49.0241.9817% Has exposure in Southeast Asia (Indonesia) and plans to add moreoverseas capacityAnhui Conch-H914.HKChina31.4Buy57.8846.5024% Has exposures in Southeast Asia such as Indonesia and will add moreoverseas capacitiesSemen IndonesiaSMGR.JKIndonesia5.6Buy15,00013,32513% Owns larges

37、t installed capacity in Indonesia with diverse plant locationsChina Oriental0581.HKChina1.3Buy4.542.7565% Product mix with high downstream exposure to infrastructure; locationadvantage to Southeast Asia through a new project in GuangxiRenewable energyLongi owns mono-silicon wafer/cell/ module capaci

38、ty in Malaysia whichLongi Green Energy601012.SSChina11.7Buy32.8022.8444% caters to rising global solar demand driven by grid parity, and it alsoannounced further capacity expansion in ASEAN countriesGCL-Poly Energy3800.HKChina0.7Buy0.510.3262% Currently no capacity in ASEAN, but GCL has exposure to

39、theincreasingly higher ASEAN solar demand mainly driven by grid parityXinyi Solar0968.HKChina4.2Neutral5.404.46XYS owns solar glass capacity in Malaysia with higher NPM than in 21% China due to local tax advantages. It has announced further expansionplans for solar glass capacity in MalaysiaNote:Abo

40、vedataasat30October2019. Source: UBSestimatesRecap of the Belt and Road InitiativeLaunched in September 2013, the Belt and Road Initiative (BRI) aims to jointly builda new Eurasian Land Bridgethe Silk Road Economic Belt and 2)transport routesconnectingmajorseaportsinASEANcountriesthe21st-CenturyMari

41、time Silk Road. It is worth noting that: 1) by design, the BRI is more of a loosely definedbrandthanastructuredprogramme;and2)despitebeingtheinitiator, Chinaisnotexpecting(orexpected)tofundandbuildallBRI-relatedprojectsin theirentirety.ThecoreframeworkrequiresintensivecooperationamongBeltand Roadcou

42、ntries(B&Rcountries)andincludesdevelopingsixeconomiccorridors HYPERLINK l _bookmark2 (Figure 8) and improving connectivity of corresponding transport infrastructure; namely,highway,railway,airway,waterway,pipeline,andcomprehensivenetwork and spatialinformation.China-Mongolia-Russia Economic Corridor

43、 New Eurasia Land Bridge Economic CorridorChina-Central Asia-West Asia Economic CorridorChina-Indochina Peninsula Economic Corridor China-Pakistan Economic CorridorBangladesh-China-India-Myanmar Economic CorridorFigure 8: The six economic corridors of the Belt and Road InitiativeChina-Mongolia-Russi

44、a Economic Corridor New Eurasia Land Bridge Economic CorridorChina-Central Asia-West Asia Economic CorridorChina-Indochina Peninsula Economic Corridor China-Pakistan Economic CorridorBangladesh-China-India-Myanmar Economic CorridorNote: Borders are indicative, not definitive.Source: Hong Kong Trade

45、Development Council, UBSAfter six years of implementation, the Chinese government has signed 195 cooperation agreements and MOU with 136 countries and 30 international organisations.In2013-18,ChinarealisedaroundUS$90bnFDIinB&Rcountries. Asofend-June2019,theSilkRoadFund,whichwasfoundedexclusivelyforB

46、RI, had invested around US$10bn (per Belt and Road Portals data), while China Export & Credit Insurance Corporation had realised a total insured sum of US$770bnandtotalclaimamountofUS$3bnforB&Rcountries.Figure9:ChinasFDI,E&CcontractrevenueinB&R countries grew6-10%/yearFigure 10: Chinas E&C revenue a

47、nd EXIM value in South/SE Asia grew 6-14%/year0US$bn0US$CAGR = 6%140140106106480588112248058811222134201420182014CAGR = 14%E&CrevenueEXIMvalueCAGR = 14%ASEANSouthAsiaCAGR = 10%CAGR = 9%CAGR = 6% 1316201420182014201820142018FDINewE&CcontractE&Crevenue648689126Source:CAGR = 10%CAGR = 9%CAGR = 6% 13162

48、01420182014201820142018FDINewE&CcontractE&Crevenue648689126Do B&R countries in South/SE Asia have sufficient infrastructure?World Economic Forum (WEF) statistics in 2018 show that most South and Southeast Asian countries still have significant infrastructure development opportunities,asonlySingapore

49、andBruneihavereachedOECDsaverage.Road andrailwayconnectivity,inparticular,arelaggingfarbehind.Watersupplyand ICT coverage also need toimprove.Forthesevenlargest1SouthandSEAsiancountries(India,Indonesia,Thailand, Malaysia,Philippines,PakistanandVietnam)coveredinthisreport,weestimate totalinfrastructu

50、reinvestmentoverthenextfiveyearswillrangefromUS$1.2trn toUS$1.9trn(US$1.5trninourbasecase),equivalenttoUS$245bntoUS$375bn per year (US$291bn in our base case). Of the seven countries, we consider Indonesia, Philippines and Thailand as the most important markets for infrastructure development. We exp

51、ect further upside in our forecasts for MalaysiaandThailandaswehaveonlyincludedmegaprojectsinourbasecase.Figure 11: Scorecard of infrastructure development and financial capability(Scale from 1 to 5; 5 is the best)IndiaIndonesiaThailandMalaysiaPhilippinesPakistanViet NamScoreDemand for infrastructur

52、e development *3331554Total infrastructure FAI in 2020-24E5311221Estimated infrastructure FAI per capita1424513Savings as % of GDP4554414Current account balance as % of GDP2254214Overall score3.2ValueInfrastructure score defined by WEF69677078595965Total infrastructure FAI in 2020-24E (US$ bn)674328

53、523615711789Infrastructure FAI per capita in 2020-24E (US$)101248150231299113187Savings as % of GDP29313326251030Current account balance as % of GDP-2.1-3.06.42.1-2.4-6.32.4Note:*5meansthatinfrastructureisleastdevelopedandinhighestdemandofimprovement. Source: WEF, Haver, UBSestimatesIn its 2017 pape

54、r, Meeting Asias Infrastructure Needs, ADB forecast that South and Southeast Asia would require US$6.3trn and US$3.1trninfrastructure investment over 2016-30, equivalent to US$423bn and US$210bn per year, respectively.However,wethinkthemarkethasbeenquestioningthepracticability ofADBstheoreticaltop-d

55、ownapproach.Ourforecastsaremoreconservative, because:1)wefocusonaddressableprojectsandhaveselectedonlytheseven largestcountriesforouranalysis;2)wedonotfactorinanyclimatechangeimpact whichincludesadditionalcostsforclimatemitigationandadaption;and3)weare moreconservativeabouttheIndianmarketourforecast

56、onlyaccountsfor39% ofADBsaswebelieveIndianolongerhasasubstantialinfrastructuredeficit.Existing infrastructure: insufficient connectivity of land transportThe Global Competitive Report 2018 published by WEF listed infrastructure (including transportroad, railway, airway, seaway and utilitieselectrici

57、ty and1 Measured by 2018 GDP per World Bank dataFigure 12: ADBs estimated infrastructure investment in AsiaUS$ bn South Asia2016-30 aggregate6,347Annual average 423Southeast Asia3,147210East Asia16,0621,071CentralAsia56538Source: ADBwater) and ICT (information and communication technology) adoption

58、as two majordimensionswhenmeasuringthecompetitivenessofeachcountry.In HYPERLINK l _bookmark4 Figure HYPERLINK l _bookmark4 13,weshowthescoredetailsofASEAN(excludingMyanmarwhichwasnot assessedbyWEF),IndiaandPakistanineachsub-category.Figure 13: Infrastructure score summary of ASEAN, India and Pakista

59、nSingapore MalaysiaBruneiThailandIndiaIndonesia Viet Philippines PakistanLao CambodiaOECDASEANSingapore)ChinaInfrastructure95.777.971.369.768.766.865.459.459.057.551.782.168.465.078.1Transport92.165.349.354.763.151.547.236.948.835.532.868.351.746.668.0Road90.850.571.863.159.741.340.232.458.028.843.0

60、74.351.346.474.0RailwayN.A. 43.3N.A.26.754.133.828.513.837.8N.A.14.064.826.726.738.2Airway90.282.746.982.882.083.466.767.071.567.865.080.3Seaway95.384.829.246.356.747.553.434.442.3N.A.25.779.3Utilities99.390.593.384.674.382.283.782.069.279.670.696.085.183.388.3Electricity100.098.398.798.983.492.896.