As technology provides the scope for radically different solutions to infrastructure needs and often much more cost-effectively, it is important for infrastructure players such as planners, investors, regulators and owners to understand the changes in the infrastructure landscape and to leverage them.

KPMG’s research on ‘Emerging Trends in Infrastructure” explored the top 10 trends influencing the infrastructure sector in 2019:

Trend 1: The public sector will begin to reassert its role: With new models and solutions being introduced within the infrastructure sector, governments have been working to keep regulatory pace with these changes. In 2019, we will see governments and authorities taking a more assertive approach to define the regulations to govern new technologies and models. Regulatory frameworks need to be more flexible and durable to make sure they are able to strike the right balance between control and innovation, as well as agile enough to support future disruptions.

Trend 2: Data drives operational efficiency: Data and analytics will be used to uncover insights, enabling greater efficiency. This includes operational efficiency and better planning to create stronger alignment between supply and demand. Regulators can also use data to better govern and oversee infrastructure delivery. Governments and infrastructure authorities are starting to recognise the true value of their data in driving insights, operational performance and broader innovation. This year, we expect to see adoption spread – across sectors, ecosystems and life cycles.

Trend 3: The challenges of megaprojects are magnified: As we see megaprojects increasing in scale, such as Thailand’s Eastern Economic Corridor, infrastructure players need to address unprecedented challenges, including capacity fulfilment and project management. We expect to see much more need for benchmarking, performance analysis and knowledge sharing within the industry as traditional planning and age-old solutions are becoming less applicable.

Trend 4: Eyes shift to emerging market opportunities: As interest in new growth opportunities increases and as multilateral agencies seek to facilitate more investments, we will see more investors looking for new opportunities in emerging markets. Therefore, governments in emerging markets need to put greater emphasis on properly selecting, preparing and delivering projects.

Trend 5: Embracing the evidence: Infrastructure authorities will adopt holistic and evidence-based, decision-making processes that enable a much more informed approach to delivering society’s needs and expectations.

Trend 6: Sustainability goes mainstream: Sustainability is quickly becoming a board-level priority and not just an environmentalist’s agenda as investors are starting to direct their money towards companies deemed to be acting sustainability. Infrastructure sustainability is not just about environmental impact, but also includes financial and funding sustainability through operational and technological sustainability. We expect to see more public pressure and scrutiny on the sustainability of infrastructure planning.

Trend 7: Progress trumps divisiveness: Despite increasing global political divisiveness and economic disagreement, multinational infrastructure collaboration is going strong, such as China’s Belt and Road initiative, which spans multinational and regional collaboration. Countries will continue to coalesce around a common sense of progress.

Trend 8: Competition for new technologies heats up: The competition around new technologies will intensify as players continue to look for new opportunities to improve their services, products and revenues. This also means that different approaches and easier access to technological disruptions may see emerging markets leapfrog into mature markets, as new players and startups enter the market.

Trend 9: The customer becomes king: Today, users are impacting infrastructure in non-traditional ways; ride sharing models like Grab are causing users to shift away from set-route transportation (eg buses) and thus changing traffic patterns; and virtual working and co-working spaces are decreasing the focus on central business districts. Governments will need to focus more on understanding actual user choices and how they will affect the way people interact with infrastructure. Infrastructure plans will need to be informed by real-time and predictive customer insights.

Trend 10: Interdependence creates opportunities: Infrastructure planning can no longer be done in separate silos. For example, Thailand’s scheme to promote the use of electric vehicles will need to be supported by charging station operators and grid planning in order to distribute enough power to charge cars. Infrastructure planners will take the steps necessary to start considering multiple long-term plans, supported by robust scenario planning capabilities, as a way to maximise the growing interdependence of infrastructure.

Contributed by TANATE KASEMSARN, head of infrastructure, KPMG in Thailand

The Innovation Granting Agency under the NIA is undergoing transformation into the National Innovation System Integrator, and is tasked with facilitating and driving the private sector, government, universities and social enterprises to move together towards an innovation society and innovative economy.

The agency also aims to develop 3,000 innovation companies in the country within the next 10 years.

Pun-Arj Chairatana, the NIA’s executive director, says the agency has transformed itself into an innovation system integrator so that it could facilitate the participation of multiple sectors driving towards an innovation-based economic and social ecosystem.

In the role of a systems integrator, the agency hopes to push for the emergence of an innovation society and innovative economy via four main areas. The first is to develop at least 3,000 innovation companies in the country. The second is to develop the Innovation Foresight Institute in order to drive innovation and technology trends in the country. The third is to create new mechanisms and new opportunities nationwide for an innovation society and innovative economy. Lastly, the agency is also setting up a diplomatic programme in order to create opportunities and invite both local and international ventures to invest in innovation companies.

The agency also expects that by the end of this year, business and venture capital will inject more than Bt3.5 billion into innovation companies via its direct contact.

The agency will also focus this year on supporting deep innovation technology in three areas – health-tech, agri-tech and food-tech.

Moreover, the agency is launching a promotional campaign to support Thai entrepreneurs and startups through the new “Groom Grant Growth” package. It aims to increase the potential of Thai entrepreneurs and startups in both economic and social innovation businesses.

The agency will provide grants of between Bt1.5 million and Bt5 million to support entrepreneurs and startups in six areas – healthcare innovation, food innovation, herbal innovation designed for chronic non-communicable diseases, national defence industry innovation for security and civil affairs, travel innovation, and smart logistics innovation/manufacturing industry that uses IoT technology.

“The NIA has plans and guidelines to support the needs of entrepreneurs and startups so that we will be able to increase their opportunities,” said Pun-Arj.

“This is another important opportunity that will facilitate the innovation ability of entrepreneurs and startups so that they can reach their goals faster.”

As Asean’s chair in 2019, Thailand – under the theme of Advancing Sustainable Partnerships – has set a positive tone for the region highlighting several areas of focus.

The year is already shaping up as one where the headlines will write themselves: markets second-guessing a return of policy tightening by the Fed, a Brexit deal or no deal, company downgrades from trade tariff uncertainty, and oil prices running roughshod.

Amongst the bearishness, Asean remains one of the most optimistic and open regions in the world and in 2019 the region has the opportunity to further distinguish itself by continuing to drive reform and seek increased openness.

Key areas of focus for 2019

Improving intra-regional flows to offset global trade slowdown: Asean economies can partly offset any trade downturns if the much-discussed supply chain diversion to Southeast Asia – from China, US and Korea – materialises, but increasing the ease in which goods and services flow across Asean will make the transition more widespread. Important progress has already been made including the imminent launch of the Asean-wide Self-Certification scheme which allows wing certified exporters to self-certify the origin of their exports

The Asean Single Window – which digitised intra-Asean trade documents – which was launched across Indonesia, Malaysia, Thailand, Vietnam and Singapore in early 2018 – means cross-border goods flows has come down from 5-10 days to one.

But more needs to be done to smooth the flow of goods and services across Asean. This includes rolling out the Asean window to all Asean countries, standardising the cost and time of customs clearance across South-east Asia and enabling the freer movement of professionals across the region.

Attracting more inbound investment: Foreign Direct Investment (FDI) into Southeast Asia has improved post-global financial crisis, but more needs to be directed to countries like Thailand, Indonesia or Philippines where supply chains are expected to grow in future.

The levers to attract investment to Asean more widely are clear: reasonable production costs, stable institutions, improved technological innovation, lowering tariffs and import barriers for production inputs, and increasing labour skills.

A further way to bolster Southeast Asia’s investment appeal will be through free trade agreements (FTA) including:

lBringing new members into the recently-launched Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

lConcluding new agreements like the Regional Comprehensive Economic Partnership (RCEP) and the Asean/Europe FTA

lUpgrading existing trade pacts with the likes of Hong Kong and China

lInvestment in digital economy

lImproving digital connectivity, and investment into Asean’s digital space to support the region’s burgeoning consumer base, could be another game-changer – both to shore up the region’s supply chain potential and to increase the gravitational pull for multi-nationals and companies.

The Masterplan on Asean Connectivity 2025 has stated that between US$220-650 billion in additional annual economic impact in Asean by 2030 could be injected into Asean through new technology and the internet economy. Asean members signed the Asean Agreement on E-Commerce in November; however, converting this into tangibles will be crucial including

lDeveloping regional electronic payment infrastructure

lEnabling the cross-border movement of business

lCollaboration on cyber security to instil consumer and government confidence ?

lDriving a sustainable Asean

Perhaps the biggest challenge for Asean will come in the form of natural events rather than man-made ones as Southeast Asia is one of the most natural disaster-prone regions in the world. This has only been exacerbated by climate change in recent years. Weather aside, urbanisation will mean that by 2030 more than 100 million people will migrate urban areas across Southeast Asia placing massive strains on resources such as food, health, and infrastructure.

Areas of focus to drive a more sustainable Asean include:

lDeveloping regional incentive |frameworks and standards (such as subsidies on the legal and banking advisory costs linked to generating green loans and bonds) which will increase the cost effectiveness and, therefore, attractiveness of these |financial instruments for corporates.

lTo start converting the Asean Smart Cities Network – launched in April 2018 – from a concept programme into specific projects across the 26 pilot cities

lWorking with China, US, Europe and Japan – who have all earmarked Southeast Asia for their respective sustainable development programmes – to push for ‘bankable’ and transparent infrastructure projects that will generate commercial demand and, therefore, sustainable debt.

lThe first Asean Foreign Ministers’ Retreat – on 17-18 January – was a good kick-off under Thailand’s chairmanship. The meeting saw Asean members welcome the many priorities that have been placed on the table that seek to further drive prosperity and sustainability across the region. Clearly, continued integration of the region is crucial in the face of 2019’s challenging global backdrop. Businesses are crying out for tangible developments that will smooth intra-regional trade, encourage international investment and create a sustainable future. So achieving more reform, integration and openness in 2019 will help the region both capitalise and shield itself from global events that are likely to play out over the coming years.

Contributed by KELVIN TAN, Chief Executive Officer, HSBC Thailand

Stock Exchange of Thailand (SET) president Pakorn Peetathawatchai said that MSCI is conducting a survey on the possible inclusion of non-voting depositay receipts (NVDRs) into its emerging markers index at the next rebalancing of the market gauge.

Should MSCI go ahead with the change, foreign MSCI index funds would likely increase their weightings of Thai stocks in their portfolios, given the large the number of foreign investors that hold Thai stocks through NVDRs, Pakorn said.

Thai stocks make up about 2.5 per cent of the MSCI Emerging Markets Index. NVDRs are depositary receipts issued by Thai NVDR Co Ltd.

Foreign investors own Bt1.15 trillion in Thai stocks through NVDRs, representing 6.78 per cent of the SET’s Bt17.03-trillion market capitalisation at the end of January.

By that time, the biggest holdings of NVDRs were in Bangkok Bank, with 645.74 million shares worth about Bt138 billion, followed by Kasikornbank with 552.68 milllion shares for Bt110 billion, PTT with 2.13 billion shares for Bt103 billion, CP All with 812.04 million shares for Bt63.1 billion and Siam Commercial Bank with 346.82 million shares for Bt46.1 billion.

Paiboon Nalinthrangkurn, president of the Federation of Thai Capital Market Organisations (Fetco), said that if NVDRs held by foreigners are included in the MSCI, Thai stocks will gain a larger weighting in the portfolios, given that many foreign funds make their stock picks with reference to MSCI indices.

SET senior executive vice president Soraphol Tulayasathien said that, from January 2 to February 1, some Bt7.3 billion in foreign capital was invested in the Thai bourse and Bt1.8 billion in long-term government bonds. These holdings portend goods signs for the market and reflect foreign investors’ confidence in the prospects for Thailand’s economic expansion, said Soraphol, citing benefits from an easing external environment after the US Federal Reserve left its benchmark interest rate unchanged. Signs of progress on resolving the US-China trade dispute added to the positive sentiment.

Whether foreign capital inflows will continue will be subject to progress on the US-China trade negotiations, other central banks’ monetary policies, global liquidity, each country’s political developments and the performance of Thai exports, said Soraphol, also citing a rise in the number of foreign tourists, increased private and public investment and political stability. Listed companies’ earnings results were another factor in the mix.

In January, the bourse’s daily trading turnover rose 15.5 per cent month on month to Bt48.58 billion.

Peerapong Jirasevijinda, chief executive officer of Bualuang Asset Management (BBLAM), said that foreign capital is expected to continue flowing into the Thai stock market if MSCI rebalances its weighting on Thai stocks from 2.5 per cent to 3 per cent for MSCI emerging markets. MSCI will announce any changes in changes in its standard index series in March.

Foreign capital inflows are projected to reach Bt64 billion in emerging markets, particularly the Thai market, which may enjoy rises, Peerapong said.

“The Thai stock market is expected to see limited downward risks, given last year’s sharp corrections. Stocks with price to earnings ratios at 13.5-14 times are not expensive. However, drops in crude prices have pressured listed companies’ earnings results,” he said.

Forecasts for listed companies’ earnings per share growth have been revised down to 4-5 per cent from 8-9 per cent, which could also limit the stock gains.

This year economic growth is estimated at 4.1 per cent, driven by public investment, tourism and domestic consumption. Last year’s growth in GDP is expected to come in at 4.2 per cent.

However, Thai exports may slow down from the superpower trade war, while the Thai policy rate is expected to remain unchanged at 1.75 per cent this year.

If Thailand retains its stability after the election, the Thai stock market could see sustained gains, Peerapong said.