ECONOMICOUTLOOK
Prospects soften
in the context of the region. The vertical axis
represents the five year outlook for compound
annual growth in the industry. The size of the
bubble reflects the size of the construction
market and the horizontal axis reflects the risk of
construction investment.
This is a basket of risk assessment includes the
ability to repatriate earnings, enforce a contract,
protect a patent, deal with regulatory hurdles and
Indonesia is an example of the challenges
to emerging markets. While it continues to
offer above average growth on the strength of
large infrastructure developments and a strong
residential outlook, the outlook has softened.
Weakness in commodities is compounded by
a rigid regulatory framework that limits the
potential for foreign investment.
However, Vietnam has managed to avoid some
of theseproblems.This is partiallydue to its lower
exposure to commodity prices.
But in addition, many companies set up
operations inVietnamasahedgeagainstproblems
inChina, souncertainty in theChinese economy
onlymakes these investments seemmoreprudent.
Andwhile tensionswithChinamay limitChinese
investments inVietnam, theymayevenencourage
investment from other nations.
Outlook
In general, the outlook forAsian constructionhas
become a littlemore subdued.
Still, the region as a whole offers above average
potential, and certain countries remain solid bets
for themedium and long term.
If the new governments in India and Indonesia
(and effectively in China) engage in serious
structural reform, there could be positive change,
and the outlook could improve this year.
iC
IHSGlobal Insight
Recognised as themost consistently accurate
forecasting company in theworld, IHS Global
Insight has over 3,800 clients in industry, finance,
and government with revenues in excess of
US$ 80million, 5,100 employees and 50 offices
around theworld in 30 countries. 80% of Fortune
500 companies are customers of IHS Global Insight.
■
For more information onmatters discussed in
this article or Global Insights’ services, visit
or contact Scott Hazelton
in the US on+1 781 301 9044 or at
obtain stable prices and labour relations.
The risk score extends to100 and the cross-hairs
represent global averages for constructionmarket
growth and risk
Much of the region falls into the lower left
quadrant which features slower growth, but also
relatively low risk. India and Malaysia have the
enviablepositionof offeringabove averagegrowth
with below average risk. Indonesia, Bangladesh,
Vietnam and Pakistan join China offering above
average growth, but with some higher risk
exposure.
This forecast was completed before martial law
inThailand. It is likely that Thailand will move
into theundesirable zoneof below averagegrowth
and above average risk. Indeed, Pakistan routinely
hovers in this zone as well, due to its political
uncertainty.
There are issues affecting emerging markets
around the world that have reduced construction
growth projections in general. These include
cyclical factors – withdrawal of policy stimulus,
weak export markets, excess capacity after
investment booms and capital rotation as money
flows to theUS thanks tobetter bond yields.
They also include structural forces, such as
slower labour force growth, a slower pace of
globalisation, the end of the commodities super-
cycle and a lack ofmarket reforms.
international
construction
june 2014
16
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