How is infrastructure linking supply chains in Asia?

The establishment of a more robust network across supply chains in Asia experienced an increase in attention to infrastructure development. Said trend is being driven by various factors such as globalization, technological advancements, and changing consumer demands.

Asia is gradually emerging as a major manufacturing and trading hub. Wherein, the existence of a highly-functional infrastructure could impact operations from manufacturing to logistics. 

An infrastructure can refer to ports, airports, railways, roads, warehouses, communication networks, storage, and other facilities. All of these help enable the movement of goods, services, and information along the supply chain. 

“There is little doubt that investments in infrastructure help the economic development of the receiving country,”

said Raymond Yamamoto, an expert on Japanese official development assistance and Associate Professor at Aarhus University in Denmark.

Noteworthy infrastructure drives economic progress

Mobility makes the circumvention of services and goods amicable. And China’s Belt and Road Initiative (BRI) is one of the significant related initiatives to date. 

The BRI enhances connectivity and promotes economic cooperation among countries along the ancient Silk Road trade routes.  It facilitates the movement of goods between China, other Asian countries, Europe, and Africa. Such is through the creation of new trade routes and the expansion of existing ones.

Meanwhile, Vietnam prioritizes infrastructure. They deem it as a central factor supporting its fast-paced economic development. While other ASEAN nations spend an average of 2.3% of their GDP on infrastructure, Vietnam allocates around 6% of its GDP. 

Vietnam Prime Minister Pham Minh Chinh stated at the 13th National Party Congress in 2021, that disbursing public investments mainly focused on infrastructure construction. One which he deems among the important solutions to promote economic growth. 

Recently, the Vietnamese Government approved a USD 14 billion plan to build a 1,372 km North-South highway by 2030. With a hope to support the network infrastructure of the manufacturing and processing sector, the infrastructure in Vietnam could grow at a CAGR of approximately 4% during the 2023 – 2028 period.

Modernization of ports 

Certain ports in Asia, such as Shanghai, Singapore, Busan, and Dubai, have undergone massive expansion and modernization. These include state-of-the-art facilities and advanced technologies to handle larger volumes of cargo and provide faster and more reliable services. 

These modern ports are with digital infrastructure. A “Smart Port” is leveraged by automation and cutting-edge technologies such as Artificial Intelligence, Big Data, Internet-of-Things, and Blockchain. They are now being applied in some of the supply chains in Asia.

“The cornerstone of the economic welfare of any country is the presence of a performing infrastructure. Seaports are a critical part of this infrastructure and essential to boost and support the economic development. In that respect, any plan to modernize and revitalize the port system should be encouraged,”

Luc Arnouts, Vice President of International Relations and Networks, Port of Antwerp-Bruges said.

Yangshan Port of Shanghai, the world’s largest automation port, has a capacity of 6.3 million TEUs which is 20-foot equivalent units. Its energy consumption system results in zero carbon dioxide or other emissions while allowing savings of up to 70 percent.

The automatic port intellectual production management control system, or TOS system, acts as the brain of the new port, which covers 2.23 million square meters. It reduced 66% of the labor force needed while increasing 700% handling cargo volume.

About 15 million equipment interchange receipts are at Shanghai Port. Wherein, the paperless procedure can save more than 400 million yuan or USD60 million in cost. It will also shorten the cargo arrival to collection time from 4.5 days to between 12 and 24 hours.

Sustainability

There is a growing movement on green infrastructure in Asia. It consists of renewable energy projects, sustainable buildings and transportation systems.  

Such is in consideration that Asia is prone to natural disasters like earthquakes, typhoons, floods, and tsunamis.  Hence, adequate resilient infrastructure is essential for mitigation.

Some of Asia-Pacific’s middle to low-income nations are in need of new infrastructure investment.  India, Indonesia, the Philippines, Thailand, and Vietnam, has a 60 percent  estimated gap to fill-in. This was in Vn Economy, which highlighted the results of  the research made by PwC, a global network of firms. 

Additionally, the 2021 United Nations Climate Change Conference  (COP26) significantly underlined infrastructure development in Asia.  Financial institutions have a larger financing pool thanks to the rising investor interests in sustainable investment. 

Whilst, governments focus on green elements and promote infrastructure projects that support a fair and inclusive transition to low-emission economies while accelerating climate-resilient growth. 

On the side, the private sector adds with their financial resources, technical expertise and efficiency to bridge the infrastructure gap. Said sector also supports the shift towards sustainable development, especially in areas with limited public resources. 

These efforts, together, may pave a greener path for the fast-paced economy and supply chain in Asia. It aids in the net-zero commitment in COP26 in 2050.

One example is Nike, which built the first LEED platinum warehouse in China in 2011. It saved 4,400,000 kilowatts of electricity yearly through the use of efficient lighting, an on-site solar heating system, and access to natural light, along with other green features. The impact of all of these green approaches is to reduce CO2 production by 4,200 tons every year.

Growth through investments

According to Asian Development Bank (ADB), developing countries in Asia and the Pacific need to invest $26 trillion in infrastructure from 2016 to 2030, or $1.7 trillion per year. This is a must for the region to be able to maintain its gradual growth, while fighting poverty, and climate change.

Japan is still the leader in providing Southeast Asia infrastructure investment. There is over $330 billion invested in network infrastructure of Indonesia and Vietnam. Also about  ¥130 billion in loans to Indonesia in 2022 for the second phase of Jakarta’s mass rapid transit (MRT) project and for an expressway connecting Patimban Port. Meanwhile, ¥40 billion are in loans to more than 30 projects across Southeast Asia.