VINACHEM

“I used to swim in this bay when I was a kid but there’s nowhere to swim anymore,” the hotel driver said on the way to Manila airport, pointing to the hotels and giant shopping malls that now occupy the Bay City area of the Philippine capital.

A population of 12 million people and some of the worst traffic in the world are bursting Manila’s seams, forcing it to reclaim many hundreds of hectares of new land from the city’s natural harbor. Development continues apace in the Bay area, as evidenced by stalks of steel reinforcing bar sprouting from high rise building sites. Plenty more residential apartment buildings will be required in the years ahead, as the Philippines’ working age population is projected to grow by 70% over the next three decades – the most positive demographic outlook in Southeast Asia.

Earlier in the day, there had been more police than tourists taking a break near the closed fairground rides and snack shops along the waterfront promenade. A lone police helicopter kept watch from above. Security had been stepped up due to the ASEAN (Association of Southeast Asian Nations) Ministers of Energy Meeting at the ASEAN Energy Business Forum 2017 event, hosted by the Philippines this year.

Energy is one of the most vital issues facing ASEAN – a region of 630 million people that is expected to become the world’s fourth-largest economy by the middle of this century. At the moment, 20% of this number live without electricity. Young, aspirational families – those that will live in the apartments mushrooming around Manila Bay – will buy fridges, washing machines and TVs. Many thousands of air conditioners will need to run 24/7 to keep out the heat and humidity.

All of this will require considerable energy – and of course significant investment. To fund the energy needed to support ASEAN’s economic growth will require $90 billion of investment every year until 2040, for a total spend of $2.3 trillion, according to Japan’s Institute of Energy Economics. Oil and gas – particularly LNG – will account for the lion’s share of investment. ASEAN has set a target to source 23% of its energy from renewables by 2025, though coal will continue to play a major role.

ASEAN needs to do more to attract FDI

But foreign direct investment fell 8% on the year before in 2015 and governments of ASEAN member states know they need to lift their game to attract investment – particularly from outside of the region. [This and many other topics are discussed in detail in S&P Global Platts’ new report Emerging among giants – The energy and commodity opportunity as ASEAN turns 50]

In his opening address at the Energy Business Forum, Philippine Energy Minister Alfonso Cusi noted important projects such as the Trans-ASEAN Gas Pipeline, which will connect Singapore, Malaysia, Thailand, Myanmar and Indonesia. But he acknowledged that “great plans cost money.”

“It is now imperative on us to draw in more investments and expertise to ensure that we are prepared for this new future,” he told delegates and fellow regional government representatives.

With regards to the Philippines, Cusi showed he knew what was important to investors. The country had open and transparent energy markets, a sound regulatory environment, and had made efforts to speed up project development, he said.

Outside the forum venue, where small fishing boats were almost static in the flat waters of Manila Bay and the Big Wheel on the promenade awaited its first evening customers, the scale of the challenges ahead was also apparent to investors. - Platts -