Economies: Slowing Construction to Help Against Inflation

Updated On: Jul 28, 2008

Asian governments faced with the highest inflation for a decade or more, are shelving billions of dollars worth of landmark infrastructure projects and shifting funds to more immediate economic assistance.

Given the threat presented by surging food and fuel prices long-term projects have been de-emphasized while priority is given to short-term assistance.

In Thailand, the Samak government had pledged in last year’s elections to invest US$50bn on infrastructure over four years. But few large projects have been annmounced. Instead of $9bn of planned investments in improved mass transit in Bangkok, a smaller $1.4bn fiscal stimulus package was announced in July. This included items such as subsidised public transport fares and residential electricity.

The Malaysian government in April cancelled construction of a $2.5bn bullet-train line to Singapore in favour of a $1.3bn move to stockpile food and increase production of rice, fruit and vegetables. In June, the government shelved dam, road and monorail projects worth $1.2bn in the state of Penang, which was won by the opposition in March elections. Officials cited spiralling energy and building material costs, while pledging extra funds for rice and anti-poverty programmes.

In Singapore, despite ample reserves and steady politics, authorities decided in July to delay US$1.2bn) of construction work, including a hospital. This is said to be part of an effort to rein in rising costs and alleviate acute shortages of labour and building materials.

Since November, Singapore has postponed a total of S$4.7bn of construction work. Latest data show consumer prices climbing 7.5 per cent in June, a 26-year high.
Beyond ASEAN, similar steps are observed in Taiwan and South Korea,

Source: Financial Times, 25 July 08, Inflation puts brake on Asian construction, http://www.ft.com/cms/s/0/4136ea80-59e4-11dd-90f8-000077b07658.html

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