Infrastructure spending should be increased to provide the additional capacity for future growth in business activity if high economic performance is to be sustained. In such a case, infrastructure stocks will gain from the increase in building projects. Asia's economic boom has put a tremendous strain on existing infrastructure. If infrastructure is inadequate to cope with the surge in economic activity, it will prove an obstacle to further growth. Productivity suffers as a result of poor infrastructure.
Foreign investors lose confidence, and become concerned over efficiency and costs.
So we expect governments to spend large sums of money to build the necessary infrastructure. Expenditure on infrastructure also creates employment opportunities as well as indirect benefits for supporting industries. The business potential is enormous. In some cases, having too many players is counter-productive, as duplication results in misallocation of limited resources. In Malaysia, we perhaps see this problem in the telecoms industry.