Developing East Asian countries need $1T for infra over 5 years

Developing countries in East Asia need to spend more than a trillion dollars over the next five years in infrastructure such as roads, water, communications and power in order to cope with rapidly expanding cities’ increasing populations and growing demand of the private sector, a new joint study initiated by the Asian Development Bank (ADB), Japan Bank for International Cooperation (JBIC) and the World Bank showed.

Government and private investment in infrastructure have been vital to growth in East Asia, providing the regional and international links for trade, and connecting rural and urban areas to help share the benefits of rapid growth.

After the economic crisis of the late 1990s, private investment in infrastructure dropped in countries like Indonesia and the Philippines, resulting in a serious infrastructure gap after years of little or no investment, the study indicated.

Poorer countries in the region like Lao PDR and Cambodia continue to attract little or no private infrastructure funds at all, it added.

The study estimates that the 21 countries covered will need more than $200 billion a year to fund new investment and maintenance of power and piped gas, transport, information and communications technology, and water and sanitation systems.

China is expected to require 80 percent of the total investment. A more active citizenry across the region is also demanding better services, including rural roads and bridges to access markets, and clean water and sanitation services.

The joint study also noted that companies investing in infrastructure, both inside and outside of the region, are keen to invest where government policies and regulations are predictable, based on extensive regional consultations with government officials, private investors, non-governmental organizations (NGOs), academics and development partners.

In addition, in-depth interviews with officials from 48 companies from both inside and outside of the region were conducted to gauge the level of interest in infrastructure investment and to identify what criteria companies use when deciding where to invest.

Among the constraints to investment, the companies cited the lack of enforcement of contracts, inconsistencies in regulations and in the courts, and corruption.

"Governments clearly have significant incentives for improving their investment climates and making sure that reliable public policies are in place to attract the right kind of investment, said ADB vice president Geert van der Linden said.

"In the past, infrastructure has been a key driver of economic growth and for reducing poverty. Getting the policies right is clearly going to be a priority for countries in the region to attract the private funds needed to promote economic growth and to share the benefits of that growth with poorer groups," he pointed out.

This is particularly important as the region is increasingly interconnected through supply chain production networks and expanding cross-border trade.

"In order to continue the growth trend, East Asian countries must keep up with the demands of companies which need energy, reliable logistics links, and other services as part of investment climate, JBIC governor Kyosuke Shinozawa said.