Developing countries in East Asia need to spend more than a
trillion dollars over the next five years in roads, water,
communications, power, and other infrastructure to cope with
rapidly expanding cities, increasing populations, and the growing
demands of the private sector, says a new study released here today
by the Asian Development Bank (ADB), Japan Bank for International
Cooperation (JBIC), and the World Bank.
Government and private investment in infrastructure has 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 off for
countries like Indonesia and the Philippines, resulting in a
serious infrastructure gap after years of little or no
investment.? Poorer countries in the region like Lao PDR and
Cambodia continue to attract little or no private infrastructure
funds.
Now, developing countries in East Asia? face a massive
infrastructure funding challenge. The study estimates that the 21
countries covered will need more than US$200 billion per year to
fund new investment and maintenance of roads, power plants,
communications, 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.
Connecting East Asia: A New Framework for Infrastructure,
the first joint study by ADB, JBIC, and the World Bank, notes that
companies investing in infrastructure, both inside and outside of
the region, say they are keen to invest where government policies
and regulations are predictable.?
The study is based on extensive regional consultations with
government officials, private investors, 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 (power and gas, telecommunications, water
and
sanitation, and transportation) 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.? "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."
This is particularly important as the region is increasingly
interconnected through supply chain production networks and
expanding cross-border trade, fueled by China which has served as a
magnet for regional exports.?
"In order to continue the growth trend, East Asian countries must
keep up with the demands of companies which need energy, reliable
transportation links, and other services," said JBIC Governor
Kyosuke Shinozawa.? "Along with new investments, this will
require a new kind of regional cooperation, both in infrastructure
and logistics, to maximize the benefits, particularly, for the
poorer countries."
Although the private sector will provide a portion of the
financing, and public-private partnerships will also be critical,
the public sector itself also has an important role to play where
private financing is insufficient, unavailable, or too expensive,
particularly in the smaller countries.?The emphasis must be on
selecting the right investments and putting in place the right
institutional and policy structures to make them worthwhile.
The three institutions supporting this study intend to play a major
role in supporting its findings and in helping countries meet their
growing infrastructure – and institutional needs.?
"Over the course of our consultations, people we talked with
emphasized the long-term nature of infrastructure development, a
process which requires dedicated and reliable partners," said
Jemal-ud-din Kassum, the World Bank's Regional Vice President for
East Asia and Pacific. "Although official lenders and donors
provide a small fraction of the financing in this sector, usually
for more complex projects or new approaches, the organizations
responsible for this study are contemplating stepping up our
engagement, both in terms of the funds we provide and the scope of
the projects we support.? It is critical that we seize this
opportunity to contribute to the region's ability to reduce
poverty, expand opportunities, and share the benefits of future
growth."
(China.org.cn March 16, 2005)