How private finance can bridge Asia’s infrastructure gap
Philippe Le Houérou says as government budgets dwindle, the region’s immense needs in infrastructure can only be met by convincing investors to step up
Since the financial crisis of 1997, Asia’s growth has astounded the world, lifting nearly 1 billion people from poverty and redrawing the global economic map. Today, parts of Asia have some of the world’s best infrastructure – the best-in-class airports in Changi, Incheon and Chek Lap Kok, for example. But infrastructure coverage across the continent is uneven and major financing gaps remain. In Cambodia, two out of three people struggle without electricity. In Myanmar, just one fifth of the roads are paved. In Indonesia, fewer than half the population has access to clean water. Everywhere in the region, there is a need for better infrastructure.
The Asian Development Bank has estimated it would cost US$8 trillion per decade just to maintain Asia’s existing rate of infrastructure provision. This is a tall order. For most Asian economies, government support for infrastructure has been declining due to weaker finances. Governments in the region have typically provided about 70 per cent of infrastructure financing, while the private sector and development finance institutions contributed the rest. This ratio needs to shift.
China says AIIB will have better understanding of developing world’s needs than other international development banks
So what is holding back investment?
Investors are mostly likely to invest when they have repeat opportunities to engage