Developing Asia Needs to Invest More Than 5% of GDP Over Next Decade for Infrastructure
MANILA, PHILIPPINES (29 October 2019) — Developing Asian countries need to invest more than 5% of their gross domestic product (GDP) over the next decade to be able to meet the infrastructure needs of their fast-growing economies, says a newly launched book co-published by the Asian Development Bank (ADB).
According to Infrastructure Financing in Asia, a new book edited by ADB Vice-President for Knowledge Management and Sustainable Development Mr. Bambang Susantono, many, if not most, of the countries in the Asia and Pacific region are currently investing less than the proposed 5% of GDP for infrastructure development. At this rate, financing infrastructure to maintain and sustain economic growth and development will be a tough challenge.
An ADB report has estimated that infrastructure needs in developing Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year. The estimates rise to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated.
To address this challenge, the book offers a variety of policy approaches, such as wide-ranging public finance and institutional reforms to create a stronger enabling environment for public–private partnerships. It provides outside-the-box solutions in the form of tax financing, mass transit investments, and smart energy grid investments to help meet the infrastructure financing gap.
The book explores alternative financing methods to unlock long-term funding from institutional investors and offers mechanisms to deepen the region’s bond markets. For example, the book dives into the efforts of countries under ASEAN+3—Brunei Darussalam, Cambodia, People’s Republic of China, Indonesia, Japan, Republic of Korea, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam—in developing local currency bond markets to provide long-term local financing. It also examines the use of green bonds to finance sustainable growth in Asia.
“Developing Asia must strive to find new, innovative, outside-the-box financing solutions to meet its huge infrastructure investment needs. I am confident that this rich collective volume prepared by experts from inside and outside ADB will set forth some concrete and specific directions for infrastructure financing, as well as provide food for thought,” Mr. Susantono said in the book launch today.
The book, co-published by World Scientific, documents the evolution of Asia and the Pacific’s infrastructure over the past 50 years and reviews the pivotal role of infrastructure in supporting the region’s robust growth and social development. It is co-edited by ADB Principal Economist Mr. Donghyun Park and Economist Ms. Shu Tian.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.