Asia and the Pacific economies invest nearly $900 billion a year in infrastructure, but the region needs much more to keep pace with rising demand spurred by economic growth.
Surely, Asia has enough infrastructure. Everywhere you look it seems there are new roads, subways, airports, and power plants.
But that’s only part of the story. More than 400 million people in the region go without electricity, and as much as 30% of electricity generated in countries like Nepal and Cambodia is lost in transmission and distribution. Many roads are low quality and dangerous for motorists and pedestrians alike. Around 300 million Asians still have no access to safe, clean drinking water, including half the rural populations of Afghanistan, Kiribati, and Papua New Guinea. Roughly 1.5 billion people lack basic sanitation facilities such as toilets.
Where will the money come from?
The need for more infrastructure is outpacing the capacity of countries to fund it. Though nearly $900 billion is spent a year on infrastructure in Asia and the Pacific, that’s substantially less than the $1.5 trillion that ADB estimates the region needs annually from 2016 until 2030 to keep pace with economic growth. The estimated annual need rises to $1.7 trillion when climate change impacts are factored in.
“The need for more infrastructure is outpacing the capacity of countries to fund it.”
If this problem is not addressed, subpar infrastructure will stunt economic growth. Power outages hurt factory productivity; bad roads, ports and airports stifle flows of people, goods, and services across cities, countries, and regions. The traffic jams plaguing Asia’s cities have huge economic and environmental costs. Bad health limits opportunities: How can parents give children the schooling they need to find a good job when they don’t even have clean water?
Infrastructure that meets tomorrow's needs
So, what kinds of infrastructure does the region need?
Better quality bridges, roads, railways, runways, ports, and harbors—will always be important to economies, as will new power plants, gas and oil pipelines, hydro dams, electricity grids, and power lines.
But the region’s governments needs to rethink how they build infrastructure, and what else modern economies need to thrive. As a start, new infrastructure should be able to withstand climate change. Roads, for example, should be elevated and built from highly absorptive materials in flood-prone areas. Less glamorous facilities such as irrigation and flood control works will be crucial to help farmers cope with an unpredictable climate. More efficient water and sewer mains and treatment plants will be indispensable as water gets more scarce.
State-of-the-art communications will be indispensable. Telephone and internet systems, communication towers and undersea cables will be key tools for any economy wanting to seize growth opportunities in the global marketplace.
Engine of economic growth
In Meeting Asia’s Infrastructure Needs, ADB calculates that the region needs to invest $14.7 trillion through 2030 to build and maintain electricity infrastructure so it is resilient against climate change. A further $8.4 trillion is needed for transport infrastructure, while telecommunications requires $2.3 trillion, and water and sanitation an extra $800 billion. Energy and transport account for nearly 90% of total investment needs.
The economic payoff from having this infrastructure would be massive. Good rural roads reduce poverty by boosting production and wages while cutting the costs of farm inputs and transport. Studies show that India’s Golden Quadrilateral highway project has lifted productivity by 50% at districts close to new stretches of road.
Railways can open new avenues for economic growth, as in south Uzbekistan where rising local GDP has been attributed to the recently built Toshguzar-Boysun-Kumkurgon railway. Investments by the People’s Republic of China in clean drinking water have resulted in rural youth attending school for an extra year on average—simply because they are healthier.
The challenge is clear, and the potential gains enormous. Let’s get started. #LetsBuildAsia.