The developing Asia needs around USD 1.7 trillion of investment per year till 2030 to keep its growth momentum going that will help the region reduce poverty and fight climate change effectively, Asian Development Bank (ADB) said on Tuesday. “Developing Asia will need to invest USD 26 trillion from 2016 to 2030, or USD 1.7 trillion per year, if the region is to maintain its growth momentum, eradicate poverty, and respond to climate change (climate-adjusted estimate),” the Manila-headquartered multilateral funding agency said.
The investment needs without adjusting climate change and adaptation costs will be a little less at USD 22.6 trillion, or USD 1.5 trillion per year, through 2030.
The USD 1.7 trillion annual climate-adjusted estimate is more than double the USD 750 billion that ADB estimated in 2009.
In its flagship report ‘Meeting Asia’s Infrastructure Needs’, ADB said regulatory and institutional reforms are needed to make infrastructure more attractive to private investors and generate a pipeline of bankable projects for public-private partnerships (PPPs).
“Countries should implement PPP-related reforms such as enacting PPP laws, streamlining PPP procurement and bidding processes, introducing dispute resolution mechanisms and establishing independent PPP government units,” said the report.
Deepening of capital markets is also needed to help channel the region’s substantial savings into productive infrastructure investment, ADB said.
The report focuses on region’s power, transport, water, telecommunication and sanitation infrastructure.
“The demand for infrastructure across Asia and the Pacific far outstrips current supply,” said ADB President Takehiko Nakao.
“Asia needs new and upgraded infrastructure that will set the standard for quality, encourage economic growth, and respond to the pressing global challenge that is climate change,” he added.
As per the ADB report, the region currently invests about USD 881 billion in infrastructure (for 25 economies with adequate data, comprising 96 per cent of the region’s population).
The infrastructure investment gap, which is the difference between investment needs and current levels, equals 2.4 per cent of projected GDP (climate-adjusted) for 5 years from 2016 to 2020.
China has a gap of 1.2 per cent of GDP in climate-adjusted scenario. Without China, the gap rises to a much higher 5 per cent of the remaining 24 economies’ projected GDP.
“Public finance reforms could generate additional revenues estimated to bridge around 40 per cent of the gap (or 2 per cent of GDP) for these 24 economies,” the report added.
For private sector to fill the remaining gap (3 per cent of GDP), it must increase investment from about USD 63 billion today to as high as USD 250 billion a year over 2016-2020, ADB said.
Covering 45 countries under the report, ADB said infrastructure has grown drastically over recent decades. However, a substantial infrastructure gap remains.
Over 400 million people in developing Asia still do not have sufficient supply of electricity. Moreover, 300 million have no access to safe drinking water, while about 1.5 billion go without basic sanitation.
Many economies in the region lack adequate ports, railways, and roads that could connect them efficiently to larger domestic and global markets.
“Private sector is crucial to fill infrastructure gaps, ADB will promote investment friendly policies and regulatory and institutional reforms to develop bankable project pipelines for public-private partnerships,” Nakao said.