ADB: Three Trillion Dollars Needed for Infrastructure in Asia

Many countries in Asia face sewage and waste disposal

Asia must dramatically boost investment in infrastructure in the next decade or risk losing its global competitive edge, the president of the Asian Development Bank warned Friday.

According to a copy of a draft speech, Haruhiko Kuroda told an emerging markets forum in Jakarta that Asia would need to invest three trillion dollars over the next 10 years to keep up with increasing demand for infrastructure.

But at current rates of investment, less than half this amount will be met, Kuroda said, adding that tapping into available financial resources would require far-reaching reforms, including in governance and risk management.

"With Asia's urban centers set to swell by nearly half a billion people in the next 20 years, there is simply no time to lose," he said.

Infrastructure gaps have left more than half a billion Asians with no access to safe water, and three times as many without proper sewage or waste disposal.

This shortfall has not yet affected the region's overall export and economic performance, he said.

"But the danger signs are there. Inadequate transport and communication infrastructure, uncompetitive transport, logistics and industries, and high fuel costs will all push up the cost of doing business in Asia," he said.

"Unless action is taken soon, the region may lose its competitive edge. Moreover, it will fail to achieve the potential that currently exists for improving the lives of the poor."

The Asian financial crisis of 1997-98 led to a reduction in the level of domestic savings being channelled toward infrastructure development in Asia, the head of the Manila-based bank said.

In Indonesia, Southeast Asia's largest economy, for instance, infrastructure investment accounted for six percent of gross domestic product before 1997 but now sits at just two percent, according to ADB figures.

Meanwhile boosting private investment requires an improvement in the quality of information on projects provided to investors, Kuroda said.

"Macro-level investment needs have yet to be translated into projects that are well planned, financially viable and prepared to international standards.

"Private investors need to be presented with well prepared, bankable projects before they can decide whether to invest in them or not," he said.

"As well, governments must create an enabling environment that assures investors of predictability, a level playing field, low transaction costs and fair rates of return commensurate with the risks they take."

On a positive note, Kuroda said private investors -- particularly from Asia -- were sniffing out investment opportunities in the region.

But the pace of reform being carried out must be accelerated before investors will be convinced to invest in Asia's infrastructure development, while the region's financial system must also be improved, he said.

"Developing regional capital markets, harmonizing rules and regulations, and allowing innovative solutions are all crucial to increase infrastructure investment in Asia," he added.

Source: AFP

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