SINGAPORE, 17 March 2005 — Asia-Pacific developing economies led by China need to invest more than $1 trillion over the next five years to upgrade their infrastructure and sustain growth, a report said yesterday.
China alone is estimated to account for 80 percent of the total amount needed, the Asian Development Bank (ADB), the World Bank and the Japan Bank for International Cooperation (JBIC) said after a joint study.
The 21 economies covered in the report face a massive funding challenge with more than $200 billion required annually from public and private sources for roads, power plants, communications, water and sanitation systems during the five-year period.
“Governments clearly have significant incentives for improving their investment climates and making sure that reliable public policies are in place to attract the right kind of investment,” ADB Vice President Geert van der Linden said. “In the past, infrastructure has been a key driver of economic growth and for reducing poverty,” van der Linden said in a statement issued by the three lenders. “Getting the policies right is clearly going to be a priority for countries in the region to attract the private funds needed to promote economic growth and to share the benefits of that growth with poorer groups.”
The report noted that some of the poorest economies such as Laos and Cambodia have little or no infrastructure investment while the 1997-98 Asian crisis forced others like Indonesia and the Philippines to spend less in this area. “The economic crisis is now over, most countries have resumed high level growth levels and private investment in general is beginning to recover but private investment in infrastructure is returning only very cautiously and governments are sometimes tentative in their response,” it said.
The three lending institutions, however, noted important developments since the regional financial meltdown in the late 1990s. The countries affected now have more open governments, allowing vigorous debate on policy and spending issues, as well as stronger state institutions capable of handling large transactions and investments more efficiently. “And significantly, while it is hard to say that there is less corruption, there is less tolerance of it and fewer illusions about its hidden costs on business and the poor,” they said.
The report covered Cambodia, China, Fiji, Indonesia, Kiribati, Laos, Malaysia, Marshall Islands, Micronesia, Mongolia, Myanmar, Palau, Papua New Guinea, the Philippines, Samoa, Solomon Islands, Thailand, East Timor, Tonga, Vanuatu and Vietnam.
In the Philippines, development plans are often undermined by short-term pressures within a fluid and fragmented political system, which in turn diminishes accountability and nurtures corruption, the report said.
Poor coordination among the various levels of government has also led to less funds being set aside for infrastructure investment. In Indonesia, “fiscal space for infrastructure has been very limited in the last few years and significant infrastructure backlogs have emerged.”
In China, authority over infrastructure has been extensively decentralized to the provincial and municipal levels but the main planning agency still “generates the strategic vision” that binds the system, the study said.
