Infrastructure for a Seamless Asia

	Translated versions

Tokyo, Japan (29 September 2009) US$8.3 trillion infrastructure investment needed during 2010-2020 to sustain Asia's growth through pan-Asia infrastructure connectivity-bringing US$13 trillion increase in Asia's real income during this period and beyond.

Asia, becoming the center for growth in the world, needs a seamless network of infrastructure across the region to spur economic growth in the coming decades. In this regard, a total of US$8.3 trillion will need to be invested in infrastructure over the next 11 years (2010-2020), a joint flagship study of the Asian Development Bank (ADB) and the Asian Development Bank Institute (ADBI) Infrastructure for a Seamless Asia reports.

Two aspects of the "seamless" concept are relevant for Asia. Asia needs a seamless common market and substantial efforts towards regional economic integration for realizing its enormous growth potential. As a first step to realize it, the creation of a "seamless" network of infrastructure is very important.

The study reports that, out of US$8.3 trillion to be required for total infrastructure investment, Asian countries would need to invest US$8.0 trillion in total for their domestic infrastructure. Investment in the planned regional infrastructure projects would be approximately US$290 billion. The overall average investment needed would amount to US$750 billion per year during 2010-2020.

The above national infrastructure investment covers four areas-energy, telecommunication, transport, and water and sanitation, both investments for new capacity and for replacement being involved. Infrastructure investment for energy, for electric power in particular, would share more than a half of total amount (US$4.0 trillion). Investment for telecommunication, both mobile phone and landlines, would be US$1.0 trillion. It is also expected that investment for transport which includes massive road investment as well as for ports, railroads and airports, would amount to US$2.5 trillion, and investment in the area of water and sanitation would be US$380 billion, the book analyzes.

The study estimates that this massive infrastructure investment would bring US$13 trillion increase in total real income of Asian developing countries during 2010-2020 and beyond. For example, the People's Republic of China (US$3.5 trillion) and India (US$3.0 trillion) would experience remarkable increases in real income. The investment would also have positive effects on real incomes in Indonesia (US$1.3 trillion), Thailand (US$1.2 trillion), Malaysia (US$830 billion), and Viet Nam (US$400 billion).

The study states "the inadequacy of Asia's infrastructure networks are a bottleneck to growth, a threat to competitiveness, and an obstacle to poverty reduction." Better connections between coastal areas and inland or isolated areas through infrastructure for telecommunication and transport would narrow the infrastructure gap, thus boosting the region's trade and economic growth.

Not only effective coordination among Asian countries but also strong leadership are prerequisites for taking forward the idea of a seamless Asia through massive investment for infrastructure projects smoothly and effectively. The study states that it is important to have a top-down, market-expanding and demand-inducing approach geared toward creating a seamless Asia to complement a bottom-up, market-driven approach which Asia has largely followed. For this purpose, the book advocates the establishment of a pan-Asian infrastructure forum (PAIF) to develop a regional strategy and to play a leading role as an overall coordinating body in coordinating the implementation plans. The study states "it would bring together all the key stakeholders in the region, which would help build consensus about, prioritize, and coordinate regional infrastructure plans". One of the major concerns is how to finance the massive funds needed for infrastructure investment. In view of this, the book emphasizes that Asian governments must bolster their collective efforts to mobilize a large pool of regional savings for viable regional infrastructure. It also emphasizes that strengthening local currency bond markets is a necessary step in creating a viable source of regional investment to tap vast savings.

Furthermore, the book proposes the establishment of an official Asian infrastructure fund (AIF) to help mobilize Asian regional savings and international funds, and meet the challenges for financing "bankable" regional infrastructure projects in Asia. "The AIF's capital could come from a variety of sources, including governments, sovereign wealth funds, multilateral development banks, bilateral agencies, and the private sector", the study notes. The book proposes the AIF "should have its own legal identity so as to enable it to help finance projects through its own resources, as well as by issuing bonds or thorough co-financing arrangements with other entities, including private investors."

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Tokyo-based ADBI, which is a subsidiary of Asian Development Bank, was established in 1997 to help build up knowledge on poverty reduction and actions needed to support long-term growth in developing economies in Asia and the Pacific.