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Developing Asia will need to invest USD 2.4
trillion per year in infrastructure until 2030
to maintain its growth momentum1. Rising
urbanisation, shifting demographics and
increasing affluence are key trends that will
continue to push infrastructure development
in Asia. Although each country has different
needs, a pan-Asian integrated infrastructure
network can deliver rich benefits for the region.
Studies show that countries that have better
infrastructure are also the ones that have higher
economic growth, employment opportunities and
living standards. Infrastructure gaps are a bottleneck
for growth as it increases transport costs, reduces
market access and hence lowers the trade volume.
Post the 1997-98 Asian financial crisis,
countries that had invested heavily in
infrastructure recovered faster. In fact, Asia’s trade
competitiveness vis-à-vis the world depends on
efficient and reliable infrastructure.
CURRENT STATE OF AFFAIRS ---------------The quality of infrastructure varies significantly
across Asia. The 2018 Global Competitiveness
Report2 clearly highlights this disparity with most of
the region’s infrastructure still below average except
for a few that can boast world class standards.
Nonetheless there have been improvements
over the past decade; emerging Asia has built
more infrastructures across all sectors than other
developing regions. For example, between 2001
Asian Infrastructure Connectivity: Building for prosperity
CONNECTION SERIES: 2 OF 4
Fig. 1: Risk-Return profiles of infrastructure investments in relation to traditional asset classes3
Expected risk
Expe
cted
ret
urns
Fixed Income
Seasoned toll roads Social infrastructure
Electricity generation Gas processing Ports
Airports Desalination Rail infrastructure
Greenfield project New toll roads Merchant power plants Rail infrastructure
Equities
GreenfieldInfrastructure
BrownfieldInfrastructure
and 2010, emerging Asia’s road network grew at a
faster rate annually than OECD economies. Similarly,
its electricity generation capacity per capita saw
rapid growth during this time, albeit slightly below
the average versus other developing economies4.
There are also investments in high-tech
infrastructure. According to Michelle Qi, CIO of
Eastspring China, new Chinese infrastructure
such as 5G, high-speed rail, urban rail transit, big
data center, EV charging stations and artificial
intelligence, is expected to deliver stronger growth
and spill-over effects to other industries.
A major impediment to faster progress,
however, has been finance.
Government financing accounts
for 90 per cent of infrastructure
expenditure in Asia, compared to
70 per cent in emerging markets
and 40 per cent worldwide. But
given Asia’s growing needs, this
rate of government financing
is unsustainable5; public-private
partnerships need to be forged
to jointly shoulder the financing
requirements.
One way to involve the private
sector is to adopt a regional
integration approach whereby a
number of neighbouring countries
work together to achieve mutually
benefitting goals. Regional
integration has become a useful
development strategy for many
global and regional institutions.
Nevertheless, financing regional
infrastructure projects comes with risks and
uncertainties which may put off many private
players. Ultimately even those projects funded by
public-private partnerships still require some form of
government guarantee.
EXISTING REGIONAL INITIATIVES ---------------With the help of multilateral agencies, Asia
has pushed ahead with some sub regional
infrastructure programmes. The Asian Land
Transport Infrastructure Development established
in 1992 is one key initiative which comprises three
pillars: the Asian Highway, the Trans-
Asian Railway, and the provision of
dry and inland ports. An integrated
physical connection is critical to
support the complementarities
in the supply chain production
processes across the region.
There are many other regional
initiatives that aim to create
transnational economic corridors
through physical infrastructure. Over
in ASEAN, there are four flagship
regional initiatives covering the
ASEAN Power Grid, the Trans-ASEAN
Gas Pipeline, the ASEAN Highway
Network, and the Singapore-
Kunming Rail Link. Kunming,
China is being dubbed the central
transportation and communications
hub, as it constructs an advanced
network to connect with Southeast
Asia and South Asia.
90%
70%
40%
In ASEAN, there are four flagship regional infrastructure initiatives
The Trans- ASEAN
Gas Pipeline
The ASEAN Power Grid
The ASEAN Highway Network
The Singapore-Kunming Rail Link
1 2 3 4
China’s Belt and Road Initiative (BRI), launched
in 2013, aims to boost land and maritime
connectivity and intraregional trade by connecting
over 65 countries, over 60 per cent of the world’s
population and accounting for 30 per cent of
global GDP6. For now, one maritime and three
overland transport corridors are in operation, with
the rest under construction.
WHY IT MATTERS---------------Regional initiatives help make a positive impact.
Upon completion, the BRI initiative could
potentially reduce travel times along economic
corridors by 12%, increase trade between 2.7%
and 9.7%, increase income by up to 3.4% and lift
7.6 million people from extreme poverty7.
Similarly, a pan-Asian renewable energy grid
would see the power networks of Japan, South
Korea, China and Russia link up via Mongolia to
tap that country’s vast solar and wind resources.
By encouraging countries to link up their power
grids, regions with untapped renewables capacity
could attract much-needed investment, boost their
own supplies and export their surplus. Such a move
is also favourable to tackle climate change and help
reduce Asia’s dependence on fossil fuels.
Well-connected cross-border infrastructure
will also drive tourism; the number of airports,
number of air routes will all contribute positively and
significantly. Research estimates show that a 10 per
cent increase in the number of routes in either the
country of departure or destination country will lead
to an increase of international visitors by 7.4 percent8.
A LONG WAY TO GO---------------Asia’s infrastructure needs are significant, with
over 400 million Asians currently living without
electricity, 300 million without safe drinking water,
and over 1.5 billion without basic sanitation9.
Moreover, the region’s huge potential remains
untapped as many parts of Asia remain isolated
economically and geographically.
Infrastructure will also play a critical role in
facilitating the world’s biggest free trade pact, the
Regional Comprehensive Economic Partnership
(RCEP) between ASEAN, along with China, Japan,
South Korea, Australia, New Zealand and India,
when it is signed in the near future. This trade pact
not only links around half the world’s population
and a quarter of its exports10, but also promotes
investments and helps emerging Asia develop faster.
In the long run, the full benefits of Asia’s size
and diversity can only be harnessed by creating an
Asian market where goods & services, information
and people move freely. Building roads, railways,
bridges, power stations, and pipelines across Asia
should therefore be a priority for the region’s
policymakers.
Bangkok | Chicago | Ho Chi Minh City | Hong Kong | Jakarta | Kuala Lumpur | London | Luxembourg | Mumbai | Seoul | Shanghai | Singapore | Taipei | Tokyo
Sources: 1https://www.channelnewsasia.com/news/singapore/new-government-agency-launched-to-facilitate-regional-10855162. 2World Economic Forum, 2018. 3Russ and Foscari, 2010. 4Asian Development Bank: Meeting Asia’s Infrastructure Needs, 2017. 5https://www.straitstimes.com/business/economy/public-private-partnership-needed-to-address-infrastructure-financing-challenges. 6Reshaping the future world economy, HSBC 2017. 7https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative. 8Asian Infrastructure Investment Bank : Bridging Borders – Infrastructure to Connect Asia and Beyond, 2019. 9https://www.adb.org/news/ppps-can-help-fill-asias-infrastructure-gap-report. 10https://www.thestar.com.my/news/regional/2019/06/23/what-is-the-rcep-and-could-it-be-signed-this-year
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