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Asia’s infrastructure needs of $1.7 trillion per year threaten growth in the region.

Posted by Emily O'Dowd on Feb 28, 2017

Fast-growing economADB recommends that Asia's infrastructure will need $1.7 trillion investmenties in the Asian region have been urged to double spending on transport, power and sanitation. Infrastructure needs in developing Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year, if the region is to maintain growth momentum, according to a new flagship report by the Asian Development Bank (ADB). The estimates rise to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated. Infrastructure development in the 45 countries covered in a report has grown dramatically in recent decades — spurring growth, reducing poverty, and improving people’s lives. But a substantial infrastructure gap remains, with over 400 million people still lacking electricity, 300 million without access to safe drinking water, and about 1.5 billion lacking access to basic sanitation. Many economies in the region lack adequate ports, railways, and roads that could connect them efficiently to larger domestic and global markets.

The report, Meeting Asia’s Infrastructure Needs, focuses on the region’s power, transport, telecommunications, and water and sanitation infrastructure. It comprehensively examines current infrastructure stocks and investments, future investment needs, and financing mechanisms for developing Asia. However, there have been many warnings along the way because the past two decades have failed to keep pace with the rapid growth of economies, population and urbanisation. Most of the problem is based in China which has already spent more the 90 per cent of the levels it is projected to meet.

The 45 countries surveyed in the report, which covers 2016-2030, are forecast to need investment of $26 trillion over 15 years to maintain growth, cut poverty and deal with climate change. Asia is estimated to spend $881 billion a year which is a gap of 2.4 per cent of forecast gross domestic product in 2016-20.

ADB, ( @ADB_HQ )based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. 2015 marks the launch of the ASEAN Economic Community, a common market comprising over 600 million people. To help ensure continued economic growth, job creation and poverty reduction, the region requires $60 billion in annual investments for road, rail, power, water, and other critical infrastructure.

ASEAN nations possess over $700 billion in foreign exchange reserves, but these funds are being largely invested outside of the region. The ASEAN Infrastructure Fund (AIF) is an innovative ASEAN initiative to mobilize the region's resources for its infrastructure development needs.

“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.”

Chinese engineers prepare for high-speed railThe report highlights that developing Asia will need to invest $26 trillion from 2016 to 2030, or $1.7 trillion per year, if the region is to maintain its growth momentum, eradicate poverty, and respond to climate change (climate-adjusted estimate). On top of this, the $1.7 trillion annual climate-adjusted estimate is more than double the $750 billion ADB estimated in 2009. An even more important factor is the continued rapid growth forecasted for the region, which generates new infrastructure demand.

The People’s Republic of China (PRC) has a gap of 1.2% of GDP in the climate-adjusted scenario. Without the PRC, the gap rises to a much higher 5% of the remaining 24 economies’ projected GDP. Public finance reforms could generate additional revenues estimated to bridge around 40% of the gap (or 2% of GDP) for these 24 economies. For the private sector to fill the remaining gap (3% of GDP), it would have to increase investments from about $63 billion today to as high as $250 billion a year over 2016-2020.

“ADB pledges to work with member countries and use our 50 years of experience and expertise to meet infrastructure needs in the region. As the 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,” said Mr. Nakao.

To discover more about Asia's rail developments you should read:

Bombardier deliver the first Innovia Automated People Mover to China.

Chinese cash aims to help realise Europe-Asia high-speed dream.

The innovative asset management approach of WSP giving Singapore’s MRT a new lease of life.

New optical fibre solution to improve maintenance and monitoring to launch in Singapore.

600km/h! China eyes ambitious new maglev speed target.

Topics: projects

Emily O'Dowd

Written by Emily O'Dowd

On graduating with a degree in English Literature at Royal Holloway University of London, Emily joined the editorial team. When she isn't writing articles for the website or interviewing experts in the industry she enjoys reading, running and sailing.

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