Creative thinking needed to beat high cost of Asia-Pacific’s infrastructure needs – UN

17 May 2005

Demands for Internet connectivity and revamped transportation infrastructure in Asia-Pacific countries in a climate of slumping foreign investment in the region will mean finding innovative ways to boost financing for development, the head of the United Nations regional commission said today.

Estimated at over $200 billion a year, the region’s infrastructure needs are “overwhelming, both in social and physical infrastructure,” said Kim Hak-Su, Executive Secretary of the UN Economic and Social Commission for Asia and the Pacific (ESCAP).

Mr. Kim warned delegates in Bangkok attending the ministerial segment of the Commission’s annual meeting that the region’s needs far exceeds the available resources of around $50 billion for all purposes. Private investment in infrastructure is a quarter of the levels prevailing before the 1997 crisis, creating a large financing gap.

ESCAP investment estimates for desperately needed infrastructure are massive. For the Asian Highway, an additional $18 billion will be required just to finance priority projects. The Trans Asian Railway would also need substantial investment – one route from Singapore to Kunming, China, will alone cost $2.5 billion. The costs of regional connectivity infrastructure such as Internet connections, cabling and broadband are also substantial.

The gap is exacerbated by a decline of private investment for infrastructure since the Asian financial crisis in 1997, which has declined from $40 billion in 1997 to $11.5 billion in 2003.

The region faces major challenges in securing funding for infrastructure, said Mr. Kim. “We must mobilize regional domestic savings and further engage the private sector in infrastructure investment,” he added.

“At this stage of transformation, Asia and the Pacific region requires an institution like the European Investment Bank (EIB) – an independent, government-owned Asian Investment Bank (AIB) to promote regional capital markets,” he said.

An AIB could provide infrastructure loans and collaborate with the banking community in both raising and investing resources, Mr. Kim said. “The AIB could work with the private sector by co-financing and guaranteeing private investment financing. Asian capital markets are faced with limited capacity to finance large and risky infrastructure project and we need an alternative.”

 

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