ADB: Developing nations need 5% of GDP for infra investment

By Chino S.Leyco

Developing Asian countries, like the Philippines, need to maintain a certain level of infrastructure investment for the next decade to be able to maintain their fast-growing economies, the Asian Development Bank (ADB) said.

Based on the book entitled “Infrastructure Financing in Asia,” developing nations require at least five percent of their gross domestic products (GDP) invested in infrastructure to maintain and sustain economic growth and development.

Currently, the Philippines’ infrastructure budget is already over five percent of GDP as of last year, and the Duterte administration wants it to further increase it to seven percent by 2022.

Unlike the Philippines, Bambang Susantono, ADB vice president, said many, if not most, of the countries in the Asia and Pacific region are still currently investing less than the proposed five percent of GDP for infrastructure development.

ADB estimated that infrastructure needs in developing Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year. The estimates rise to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated.

To address this challenge, ADB said a variety of policy approaches, such as wide-ranging public finance and institutional reforms to create a stronger enabling environment for public–private partnerships.

“It provides out-of-the box solutions in the form of tax financing, mass transit investments, and smart energy grids investments to help meet the infrastructure financing gap,” ADB said.

The book also explores alternative financing methods to unlock long-term funding from institutional investors and offers mechanisms to deepen the region’s bond markets.
For example, the book dives into the efforts of countries under ASEAN+3 in developing local currency bond markets to provide long-term local financing. It also examines the use of green bonds to finance sustainable growth in Asia.

“Developing Asia must strive to find new, innovative, outside-the-box financing solutions to meet its huge infrastructure investment needs,” Susantono said.

“I am confident that this rich collective volume prepared by experts from inside and outside ADB will set forth some concrete and specific directions for infrastructure financing, as well as provide food for thought,” he added.

The book, co-published by World Scientific, documents the evolution of Asia and the Pacific’s infrastructure over the past 50 years and reviews the pivotal role of infrastructure in supporting the region’s robust growth and social development. It is co-edited by ADB Principal Economist Mr. Donghyun Park and Economist Ms. Shu Tian.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members — 49 from the region.