Asian infrastructure gap can be closed, says private sector panel

From left to right: Gregory Hodkinson, Chairman, Arup; Julie Alexander, Director, Urban Development, Siemens; Michael Lawrence, Chief Executive, Asia House; David Simmons, Managing Director of Capital, Science & Policy Practice, Willis Towers; and Tom Homer, Director, Global Enterprise and Services EMEA, Telstra. Photo by Martyn Hicks

From left to right: Gregory Hodkinson, Chairman, Arup; Julie Alexander, Director, Urban Development, Siemens; Michael Lawrence, Chief Executive, Asia House; David Simmons, Managing Director of Capital, Science & Policy Practice, Willis Towers; and Tom Homer, Director, Global Enterprise and Services EMEA, Telstra. Photo by Martyn Hicks

Asian infrastructure gap can be closed, says private sector panel

28/04/17

By Paul Nicholson

The Asian infrastructure gap – the difference between current investment and Asian Development Bank’s estimated requirement of US$26 trillion – can be met by 2030, according to a group of private sector leaders who spoke at Asia House today.

The panel, convened to discuss the Asian Development Bank (ADB) report Meeting Asia’s Infrastructure Needs, said that if governments deliver regulatory reforms in areas such as land use, the private sector can play an important role in financing and developing energy and transport projects in the region.

Private sector financing in Asian transportation stands at 20 per cent of total spend and power at 50 per cent. Both having huge potential for greater investments said Julie Alexander, Director, Urban Development, Siemens, and Gregory Hodkinson, Chairman, Arup. A greater use of government credit wraps and guarantees would also encourage investment, said David Simmons, Managing Director of Capital, Science & Policy Practice, Willis Towers Watson.

The ADB estimates that the infrastructure gap until 2020 in Asia, excluding China, stands at 5 per cent of GDP for the region (comprising 24 countries) or US$308bn in real terms. Whilst the private sector can make up some of the gap through investment in Public Private Partnership (PPP) structures, governments can take a lead through fiscal measures, such as increasing debt to GDP ratios, said Rana Hasan, Director of the Development Economics and Indicators Division in ADB’s Economic Research and Regional Coordination Department.

The report headlines a $1.7tn annual infrastructure need in Asia by 2030, which is more than double the ADB’s 2009 estimate of $750bn. Discussing the new figures, Michael Rattinger, Climate Change Specialist at the ADB, explained that the adjustment is partly due to increased climate risks identified in the COP21 Paris agreement to limit climate change to 1.5 degrees, which requires a rapid increase in low-zero carbon technologies in power and transportation infrastructure. Bambang Susantono, Vice President for Knowledge Management and Sustainable Development, ADB, also pointed to the rise of the Asian middle class and ageing demographics as additional factors weighing infrastructure demand.

Technology disruption too is a new infrastructure phenomenon in Asia; China has rolled out US$100bn to enable broadband to reach across the nation, said Tom Homer, Director, Global Enterprise and Services EMEA, Telstra.

The Asia House conference was attended by over 100 professionals from the public and private sectors. It ended on an optimistic note with a positive sentiment that the US$26 trillion of infrastructure investments needed to deliver climate proof infrastructure is achievable.

Rana Hasan, Director of the Development Economics and Indicators Division, ADB’s Economic Research and Regional Coordination Department, presents the report’s key findings below.

To read the report, click here.