November 14th, 2018

Safeguarding Development in Asia-Pacific – Upgrading Infrastructure to Match Demand

Posted at 1:00 AM ET

_offset_472526_smallIn many parts of Asia-Pacific, infrastructure development does not meet the region’s rapid economic growth and urbanization, according to the latest report by Marsh & McLennan Companies’ Asia-Pacific Risk Center. The study, titled “From Threats to Impact - Evolving Risk Concerns in Asia-Pacific,” notes a finding by Asian Development Bank (ADB) that developing countries in Asia-Pacific and central Asia will require an additional USD 22 trillion for infrastructure development to maintain economic growth and eradicate poverty between 2015 and 2030.

Strong economic growth in the past 10 years in Asia Pacific has pushed up the demand for new infrastructure, particularly in the region’s emerging economies; which include China, India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. According to the report, the rate of urbanization in East and Southeast Asia has exceeded the global rate.

Demographic changes will also likely increase the demand for infrastructure, both in countries where the population is expected to continue growing like in India, or in aging societies where there is an increasing demand for infrastructure that can accommodate an older population.

Since China has already been investing heavily in domestic infrastructure projects and the Belt and Road Initiative (BRI), the gap is presently a bigger concern in other countries in the region. (1)

In terms of sectors, investment needs are the highest in energy and transportation infrastructure. Together, the investment gap in these sectors constitutes more than 86 percent of the total infrastructure gap in Asia-Pacific. This is consistent with a previous ADB estimation (2), according to which, the largest infrastructure gap is in the electricity sector at 3.17 percent of estimated regional GDP, followed by transportation, 2.3 percent, and telecommunications, 0.82 percent.

The composition of this gap varies widely across regions and countries. For example, the transportation infrastructure gap is significantly more acute in South Asia than in East and Southeast Asia, where investment needs are more concentrated in electricity infrastructure.

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NOTES: (1) Asian Development Bank. Meeting Asia’s Infrastructure Needs. (Asian Development Bank, 2017). doi:10.22617/FLS168388-2

(2) Bhattacharyay, B. Estimating Demand for Infrastructure in Energy, Transport, Telecommunications, Water, and Sanitation in Asia and the Pacific: 2010-2020. (2010)

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