‘Infra gap major threat to rising ASEAN growth’

AP

Workers are seen busy on the construction site of a high-rise building in the financial district of Makati in Metro Manila.

MANILA – Association of Southeast Asian Nations (ASEAN) nations have some of Asia’s fastest rates of economic growth, but also some of its biggest infrastructure shortfalls.

The Asian Development Bank estimates that developing countries in Asia need $1.7 trillion of infrastructure investment each year through 2030 to maintain the current expansion trajectory and to tackle poverty.

The infrastructure gap is the biggest single threat to ASEAN prosperity, which is why the region’s governments are prioritizing investment in connectivity. China is pouring record levels of money into the region: $14.5 billion last year, compared with about $1 billion in 2007. The Chinese government has already signed contracts for projects worth more than $1 trillion under its ambitious Belt and Road initiative, of which ASEAN will be a major beneficiary.

Smaller nations in the region also have big spending plans, but federal budgets alone will not cover the vast build out required to propel growth, and this creates significant opportunities for public-private partnerships (PPPs).

“You have 400 million lacking electricity, 300 million don’t have safe drinking water, and over a billion people don’t have basic sanitation facilities. In other words, we have a long way to go. We need huge investment,” Diwakar Gupta, vice president of the Asian Development Bank (ADB), said during the ASEAN Business and Investment Summit in Parañaque City on Nov. 13.

Citing an ADB study, he added that a 10 percent increase in energy distribution would mean a 7 percent increase in exports; while a 10 percent increase in transportation would lead to a 2 percent increase in exports.

The ADB and the 10 ASEAN member countries established the ASEAN Infrastructure Fund to address the region’s infrastructure development needs by mobilizing savings like foreign exchange reserves.

The fund provides loans of about $300 million yearly to finance infrastructure investment deals in the transport, energy, water and sanitation, environment and rural development, as well as social infrastructure sectors.

More PPP

“This kind of money will not come from the government. You have to pull it from the private sector. From there, PPP deals are a great way to move forward,” Gupta said.

This was echoed by AirAsia Group chief executive officer Tony Fernandes also recommended the PPP route to hasten the implementation of infrastructure projects.

“Airports seem to take a long time to build. I encourage more PPP [deals]. If I have to do it my way, I would ask JAZA (Jaime Augusto Zobel de Ayala) or Ricky (Enrique Razon Jr) to build one,” Fernandes said in jest.

Ayala Corporation chief executive officer Jaime Augusto Zobel de Ayala, who said there should be an increase in the number of PPP infrastructure projects.

“I believe in public-private partnerships. Infrastructure are about ecosystems. You cannot just do one,” Zobel de Ayala said.

In the Philippines, the administration of President Rodrigo Duterte has veered away from the PPP route, shifting its focus to official development assistance. (Bloomberg)