THE infrastructure gap in the region would be difficult to close without help from the private sector and official government data, according to an expert from the Asian Development Bank (ADB).
The gap in the region, which includes climate-adjusted estimates for the Asean-7, reached 4.1 percent of GDP, ADB Economic Research and Regional Cooperation Department’s Rana Hasan told Southeast Asian journalists in a seminar at the weekend.
Hasan said it’s not only a matter of the funds; plugging infrastructure gaps requires fiscal reforms and increased investments that are not only the domain of the government.
“If a country’s going to say ‘I’m just gonna focus on public-sector reforms,’ you’re not going to meet your targets, you have to get the private sector in,” Hasan said. “You need both the public and private sector to be really efficient.”
Hasan recommended that in order to close the gap, Asean governments should undertake fiscal reforms to generate additional revenues for public-sector investments and promote private participation in infrastructure.
These reforms could generate an additional revenue of 2 percent of GDP, enough to plug nearly half of the infrastructure gap.
The remaining 2.1 percent of GDP can be filled in by the private sector. But in order for this to happen, private firms need to increase their investments by almost six times.
“Regulatory and institutional reforms are needed to make infrastructure more attractive to private investors and generate a pipeline of bankable projects for PPPs [public- private partnerships].”
Efficiency issue
Meanwhile, efforts to improve planning, design and execution of infrastructure projects are needed to increase the efficiency of investment expenditures.
This includes improving data collection. Hasan said through the course of conducting the ADB’s study on infrastructure investments, he and his team found out that few countries report on infrastructure spending.
The Philippines is one of the few that includes a computation of both the public and private infrastructure spending in the National Income Accounts (NIA).
The PSA includes estimates on public and private construction every quarter. This allows policymakers and planners to monitor how much is really being spent.
“This is such an important thing and yet it’s not on the radar,” Hasan said. He expressed hope that policymakers can be made to realize “that if you can’t measure something, it would be difficult to do something about it.”
53 years of infra investing
Based on a separate presentation by ADB’s Chief Sector Officer Robert Guild, the Manila-based multilateral development bank has been investing on infrastructure in the region since it was founded 53 years ago.
In 2018, energy and transport were the top sectors focused on by ADB’s operations, which accounted for 23 percent each of ADB’s Ordinary Capital Resources (OCR) and Asian Development Fund (ADF) operations.
For transportation, ADB invested an average of $3.9 billion per year or about 26 percent of the bank’s total assistance in the 2010 period and onward.
This investment has steadily increased from $800 million a year or 16 percent of the total in the 1990s and $2 billion a year or 26 percent of the total in the 2000s.
In terms of energy investments, total approvals in 2018 amounted to $3.93 billion, including $1.23 billion from the Private Sector Operations Department (PSOD), which accounted for 31 percent of total energy-sector lending.
The ADB’s lending for energy projects is expected to reach $3.6 billion in 2019 and $4.1 billion in 2020. It also expects to fund climate finance projects in the energy sector of around $2 billion in 2019 and $3 billion in 2020.