INCREASED PUBLIC infrastructure spending and public-private partnership (PPP) projects are key to solving Southeast Asia’s infrastructure crisis, the Asian Development Bank (ADB) said.
In an opinion piece published in The Wall Street Journal Asia, ADB Vice-President for East Asia, Southeast Asia and the Pacific Stephen P. Groff said governments in the region should ramp up their own spending on infrastructure.
"This might mean improving tax collection and enforcement to increase revenues," Mr. Groff said. "This won’t be easy, but the private sector can’t be expected to fund all infrastructure projects."
The official said partnerships with the private sector can help bridge infrastructure gaps, but added that such collaborations are "not a panacea."
"Governments need a better grasp of how PPPs work and what drives private-sector investment."
Mr. Groff wrote the piece to call attention to an infrastructure crisis in the Southeast Asian region.
He noted that private investment in infrastructure in the 10 member countries of the Association of Southeast Asian Nations (ASEAN) plunged after the 1997 financial crisis and has yet to recover.
"The five largest Asean countries, for example, attracted $38 billion of private infrastructure funding in 1997, but only about $25 billion in 2010," he said.
"ASEAN has barely 10 kilometers of roads and 0.25 kilometers of rail per 1,000 people, compared to more than 200 kilometers of roads and five kilometers of rail in OECD (Organization for Economic Cooperation and Development) countries."
Lack of money isn’t the problem, however, as Mr. Groff pointed out that ASEAN has a savings surplus.
"These savings are not being invested in Asia. Instead they are invested in low-yield Treasury bonds or other securities in Europe and the United States," he said.
"Bringing those funds back to Asia for investment in productive assets will require concerted reform efforts by the region’s authorities across four priority areas," said Mr. Groff.
He said that, among others, capital market development will promote efficient recycling of surplus savings.
"ASEAN has taken important steps on this front including the Asean+3 Bond Markets Initiative, the Asian Bond Fund, the Credit Guarantee and Investment Facility and the Asean Infrastructure Fund," he said.
Improving a country’s business and investment climate, Mr. Groff added, likewise plays a crucial role in infrastructure development.
"Governments should also cut risks for private investors by addressing the policy, institutional and regulatory impediments to investment; fixing governance problems; setting up transparent procurement systems; and establishing clearly designed viability funding gap mechanisms which enable public funding for investments that the private sector cannot undertake," he said.
"The Philippines is working to liberalize the domestic coastal shipping industry to lower costs, and has amended the build-operate-transfer law, expanding it into a Public-Private Partnership Act," Mr. Groff cited. "Other countries in the region are making similar efforts, but much remains to be done."
source: Businessworld
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