Asian nations including India will require a massive infusion of $26 trillion in infrastructure till 2030 to sustain the economic growth momentum, Asian Development Bank said in a report on Tuesday. The report advocated reforms and regulatory changes to make mega projects attractive for private investors.
India alone will require investments of $5.15 trillion in infrastructure till 2030 while China will need $15.27 trillion, ADB said in its report titled “Meeting Asia’s Infrastructure Needs”.
“Infrastructure needs in developing Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year, if the region is to maintain growth momentum,” the report said. Currently, the region annually invests an estimated $881 billion in infrastructure.
The estimates rise to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated.
“The demand for infrastructure across Asia and the Pacific far outstrips current supply,” said ADB President Takehiko Nakao. “Asia needs new and upgraded infrastructure that will set the standard for quality, encourage economic growth, and respond to the pressing global challenge that is climate change.”
Currently, India invests close to $118 billion on roads, ports, railways, airports, power plants and other mega infrastructure projects.
ADB estimates the annual need for infra spending in India is $230 billion, which shows a gap of $112 billion or 4.1% of GDP. Adjusted for climate change-related investment, the annual infra investment need is $261 billion or 5.3% of GDP, ADB said.
Assuming a high 7.8% growth scenario, the infra investment need for India goes up to $5.5 trillion till 2030. This mean India will require $367 billion annually or 8.5% of GDP to flow into infrastructure.
Infrastructure development in the 45 Asian countries has grown dramatically in recent decades spurring growth, reducing poverty, and improving people’s lives.
“But a substantial infrastructure gap remains, with over 400 million people still lacking electricity, 300 million without access to safe drinking water, and about 1.5 billion lacking access to basic sanitation. Many economies in the region lack adequate ports, railways, and roads that could connect them efficiently to larger domestic and global markets,” ADB said.
Of the total climate-adjusted investment needs over 2016-2030, ADB said $14.7 trillion will be for power and $8.4 trillion for transport. Investments in telecommunications will reach $2.3 trillion, with water and sanitation costs at $800 billion over the period.
East Asia will account for 61% of infra investment needs through 2030. As a percentage of GDP, however, the Pacific leads all other sub-regions, requiring investments valued at 9.1% of GDP. This is followed by South Asia at 8.8%, Central Asia at 7.8%, Southeast Asia at 5.7%, and East Asia at 5.2% of GDP.
The $1.7 trillion annual climate-adjusted estimate is more than double the $750 billion ADB estimated in 2009.
Regulatory and institutional reforms are needed to make infrastructure more attractive to private investors and generate a pipeline of bankable projects for public-private partnerships (PPPs), the Manila-based bank said.
“Countries should implement PPP-related reforms such as enacting PPP laws, streamlining PPP procurement and bidding processes, introducing dispute resolution mechanisms, and establishing independent PPP government units. Deepening of capital markets is also needed to help channel the region’s substantial savings into productive infrastructure investment.”