Asian infrastructure needs $1t in investments
Asian infrastructure needs $1t in investments
MANILA (AFP): Asia needs about one trillion dollars in investments to ease infrastructure bottlenecks by the end of the century, with regional giant China gobbling up half of the funds, the Asian Development Bank (ADB) said.
The Philippine-based lending institution said in a paper obtained by AFP that infrastructure investment in the region is to increase from the current five percent of gross domestic product (GDP) to seven percent.
"Of the one trillion dollars, transport will account for $350 billion, telecommunications for about $150 billion, power for about $350 billion and water supply for about $100 billion, " it added.
Bruce Murray, ADB programs manager for China, Hong Kong, Mongolia and Taipei, told AFP in an interview that China will account for almost half of the investments, followed by India and Indonesia.
The communist behemoth, whose sterling growth has made it Asia's economic superstar, needs more than 500 billion dollars to improve the transportation and communications sectors alone over the next 10 years, Murray said.
"Infrastructure in China is a tremendous challenge," he said, noting that an efficient transportation and communication system is essential to the country's shift to a market economy.
The Chinese economy expanded by 11.8 percent in 1994, from 13.4 percent in 1993, and is projected by ADB to slow down to 9.8 percent and 8.9 percent respectively in 1995 and 1996.
Freight traffic volume has been doubling every nine years and passenger traffic every seven years. Demand for telecommunication services has been growing by 15 percent annually, the ADB paper said.
In power, the country needs to install 115,000 megawatts (MW) to meet its target of churning out 300,000 MW by the year 2000, said ADB senior programs officer Edgar Cua. Each megawatt costs roughly one million dollars in infrastructure costs.
Murray said a large portion of the investment in China's energy sector would be geared to technological innovations to reduce the environmental pollution caused by coal-fired power plants.
"You can't get away from coal," he said, explaining that it would remain China's main source of energy.
With the huge financial requirement, Murray said "it is fairly clear" that funds cannot be generated through the traditional means such as official development assistance and government resources.
"A large portion will have to come from the private sector, both domestic and foreign," he said, citing bonds and the equity markets as "major sources of funding to complement joint ventures, equity investments" and the build-operate and transfer (BOT) scheme.
However, since China has to compete with other countries for financing, ADB said Beijing has to adopt several measures to maximize foreign funding mobilization.
These measures include taming inflation and further developing the domestic capital markets and the banking system.
Beijing also needs to improve the investment climate, ensure careful selection of projects, and conduct feasibility studies to make sure that these are "technically sound, economically viable, financially rewarding" and not harmful to the environment.
Murray allayed fears that China's huge funding requirement would drain money from the rest of region, saying that "at the end of the day" smaller Asian nations must also implement similar reforms in their economies in order to get a fair share of foreign funds.
He said easing the infrastructure bottlenecks would likewise solve a migration problem from China's less developed inland areas to the more vibrant coastal cities brought about by uneven development.
About 130 million inland residents have migrated to the coastal areas, "putting tremendous pressure on urban infrastructure," he said.