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.