Asia must be creative in finding ways to tap its multi-trillion dollar savings and to mobilise private sector support for new infrastructure needed to sustain growth in the coming years, says Asian Development Bank (ADB) President Haruhiko Kuroda.
"The infrastructure challenge for developing Asia is one of the most daunting we face today. We must work diligently to be innovative, yet financially responsible, in mobilising Asian savings to deliver successful, sustainable and robust infrastructure projects," Kuroda told delegates at the Infrastructure Finance Forum in Japan.
Gross domestic savings in emerging Asia reached close to US$4 trillion in 2009. Much of this large cash pile has been underutilised, with regulatory obstacles, currency mismatches and underdeveloped capital markets hindering broader financing of essential infrastructure. The needs are immense with ADB calculating that about $8 trillion in new infrastructure investments will be required in the region through to 2020 to support current levels of economic growth.
Of the infrastructure needs, energy and electricity will take up 40% of the total, followed by transport at about 25%. Social infrastructure for education, health, water and sanitation, and other public goods will account for another 25%. The balance will be mainly investments in infrastructure for telecommunications.
With the public sector unable to meet the immense costs on its own, public-private partnerships are essential, and governments should look to strengthen existing legal and regulatory frameworks to attract more private investors and finance from funds and institutional investors.
"Infrastructure funds and local institutional investors, like pension and provident funds, can channel Asian savings to help finance public-private infrastructure projects," says Kuroda.
Further development of domestic capital markets and more local currency lending will also help address currency mismatches which are a deterrent to investors in the sector, says the ADB.
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