Emerging Asia should reform and invest in infra now

The Manila-based Asian Development Bank noted the risks in the sector have become more balanced due to US policy uncertainty, geopolitical events and natural disasters across the globe.

Developing Asian countries should “take advantage of favourable short-term economic prospects to implement productivity-enhancing reform, invest in badly needed infrastructure, and maintain sound macroeconomic management in a bid to increase long-term growth potential”, according to the latest economic publication by the Asian Development Bank.

The region’s growth is expected to remain strong at a forecast GDP growth of 5.9 percent in 2017, and 5.8 percent in 2018, the Asian Development Outlook report noted. 

“Growth prospects for developing Asia are looking up, bolstered by a revival in world trade and strong momentum in China,” said ADB chief economist Yasuyuki Sawada in a briefing in Hong Kong today, adding that risks have become more balanced. 

The report highlighted loose fiscal policy in the US and lower oil prices as potential upside risks to the region, while downside risks include tighter global liquidity, economic disruption from geopolitical events, or a weather-related disaster. 

The ADB also released a special chapter on how dedicated PPP programmes are key to helping countries in Asia and the Pacific address their infrastructure gaps by leveraging the capabilities and resources of the private sector. More than $100 trillion of institutional capital globally is underutilised for PPP development, while new finance sources need to be tapped, according to the report. 

Sawada stressed that a healthy pipeline of bankable projects, quality partners and transparent procurement process are crucial for PPP success. The bank noted that PPP transactions in the region are currently concentrated in East and South Asia, suggesting “untapped opportunities in other sub-regions”. 

“Energy and transport have been the traditional focus for PPP projects, while health and education represent new frontiers in PPP delivery,” said the ADB report. It noted that the PPP model has been gaining ground in Asia, with delivery of projects in the region growing fourfold in the past 25 years. 

The Manila-based bank estimated that about $1.7 trillion per year will be needed for countries in Asia and the Pacific to meet their infrastructure needs. PPPs would be a vital source of private sector support to fill the $500 billion per year infrastructure finance gap.