The World Bank says East Asia needs to spend up to $1.5 trillion on infrastructure by 2010, just to keep up with economic growth. And that’s a problem, when private financiers show little interest in countries outside of China and India. That’s why government are being forced to launch infrastructure funds with their own money.
Leading the charge is China, perhaps recognising that its own progress could be blocked by its neighbours’ woes. It’s setting up a $10 billion China-ASEAN Co-operation Fund, investing $5 million of its own money.
The ASEAN countries – Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Burma, Cambodia, Laos and Vietnam – are launching their own funds, too. Thailand is teaming up with its southern neighbour Malaysia to set up another joint fund with ASEAN, investing member countries’ excess foreign reserves in infrastructure projects. Indonesia, Singapore and Thailand are also hiking national infra spending.
It’s a quiet acceptance that the only way to maintain ASEAN infrastructure spending is with state money. Private investors are focussed exclusively on India and China, which both have robust economies and a massive appetite for new infrastructure. ASEAN doesn’t compare.
South-east Asian countries such as Singapore, Malaysia and Thailand already have well-developed infrastructure. And investors are wary of the newer ASEAN members such as Burma, Cambodia and Laos, whose economies are distinctly shaky. Whether governments can spend enough in the middle of a recession remains to be seen.