Asia—Infrastructure needs double

Recent Asian Development Bank estimates suggest developing Asia will need to invest US$22.6t in infrastructure by 2030 to maintain growth momentum.

The estimate is double that made in 2009—driven by expected continued rapid growth, which generates new infrastructure demand, and an increase in the number of countries covered. East Asia accounts for 61% of the investment needs (Chart 1). Excluding China, the infrastructure investment gap—the difference between investment needs and current investment levels—equals 5% of GDP. Fiscal reforms could generate additional public revenues equivalent to 2% of GDP, but the private sector will be required to fill the remaining 3% of GDP gap. The infrastructure gap in the Pacific is also significant, requiring investment equivalent to 8% of GDP.

Attracting finance and executing projects will be a challenge. India, Indonesia, the Philippines, Vietnam and most Pacific islands have a poor regulatory environment and bond markets as a share of GDP remain low. Regulatory and institutional reforms will be crucial to generating a pipeline of bankable projects. But despite the hurdles, there are examples of building momentum—a US$160b infrastructure plan is underway in the Philippines and infrastructure spending is ramping up in Indonesia. This investment should create opportunities for Australian exporters that are involved in the infrastructure space and could be a boon for commodity producers.