Asia’s needs for infrastructure are vast. Getting the right financing mix for infrastructure projects would be rewarding for borrowers and lenders and, more importantly, provide a boost to GDP growth for the region in the medium term.
Some Asian economies have seen impressive success in building and maintaining high-quality infrastructure in past decades. Hong Kong and Singapore are at the vanguard of global infrastructure rankings. Even emerging economies such as Malaysia, China and Thailand rank in the top half. On the other hand, India, Indonesia and the Philippines have remained laggards. Despite some remarkable success stories, providing adequate transport networks, power, water and other facilities remains a monumental task in Asia.
This note looks at the experience of Asian economies with various infrastructure financing options to draw observations on what worked, what could be improved upon and what would be the best way forward. A multi-pronged approach appears to be the answer. As different countries are at different stages of development and face diverse macroeconomic backdrops and endowments, suitable financing options for infrastructure development will vary.
Governments and multilateral agencies will remain important providers of funding, but the role of private financing looks set to grow. This underscores the need to put more effort into improving transparency and governance as well as enhancing cooperation in harmonising capital market standards and facilitating cross-border flows.