ADB calls for increased attention on infrastructure development in South Asia

To sustain growth and deal with climate change, ADB estimates that South Asia needs to invest almost 9 percent of its gross domestic product on infrastructure development till 2030, higher than most other subregions of Asia.

South Asia seems to defy the theory that development of infrastructure is required for sustained economic growth. Despite the severe and persistent shortage of quality infrastructure, it is the fastest growing region in the world.

However, ADB argues that the trend cannot continue.

To sustain growth and deal with climate change, ADB estimates that South Asia needs to invest almost 9 percent of its gross domestic product on infrastructure development till 2030, higher than most other subregions of Asia.

Improving the quality of and access to infrastructure services require significant increases in investment spending on operations and maintenance. 

Although there is a strong case for governments to take responsibility for essential infrastructure services, the budgetary envelope of South Asian governments is limited. 

To some extent, this can be addressed through stronger domestic resource-mobilization by identifying new sources of finance (e.g., using tax revenues to refinance infrastructure, institutional investor funds). 

But the increased allocation of public resources alone is not enough. 

The subregion needs to improve its efficiency in the use of public funds too, like improving administration and dealing with governance issues, which are at the core of service delivery problems.

ADB says that bank loans dominate private infrastructure finance in South Asia and there is a greater role for bond financing to complement banks.

ADB suggests that deepening of capital markets is also needed to help channel the region’s substantial savings into productive infrastructure to sustain growth.

(With inputs from ADB)