Sustainable Infrastructure Could Unlock Growth Across Central and Southeast Asia

The OECD finds that Central and Southeast Asia face an annual infrastructure financing gap of over USD 217 billion, but the additional cost of building climate-resilient and sustainable infrastructure is relatively small—typically around 1% of GDP. Without reforms, continued investments in coal, gas, and carbon-intensive infrastructure could undermine climate goals, while better planning, sustainable finance, and stronger governance could unlock long-term economic growth, resilience, and private investment.

Central and Southeast Asia face an annual infrastructure financing gap of more than USD 217 billion, according to a new OECD report assessing sustainable infrastructure development in Kazakhstan, Mongolia, Uzbekistan, Indonesia, the Philippines, and Thailand. The study, prepared under the Sustainable Infrastructure Programme in Asia (SIPA) by the OECD and partners, including IDDRI, IISD, ITF, UNDP, WWF, UCA, AIT, and IFS, argues that the challenge is not only about mobilizing capital but also about directing investments toward climate-resilient and low-carbon infrastructure.

The report estimates that infrastructure investment needs amount to 5–7% of GDP annually, yet the additional cost of making projects sustainable is relatively small—typically around 1% of GDP. In Indonesia, for example, climate-aligned infrastructure would require only an additional 0.4% of GDP, while Mongolia's transition needs are estimated at around 1.1% of GDP through 2050.

Fossil Fuel Investments Threaten Climate Goals

Despite growing climate commitments, infrastructure pipelines across the region remain heavily dependent on fossil fuels. The report identifies approximately 31 GW of new coal-fired power capacity under development across the six countries, alongside major expansions in natural gas infrastructure.

Coal still dominates electricity generation in several economies, accounting for around 86% of power generation in Mongolia and 58% in Kazakhstan. This creates a growing mismatch between national climate targets and actual investment decisions. Several countries have adopted carbon-neutrality or net-zero goals, yet continued investment in coal and gas risks locking economies into high-emission pathways while increasing the likelihood of future stranded assets.

The OECD warns that infrastructure built today will influence emissions, energy use, and economic competitiveness for decades, making current investment decisions critical for long-term development.

Better Planning Could Unlock More Investment

A key finding of the report is that many countries have strong climate commitments but struggle to translate them into investment decisions. Weak project preparation, fragmented governance, and poor coordination between planning and finance ministries continue to delay sustainable infrastructure development.

The report highlights that traditional project appraisal methods often underestimate the value of sustainable investments. Through pilot assessments, SIPA found that when environmental, social, and climate benefits are included, the economic value of sustainable projects can increase dramatically. In some cases, integrated assessments improved project benefit-cost ratios by up to ten times compared with conventional evaluation methods.

For governments, this suggests that strengthening project preparation, climate-risk assessment, and public investment planning could unlock significantly larger flows of domestic and international capital.

Major Opportunities for Development Partners and Investors

The report identifies substantial opportunities for international development institutions, climate funds, and private investors. As governments seek to close infrastructure gaps while meeting climate targets, demand is expected to grow for investments in renewable energy, sustainable transport, industrial decarbonisation, climate adaptation, and nature-based solutions.

Global issuance of green, social, sustainability, and sustainability-linked bonds has already exceeded USD 1 trillion annually, demonstrating strong investor appetite for sustainable assets. However, many countries in Central Asia still have underdeveloped capital markets, limiting private-sector participation.

For development partners such as the World Bank, Asian Development Bank, and bilateral donors, the report emphasizes the importance of supporting policy reforms, technical assistance, and project preparation facilities rather than focusing solely on infrastructure financing.

What Policymakers Should Do Next

The OECD recommends a comprehensive reform agenda to accelerate sustainable infrastructure investment. Governments should align infrastructure plans with climate commitments, integrate sustainability criteria into public investment systems, strengthen renewable energy policies, and gradually reform fossil-fuel subsidies.

The report also calls for climate resilience to be embedded throughout the infrastructure lifecycle, from planning and design to operation and maintenance. Greater use of nature-based solutions, stronger green finance frameworks, and expanded public-private partnerships could further mobilize investment.

The report concludes that Central and Southeast Asia have a unique opportunity to build infrastructure that supports economic growth, improves resilience, and reduces emissions. With the additional cost of sustainable infrastructure relatively modest compared with overall investment needs, policymakers face a clear choice: invest now in future-ready infrastructure or risk locking economies into costly, increasingly vulnerable development pathways.