Uncertainty around trade policies, the impact of climate change, election cycles and the slowdown of the global economy caused the total value of private transactions in Asian infrastructure to decline approximately 10 percent from USD218 billion in 2018 to USD196 billion in 2019.
The unexpected outbreak of the COVID-19 virus will cause delays in infrastructure development in 2020, while the demand for infrastructure and the pipeline of planned projects remains strong. The outbreak has underscored the importance of investment in quality public health, healthcare and information and communications technology (ICT) focused infrastructure.
The Asian Infrastructure Finance Report 2020 examines two key themes. First, it elaborates on what is needed to “invest better”, which would then create the conditions to catalyze more public and private infrastructure investment. Second, it reemphasizes the importance of infrastructure investments in raising economic growth and productivity for developing economies.
Fundamentally, investing better is about getting a larger return for every dollar invested. This is achieved by choosing projects with high economic returns, putting in necessary measures for financial sustainability and implementing them properly. However, selecting projects with high returns is not a straightforward exercise given uncertainty over future demand, technological changes, macroeconomic conditions, etc.
Recognizing that it will always be very difficult to consistently pick good infrastructure projects, the key is to put in a framework to guide public and private sector investment choices, which will be elaborated in various chapters of the report. Investing better does not suggest there will be perfect investment foresight or that all projects will be successful. Rather, it is about putting in place a set of conditions to allow the public and private sector to make better choices so that each country can on balance arrive at broadly good investment outcomes.
Scaling up investments will not be easy and can only be achieved gradually even in the best circumstances. While recognizing that countries’ specific circumstances differ, investing better will help create the conditions for developing economies to increase infrastructure investment, both public and private. Multilateral institutions like AIIB is a key part of the equation, not just catalyzing finance but also ensuring high standards in procurement, environment and social safeguards, providing coordination and support.
Importantly, investing better will help crowd in more resources for investment, which is key to the higher rate of investment into infrastructure (around 6–10 percent of GDP) bringing about faster economic growth and rekindling the promise of economic convergence. It will be difficult to see sustained development without this.
As of early 2020, the world is experiencing the sharpest economic contraction recorded. Once COVID-19 is brought under control, greater investment in infrastructure will be an effective way to kickstart economic growth, and address long term infrastructure gaps. Working together, it is possible to secure a fast and sustained recovery, with infrastructure development at the heart of it.