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ADB report on fastest growth region

Asian states must

spend $280 bn a year

on infrastructure

MANILA: Asian nations need to spend $6.9 trillion over the next 25 years, or $280 billion a year, on infrastructure to keep their position as the world's fastest growing region, according to a study funded by the Asian Development Bank (ADB).

"The requirements are staggering and the pressure on governments to raise the necessary resources equally daunting but without such investment, economic growth is likely to falter," said the study, which was presented on Tuesday at a regional seminar in Manila.

ADB president Mitsuo Sato noted that about three decades ago, only about 18 percent of the Asian population lived in urban areas while now, one out of three Asians lived in a town.

"By the year 2020, the region is expected to become predominantly urban," Sato said during the seminar on urban infrastructure finance.

The study said that with burgeoning populations in urban centres came severe bottlenecks in water supply, sanitation, drainage, waste management and transport.

Water supply in Asian countries is often run by public companies that are overstaffed and often collect high tariffs and still suffer huge unexplained water losses, it said.

"Reform should focus on improving distribution systems in parallel with providing new sources," it said.

Sewerage systems are also a headache with lower-income countries often unable to afford extensive systems. Solid waste management is also hampered by financial constraints.

"The solution is to reduce, reuse and recycle waste," the study said.

Then there is the shortage of affordable and good-quality low-cost housing. "Squatting, the market response to the failure of government housing efforts, is widespread."

The Bank sees two dominant trends adopted by Asian governments to ease the capital burden brought about by the infrastructure backlog.

One is decentralisation or the transfer of power to local governments, giving them the freedom to raise revenues, and another is increased private sector investments.

Private investment can either be through direct investment or partnership with the government. Aside from tax collections, local governments too often raise funds from capital markets by floating bonds.

The Bank also stressed the need to generate profits from urban infrastructure projects.

"Often there is a misguided desire to protect low-income households from the effects of market prices...Clearly, access to services is more imortant than price to many," it said.-Reuter