Public Financing of Infrastructure in Asia: In Search of New Solutions

Abstract

Infrastructure development is critical for sustainable economic growth and productivity in developing countries. According to a joint study (2009) by the Asian Development Bank (ADB) and the Asian Development Bank Institute (ADBI), differences in infrastructure development account for a third of the overall difference in output per worker between Latin America and East Asia. They are also linked to rising incomes of the poor, reduced infant mortality, increased school attendance, and extended learning hours (JBIC Today 2005). Survey results from the ADB and ADBI study (2009) reveal that access to roads and electricity was associated with increases in income in Thailand, lower poverty rates in India and Viet Nam, and better health outcomes in Indonesia. The empirical literature also strongly supports the positive contribution of infrastructure in reducing economic disparities both within and across the countries and regions. As many studies have analyzed, the macroeconomic effects of infrastructure in developing countries with capacity constraints are often undermined by lack of critical infrastructure in key economic sectors.