Developing Asia, according to an Asian Development Bank estimate, needs to invest $1.7 trillion a year -- about the size of Canada's GDP -- in infrastructure to maintain its growth momentum.
Building roads and ports, expanding electricity grids and telecommunication networks, and investing in water supply and sanitation drove growth across Asia, and policymakers are relying even more on infrastructure to deliver the goods. But given the region's new challenges, past patterns are not adequate: Quality must start going hand in hand with quantity.
Some countries will need to double infrastructure spending over the next 10 to 15 years. It is not hard to see the allure of making these investments for low-income countries striving for economic take-off, such as Bangladesh and Laos, and middle-income ones trying to transition to high-income status, such as Malaysia and Thailand. By one estimate, a 10% increase in infrastructure spending can contribute to 1% growth in a country's GDP.
The positive association between growth and priority for roads, bridges, and other infrastructure projects in East Asia is compelling. Japan has a striking record, including in the 1950s and 60s, with positive lessons on quality. But spending of some 4.7% of GDP annually for these projects during the 1990s and 2000s was associated with 0.5% a year growth.
Going forward in Asia, there needs to be a laser-sharp focus on relevance and returns. Growing limits to land, water and also funding, amplify the consequences of ill-conceived projects. China's drive of the 1990s and 2000s, when it spent over 8.5% of GDP on public works, helped fill gaps in transport and energy and generate double-digit growth. But on the wayside, were also roads-to-nowhere projects and ghost cities.
Transport and energy account for nearly 90% of infrastructure spending in Asia. But telecommunications, water and sanitation are getting short shrift. Analysts have voiced concern over large gaps in water and sanitation infrastructure, and the effect on health and productivity.
Infrastructure must connect with other interventions. For example, water and sanitation projects have a better chance of reducing water-related diseases if joined with education efforts promoting good hygiene. Ramping up infrastructure spending should not to come at the expense of social sectors. Government spending on health as a share of GDP in developing Asia at the end of the first decade of the 2000s was less than 4%, compared with an average of 7.4% in high-income countries.
The success of infrastructure projects varies widely. Common weaknesses are gaps in design and execution, government agencies lacking the capacity to handle big projects, and inadequate operation and maintenance spending over the life of the projects -- possibly because this is less politically rewarding than building new infrastructure.
With runaway climate change, carbon-intensive investments must become non-starters. A particularly heartening development was the China-led Asian Infrastructure Investment Bank making sustainable development the main theme of its annual meeting in February, and the bank -- a big new lender for development -- reaffirming the need to deliver on their commitments under the Paris climate change agreement.
With Southeast Asia at the sharp end of natural disasters, technological innovation will be vital in adapting to climate change and becoming more resilient to disasters. Two comparable earthquakes that struck in 2010 make the point: 525 people died in the quake that hit Chile but 160,000 died in the Haiti one because of a lack of disaster-resilience.
Climate- and disaster-proofing essential public infrastructure will need to figure much more in economic plans. Low-income countries' losses are especially debilitating: These are equivalent to 22% of their social spending, compared with 2% in rich countries, according to the United Nations Office for Disaster Risk Reduction.
If infrastructure financing is done mainly through government budget and public borrowing, governments need to account for the effect of debt servicing on priorities in health and education. And spending that relies heavily on public borrowing could kindle inflation, as in Latin American countries. Southeast Asian countries have relatively lower debt levels by Asian standards but leverage has increased, with corporate and household debt becoming a concern. Increasingly, governments, as Thailand's and the Philippines', are looking to lower costs through public-private partnerships; successful ones have notably cut project implementation times.
China, Indonesia and Thailand all have all ambitious infrastructure plans. Thailand has an infrastructure action plan worth 895.8 billion baht for 2017. China's recently announced its Belt and Road Initiative for a modern Silk Road has the potential to unleash massive investments across the region. But the next generation of infrastructure will need to help the region confront its newer challenges, especially climate change.
Vinod Thomas is a visiting professor at the National University of Singapore, and a former senior vice president at the Asian Development Bank.