Financing crunch looms for Southeast Asian infrastructure — ADB

Asian Development Bank (ADB)

SOUTHEAST ASIA had a sizeable financing gap for its infrastructure needs even before the pandemic and may need to find alternatives to ensure a recovery along sustainable lines, according to the Asian Development Bank (ADB).

In a report, “Green Finance Strategies for Post-COVID-19 Economic Recovery in Southeast Asia” released Wednesday, the bank said selected Southeast Asian countries had a financing gap of about $106 billion a year in the 2016-2020 period, and needed to invest $3.1 trillion between 2016 and 2030 on projects that address climate change.

It said investment in infrastructure has become more crucial as a form of stimulus to revive economies, and backed substantial investment in “green construction projects,” which it said have higher multiplier effects.

A separate study found spending on energy infrastructure worth $1 million generates 7.49 full-time jobs in renewable infrastructure and 7.72 in energy efficiency, compared with 2.65 jobs for comparable fossil fuel projects, it said.

“The COVID-19 pandemic has altered the financing landscape, with earlier estimates of government funds available for green infrastructure sharply reduced as government budgets are diverted to large emergency relief programs,” the report said.

Given the fiscal challenges and capital outflows resulting from the pandemic, it warned that emerging and developing countries could “run the risk of having onerous debt repayment obligations in the long term, and spiraling debt-to-GDP (gross domestic product) ratios, ratings downgrades, and the long-term dearth of capital sources due to the increased sovereign risk.”

The ADB said governments should prepare recovery measures that will attract resources from various non-public sources to avoid resorting to “unsustainable” methods given the pandemic’s impact on government revenue. This includes financing via public-private partnerships, financial institutions such as pension funds and private banks, and tapping the capital markets.

It said some countries have launched recovery packages containing “green” and climate-change responsive measures to help their economies achieve a more sustainable recovery.

“Green” recovery measures in the Philippines include a P2.5 billion worth of assistance to make 145 cities more sustainable, and some infrastructure projects under the “Build, Build, Build” program that promote sustainability such as the ADB-backed EDSA Greenways. The ADB noted the administration’s flagship infrastructure program itself could spur investment opportunities and create “green” jobs. — Beatrice M. Laforga

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