Asia and the Pacific face a daunting infrastructure challenge, requiring sustained investment to enhance connectivity, safety, and resilience. While road networks dominate spending, underinvestment in maintenance and limited private-sector involvement threaten long-term sustainability.
Asia and the Pacific will require about $43 trillion from 2020 to 2035 to develop, maintain, repair, and climate-proof its transport infrastructure, according to the Asian Transport Observatory. This represents about 2% of the region’s GDP, averaging roughly $2.7 trillion annually.
Infrastructure investment requirements have tripled, increasing from roughly $750 billion annually between 2000 and 2020 to $2.7 trillion.
Failing to secure the needed resources risks inadequate infrastructure development, leading to deterioration, costly repairs, and transport disruptions over time.
Traffic congestion currently represents about 2-4% of GDP in Asia’s major cities. Road traffic fatalities and severe injuries cost $1.5 trillion in 2021, factoring in the loss of lives, assets, and workforce productivity.
The health consequences of PM2.5 air pollution also contributed to a further loss of at least $4 trillion in 2019. Climate-related challenges may also bring significant expenses, with potential damages to Asia’s transport infrastructure approaching $54 billion.
Moreover, delays and interruptions due to weakened transport infrastructure could lead to logistical losses estimated annually at $43 billion in 2023. It’s estimated that inadequate transport infrastructure directly threatens about 7% of GDP.
Tackling these challenges requires a forward-thinking approach emphasizing infrastructure maintenance, capacity enhancement, safety enforcement, and disaster preparedness to mitigate these considerable costs.
The infrastructure investment needs across the region are vast and varied. The largest share of the investment needs lies within East Asia (58%) and South Asia (17%) sub-regions, representing 73% of the population.
Our projections suggest that investment in transport infrastructure within high-income economies will stagnate by 2035, influenced by an aging population, stabilized travel demand, and well-established infrastructure networks.
On the other hand, low- and middle-income economies are expected to see a sharp rise in investment requirements, driven by inadequate access to transport infrastructure and increasing demand for passenger and freight transport.
Upper-middle-income economies are set to spearhead transport infrastructure investments, maintaining a significant share of 67% of total investment from 2000 to 2020, followed by 65% from 2020 to 2035.
About 74% of total investment needs over the next decade will be concentrated in East and South Asia, propelled by the ongoing rapid growth of transport demand in India and the People’s Republic of China.
Road transport will continue to secure bulk investments from 2020 to 2035, accounting for 63% of total investments (approximately 1.3% of GDP). This is required to bridge the infrastructure gap and improve access and connectivity.
The remaining investment needs are as follows: 17% for railways, including high-speed rail (around 0.4% of GDP), 11% for raid urban transit (about 0.2% of GDP), 4% for ports (0.1% of GDP), and 5% for airports (0.1% of GDP).
Urban rail investment will equal that of heavy rail infrastructure for the first time. Investment in metro systems is expected to increase from 7% of total investments between 2000 and 2020 to 10% from 2020 to 2035. Other than that, we don’t see a significant shift in the pattern of infrastructure spending.
Maintenance is crucial for transport infrastructure, guaranteeing assets’ durability, safety, and effectiveness. Studies show that every dollar invested in maintenance saves $4-$5 later required for reconstruction.
However, there’s a worrying trend of underinvestment in maintenance. This underinvestment will likely persist. On average, maintenance costs for transport infrastructure are expected to represent approximately 24% of total investment expenses from 2020 to 2035.
Nonetheless, maintenance expenditures differ across various modes and countries. New construction projects often receive significant media and political attention, but maintenance initiatives, which are vital for the long-term viability of transport infrastructure, are usually overlooked and go underfunded.
Regrettably, the issue of insufficient maintenance funding is a persistent challenge in Asia.
With nearly 1.8 billion people lacking access to transport infrastructure in Asia, countries are rapidly building infrastructure. But even with a $43 trillion investment by 2035, the infrastructure gap with the global North will continue to exist.
By 2035, Asia’s average transport infrastructure per capita is projected to still be 70% lower than current levels in wealthier countries, as measured by OECD country levels. However, the silver lining is that we will bridge the gap in specific modes at a lower income level.
For example, the average availability of urban rapid transit per capita in Asia and the Pacific is expected to double, rising from 6 kilometers in 2020 to 12 kilometers per million people by 2035. OECD countries had similar access back in 2013, having a GDP per capita nearly four times higher.
Maintaining a sustained annual investment rate of 2.3% of GDP is a challenge in itself. Identifying who will provide that investment is another complex question. While infrastructure development offers clear socio-economic benefits, investments in this area have declined as a percentage of GDP.
This shift raises concerns, especially given the limited involvement of private funding in the region’s infrastructure development. Historically, governments have been the leading financiers.
However, the aftermath of COVID-19 has strained public finances and increased debt burdens. Public-private partnerships show potential but have not expanded enough to meet the growing transport infrastructure demands.
There is an urgent need for a significant increase in private investment to bridge this gap. Attracting such capital depends on the government’s ability to create a more favorable regulatory and planning environment.
Moreover, there is considerable potential for optimizing public infrastructure investments. Governments should explore alternative funding methods, such as raising user fees, leveraging land value, and adopting innovative financing techniques.
Strategic investments, regulatory reforms, and innovative funding solutions are essential to ensuring Asia’s transport infrastructure meets future demands.
The Asian Transport Observatory was developed by the Asian Development Bank to strengthen the knowledge base on transport in Asia and the Pacific, and to support better informed investments and policies in the sector.
Source: blogs.adb
