Financing Infrastructure in Asia and the Pacific Capturing Impacts and New Sources

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Financing Infrastructure in Asia and the Pacific Capturing Impacts and New Sources Financing Infrastructure in Asia and the Pacific Capturing Impacts and New Sources Edited by Naoyuki Yoshino, Matthias Helble, and Umid Abidhadjaev ASIAN DEVELOPMENT BANK INSTITUTE © 2018 Asian Development Bank Institute All rights reserved. First printed in 2018 ISBN 978-4-89974-071-1 (Print) ISBN 978-4-89974-072-8 (PDF) The views in this publication do not necessarily reflect the views and policies of the Asian Development Bank Institute (ADBI), its Advisory Council, ADB’s Board or Governors, or the governments of ADB members. The responsibility for opinions expressed in signed chapters rests solely with their authors, and publication does not constitute an endorsement by ADBI, other international organizations and secretariats which employ the authors, or their respective Board of Governors or the governments they represent, or their member countries or economies, of the opinions expressed in them. ADBI does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. ADBI uses proper ADB member names and abbreviations throughout and any variation or inaccuracy, including in citations and references, should be read as referring to the correct name. By making any designation of or reference to a particular territory or geographic area, or by using the term “recognize,” “country,” or other geographical names in this publication, ADBI does not intend to make any judgments as to the legal or other status of any territory or area. Users are restricted from reselling, redistributing, or creating derivative works without the express, written consent of ADBI. ADB recognizes “China” as the People’s Republic of China. Note: In this publication, “$” refers to US dollars. Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5, Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan www.adbi.org Contents Figures, Tables, and Boxes v Contributors xii Abbreviations xiii Acknowledgments xv Introduction 1 Naoyuki Yoshino, Matthias Helble, and Umid Abidhadjaev PART I: Economic Impact of Infrastructure Investment 1. An Impact Evaluation of Infrastructure Investment: The Case of the Tashguzar–Boysun–Kumkurgon Railway in Uzbekistan 13 Naoyuki Yoshino and Umid Abidhadjaev 2. Impact of Infrastructure Investment on Tax: Estimating the Spillover Effects of the Kyushu High-Speed Rail Line in Japan on Regional Tax Revenues 47 Naoyuki Yoshino and Umid Abidhadjaev 3. The “Highway Effect” on Public Finance: The Case of the Southern Tagalog Arterial Road Tollway in the Philippines 80 Naoyuki Yoshino and Victor Pontines PART II: Development Impact of Infrastructure 4. The Productivity Effect of Infrastructure Investment in Thailand and Japan 101 Naoyuki Yoshino and Masaki Nakahigashi 5. The Effect of Infrastructure on Firm Productivity: Evidence from the Manufacturing Sector in the People’s Republic of China 146 Yan Zhang, Guanghua Wan, and Youxing Huang 6. The Impact of Ports Improvements on Education in the Philippines 163 Kris Francisco and Matthias Helble iii iv Contents 7. Assessing the Impact of Road Development on Household Welfare in Rural Papua New Guinea 189 Christopher Edmonds, Martin Wiegand, Eric Koomen, Menno Pradhan, and Bo Pieter Johannes Andrée PART III: Connectivity and Cross-Border Infrastructure 8. The Impact of Shipping Connectivity on Trade Performance: The Case of the Pacific 239 Matthias Helble 9. The Impact of Infrastructure on Trade and Economic Growth in Selected Economies in Asia 259 Normaz Wana Ismail and Jamilah Mohd Mahyideen 10. Evaluating Impacts of Cross-Border Transport Infrastructure in the Greater Mekong Subregion: Three Approaches 296 Manabu Fujimura PART IV: Financing Infrastructure 11. Back to the Future: Instructive Features from Past Innovations in Raising Private Finance for Infrastructure 333 Naoyuki Yoshino and Grant B. Stillman 12. Infrastructure Financing Modalities in Asia and the Pacific Region: Strengths and Weaknesses 366 Michael Regan 13. Infrastructure Investment, Private Finance, and Institutional Investors: Asia from a Global Perspective 401 Georg Inderst Conclusion 448 Naoyuki Yoshino, Matthias Helble, and Umid Abidhadjaev Appendix: Introducing the Tax-Kicker Bond for Infrastructure 453 Grant B. Stillman Figures, Tables, and Boxes Figures 1.1 Illustration of the Difference-in-Difference Method with the Gross Domestic Product Growth Rate Outcome Variable 19 1.2 Transport Mode Choice in Uzbekistan by Cargo Versus Cargo Turnover, 2005–2012 23 2.1 Illustration of the Difference-in-Difference Method with the Outcome Variable of Tax Revenue 51 3.1 The Difference-in-Difference Method 84 3.2 Map of Batangas and the Location of the Southern Tagalog Arterial Road Tollway 86 3.3 Business Taxes of the Beneficiary Group versus Nonbeneficiary Group 1 88 4.1 Level of Total Factor Productivity by Industry in Thailand 105 4.2 Level of Total Factor Productivity by Industry and Region 108 4.3 Marginal Productivity of Public Capital in Secondary Industry, 1990 and 2010 131 4.4 Marginal Productivity of Public Capital in Tertiary Industry, 1990 and 2010 132 5.1 Spatial Road Density, 2002 and 2007 148 7.1 Roads by Surface Type in 2000 and 2009 196 7.2 Regional Divisions and the Highlands Region 202 7.3 Different Gridded Population Density Datasets Compared with Census 2000 Data Describing Population per Lower Level Government Level 205 7.4 Mean Annual Rainfall in Papua New Guinea 207 7.5 Luminosity Data from the Visible Infrared Imaging Radiometer Suite Dataset Compared to the Operational Linescan System Stable Lights Dataset 211 7.6 LandsatLook Image (1997) Comparing the Roads Classified by NMB around the Porgera Gold Mine 213 A7.2.1 Example of Network-Based Distance Calculation Between a Sampled Household and Nearest Town 233 A7.2.2 Network Analysis for Papua New Guinea 234 A7.2.3 Schematic Representation of All Possible Connections between Sampled Census Units and Towns 235 8.1 Trade (Export) of Pacific Developing Member Countries, 2002–2016 241 v vi Figures, Tables, and Boxes 8.2 Node Diagrams of Direct Shipping Connections and Trade Flows between Asia and the Pacific Region and within the Pacific 247 10.1 Economic Corridors in the Greater Mekong Subregion 297 10.2 Intra-Greater Mekong Subregional Trade in Electric and Transport Machinery 322 11.1 Stereotypical Progression from a Government Line Department to a Private Issuer 354 11.2 Potential Ways to Transfer Back-End Tax-Participation to Original Investors 359 12.1 Project Finance in Asia and the Pacific Region, 2004–2014 375 12.2 Global Bond and Loan Project Finance, 2004–2014 381 13.1 Infrastructure Spending, 1992–2011 403 13.2 Sources of Infrastructure Finance 408 13.3 Sources of Infrastructure Finance in Emerging Markets and Developing Economies 410 13.4 Example of an Asian Infrastructure Index 416 13.5 Infrastructure Deals in Asia, by Country, 2010–2015 418 13.6 Project Finance Loan Volume in the Asia and the Pacific Region 421 13.7 Public–Private Partnerships Volume by Region 424 13.8 Private Investment in Infrastructure in Emerging Markets and Developing Economies 426 13.9 Institutional Investor Assets 428 13.10 Asia-Based Infrastructure Investors, 2015 431 13.11 Sovereign Wealth Funds Investing in Infrastructure, by Region 432 Profit Stream of Infrastructure Projects 451 A.1 Closing the Market Gap for Infrastructure Bonds 457 A.2 Subsidiarity of the Issuer and Arm’s Length from the Government or Guarantee 460 Schematic of a New Unified Model 467 The Difference-in-Difference Calculation Formula 477 Tables 1.1 Numerical Estimation of the Difference-in-Difference Coefficient Using Regional Data for Uzbekistan, 2005–2008 and 2009–2012 20 1.2 Transport Modes in Uzbekistan, 2005–2013 24 1.3 Summary Statistics for Outcome Variables for Regional Effects 28 1.4 Summary Statistics for Outcome Variables for Spillover Effects 29 1.5 Summary Statistics for Outcome Variables for Connectivity Effects 30 Figures, Tables, and Boxes vii 1.6 Regional Gross Domestic Product Growth Rate and Railway Connection: Estimation Output for the Long-Term Connectivity Effects Context 32 1.7 Difference-in-Difference Coefficients with the Gross Domestic Product Outcome Variable 37 1.8 Difference-in-Difference Coefficients with the Agriculture Outcome Variable 38 1.9 Difference-in-Difference Coefficients with the Industry Outcome Variable 39 1.10 Difference-in-Difference Coefficients with the Services Outcome Variable 40 2.1 Prefectures Assumed to be Affected by the Construction and Operation of the Kyushu High-Speed Rail Line 52 2.2 Construction and Operation Timeline of the Kyushu High-Speed Rail Line 53 2.3 Affected Prefectures and their Corresponding Nearest Neighbors, by the Minimum Euclidian Distance between the Mean Value of Total Tax Revenues for the Pre-High-Speed Rail-Line Period, 1982–1991 55 2.4a Difference-in-Difference Empirical Results with the Outcome Variable of Total Tax Revenue 57 2.4b Difference-in-Difference Empirical Results with the Outcome Variable of Personal Income Tax Revenue 58 2.4c Difference-in-Difference Empirical Results with the Outcome Variable of Corporate Income Tax Revenue 59 2.5a Periodic Difference-in-Difference Empirical Results with the Outcome Variable of Total Tax Revenue 61 2.5b Difference-in-Difference Empirical Results with the Outcome Variable of Personal Income Tax Revenue 62 2.5c Difference-in-Difference Empirical Results with the Outcome Variable of Corporate Income Tax Revenue 62 2.6 Individual Income Tax Rates 64 2.7 Employment Income Deductions 65 2.8 Tax Burden
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