Infrastructure for Asian Connectivity
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Infrastructure for Asian Connectivity BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd i 224/08/20124/08/2012 116:206:20 BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd iiii 224/08/20124/08/2012 116:206:20 Infrastructure for Asian Connectivity Edited by Biswa Nath Bhattacharyay Advisor, Offi ce of Regional Economic Integration, Asian Development Bank, Philippines Masahiro Kawai Dean and CEO, Asian Development Bank Institute, Japan Rajat M. Nag Managing Director General, Asian Development Bank, Philippines A JOINT PUBLICATION OF THE ASIAN DEVELOPMENT BANK INSTITUTE AND ASIAN DEVELOPMENT BANK WITH EDWARD ELGAR PUBLISHING Edward Elgar Cheltenham, UK • Northampton, MA, USA BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd iiiiii 224/08/20124/08/2012 116:206:20 © Asian Development Bank Institute and Asian Development Bank 2012 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2012930619 ISBN 978 1 78100 312 1 (cased) Typeset by Servis Filmsetting Ltd, Stockport, Cheshire Printed and bound by MPG Books Group, UK BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd iivv 224/08/20124/08/2012 116:206:20 Contents List of contributors vii Foreword by Haruhiko Kuroda ix Acknowledgements xii List of abbreviations xiii 1 Introduction 1 Biswa Nath Bhattacharyay, Masahiro Kawai and Rajat M. Nag PART I DEMAND FOR AND BENEFITS OF NATIONAL AND REGIONAL INFRASTRUCTURE NETWORKS 2 Estimating demand for infrastructure, 2010–2020 19 Biswa Nath Bhattacharyay 3 Benefi ts of infrastructure investment: an empirical analysis 80 Fan Zhai 4 Socio- economic impact of regional transport infrastructure in the Greater Mekong Subregion 95 Susan Stone, Anna Strutt and Thomas Hertel 5 Socio- economic impacts of regional transport infrastructure in South Asia 139 John Gilbert and Nilanjan Banik PART II POLICIES AND INSTITUTIONS FOR EFFECTIVE INFRASTRUCTURE 6 Evaluation of regional infrastructure 167 Manabu Fujimura and Ramesh Adhikari 7 Economic space for transnational infrastructure: gateways, multimodal corridors and special economic zones 217 Peter J. Rimmer and Howard Dick v BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd v 224/08/20124/08/2012 116:206:20 vi Contents 8 Institutional and policy frameworks for sustainable infrastructure 254 ZhongXiang Zhang 9 Managing regional infrastructure: European Union institutional structures and best practices 301 Willem van der Geest and Jorge Núñez- Ferrer PART III ADDRESSING INFRASTRUCTURE FINANCING NEEDS 10 Modes of Asian fi nancial integration: fi nancing infrastructure 349 Biswa Nath Bhattacharyay 11 Foreign direct investment in fi nancing regional infrastructure 402 Kwok- Chiu Fung, Alicia Garcia- Herrero and Francis Ng 12 Public–private partnerships for regional infrastructure: lessons from the European Union 432 Willem van der Geest and Jorge Núñez- Ferrer Index 485 BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd vvii 224/08/20124/08/2012 116:206:20 Contributors Ramesh Adhikari, Director, Independent Evaluation Department, Asian Development Bank, Manila, Philippines. Nilanjan Banik, Associate Professor, Center for Advanced Financial Studies, Chennai, India. Biswa Nath Bhattacharyay, Advisor, Offi ce of Regional Economic Integration, Asian Development Bank, Manila, Philippines. Howard Dick, Honorary Professorial Fellow, Faculty of Business and Economics, University of Melbourne, Victoria, Australia. Manabu Fujimura, Professor, College of Economics, Aoyama Gakuin University, Tokyo, Japan. Kwok- Chiu Fung, Professor of Economics, University of California, Santa Cruz, CA, USA. Alicia Garcia- Herrero, Chief Economist of Emerging Markets, Banco Bibao Vizcaya Argentaria (BBVA). John Gilbert, Professor, Department of Economics, Utah State University, Logan, UT, USA. Thomas Hertel, Distinguished Professor, Purdue University, IN, USA. Masahiro Kawai, Dean and CEO, Asian Development Bank Institute, Tokyo, Japan. Rajat M. Nag, Managing Director General, Asian Development Bank, Manila, Philippines. Francis Ng, Economist in the Development Research Group at the World Bank. Jorge Núñez- Ferrer, Independent Consultant and Associate Research Fellow, Centre for European Policy Studies, Brussels, Belgium. Peter J. Rimmer, Emeritus Professor and Visiting Fellow, School of Culture, History and Language, Australian National University, Canberra, Australia. vii BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd vviiii 224/08/20124/08/2012 116:206:20 viii Contributors Susan Stone, Senior Trade Analyst, Organisation for Economic Co- operation and Development (OECD), Paris, France. Anna Strutt, Senior Lecturer of Economics, University of Waikato, New Zealand. Willem van der Geest, Director of European Institute for Asian Studies, Brussels, Belgium. Fan Zhai, Managing Director, China Investment Corporation, Beijing, China. ZhongXiang Zhang, Senior Fellow, East–West Center, Honolulu, HI, USA; and Adjunct Professor, Chinese Academy of Sciences, Beijing, China. BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd vviiiiii 224/08/20124/08/2012 116:206:20 Foreword Over the last decade, Asian countries have emerged as the growth center of the global economy. The fallout from the global fi nancial crisis that began in 2008 and the subsequent Asian- led recovery have highlighted the importance of Asia’s economic growth and development in the increas- ingly connected global economic system. One of the major factors behind Asia’s rise has been its commitment to investment in infrastructure and regional connectivity, which has facilitated its international trade and foreign direct investment. In order to maintain this positive trend in the coming decades, countries in Asia need to continue to strengthen regional connectivity and integration, particularly through cross- border infrastructure investment. Greater regional connectivity in Asia would create business opportuni- ties for fi rms and increase access to markets and jobs for individuals. It would narrow the development gap at national and subregional levels, thus promoting inclusive and sustainable growth. Better infrastructure would also support market conditions that are conducive to growth by improving competitiveness, productivity, and environmental sustain- ability, and would therefore support social and economic progress. As a result, a more peaceful, prosperous, integrated and inclusive society can be achieved. Asia’s competitiveness in the global marketplace will depend heavily on its ability to address the serious infrastructure bottlenecks and con- straints that exist in many economies. The wide geographical, social and economic diversity of the region poses many challenges to regional infrastructure connectivity. These include defi ciencies in hard infrastruc- ture (such as transport, energy, and information and communication technology infrastructure) as well as soft infrastructure (such as policies, regulations, systems and procedures, knowledge and capacity, strategies, and institutions to support the development and operation of physical structures). Asia’s rapid growth has placed considerable pressure on the existing infrastructure. Growing populations, expanding middle classes, rapid industrialization and urbanization, and depletion of resources are creating huge and visible pressures on the region’s existing infrastructure and these are preventing many Asian countries from providing even basic ix BBHATTACHARYAYHATTACHARYAY PPRINTRINT ((M2962).inddM2962).indd iixx 224/08/20124/08/2012 116:206:20 x Foreword services – such as electricity, drinking water and sanitation systems – to their citizens, particularly in rural areas. Meeting fi nancing needs remains a major challenge for Asia. Asian economies face many constraints, including lack of private sector participation, inadequacies in planning and implementation, and risks and uncertainties associated with cross- border infrastructure invest- ments. Asian countries need to prepare comprehensive infrastructure plans, identify their priorities, mitigate negative social and environmental impacts, and distribute benefi ts more equitably across people, countries and subregions. In order to keep up the growth momentum, Asian countries need to rely on regional opportunities. While several Asian countries are leading the way, many remain far behind, with insuffi cient infrastructure connectivity at national, subregional and regional levels. While building infrastructure, Asian countries need to develop policies and eff ective institutions nation- ally, subregionally and regionally to ensure cooperation and coordination that will enhance regional integration. This book, edited by Biswa Nath Bhattacharyay, Advisor, Offi ce of Regional Economic Integration, Asian Development Bank, Philippines; Masahiro Kawai, Dean and Chief Executive Offi cer (CEO) of the ADBI; and Rajat M. Nag, Managing Director General of the Asian Development Bank (ADB), is the second publication under the ADB and ADBI fl agship project Infrastructure and