The Hindu Business Line : `India can play lead role in evolving new funding body'

New Delhi March 21 India could take a leadership role in evolving a new entity for financing massive infrastructure projects in the Asian region, just as Japan played a crucial role in the birth of Asian Development Bank (ADB) in the 1960s, the visiting Executive Secretary of UNESCAP (United Nations Economic and Social Commission for Asia and the Pacific), Mr Kim Hak-Su, said here today.

In an interview to Business Line, Mr Kim said that before the advent of ADB, it was opposed by the US but Japan took the leadership. Similarly, the ESCAP-member driven idea of instituting a regional funding mechanism through the creation of a new entity might face opposition but this could be feasible, if the 61 members of ESCAP form an inter- governmental committee as a next step.

New Entity

Just as the Asian Highway and Trans Asian Railway agreement adopted by ESCAP in 2004 and 2006 respectively, the new entity for regional infrastructure financing could be adopted in the form of an ESCAP resolution. If India could propose and others co-sponsor, a new entity could be established. He said that compared to the requirement of $200 billion infrastructure investment through this new entity, other multilateral institutions, including World Bank, ADB and Japan Bank for International Co-operation (JBIC) annual commitment altogether at only $8 billion would be too little to have any effect. Meanwhile, infrastructure deficit is very large and growing in South Asia, he added.

Viable Projects

Mr Kim said that he has discussed this new funding body with the ADB President, the US and Japan but they are not willing to upscale the operations of the ADB to such a massive level. Moreover, he said, loan process of the World Bank/ADB are very long, stretching to three years even as these institutions are complaining of lack of viable projects from the members.

Hence the high-level policy dialogue that has taken place here today has proposed the new entity for infrastructure funding in the Asian region.

He said that the existing multilateral bodies looked at only East Asia, excluding South Asia and the investment requirements in this region depend on "what kind of quality infrastructure we need to upgrade". He said that infrastructure investment which was 6 per cent of India's GDP once has declined to 3 to 4 per cent of GDP now and "what this means is infrastructure is becoming the bottleneck."

Catalyst Role

The other option, he said, is that Asia has a lot of savings and there was not enough financial intermediation at sub-regional level. So ESCAP is playing "a catalyst role in establishing a new entity for infrastructure investment". He said that the Asia-Pacific region would require a large amount of financial resources and the UNESCAP study found that the region would require over $600 billion a year to upgrade its infrastructure, including cross-border infrastructure such as Asian Highway, Trans Asian Railway and Asian Gas Grid. He said that while these investments are huge, the latest study executed on behalf of ESCAP by the Research and Information System of developing countries indicates that an additional investment of over $200 billion annually is needed for achieving these levels.

Infrastructure Funding

He said that land-locked countries in the Asia and the Pacific region got excited as they see great opportunity to be linked to the outside world once the infrastructure funding institution is in place.

He said big countries like India and Indonesia have also ambitious plans to undertake massive infrastructure projects through innovative financing in this regard. Mr Kim said that he would come back to India next month to release the annual survey of ESCAP2007 to coincide with the sixtieth anniversary of the organisation in which India has been the founder member along with China, Thailand and the Philippines in 1947.

More Stories on : Interview | Infrastructure

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page