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Many economic analysts believe that extensive investment in infrastructure projects is one of the main causes of the region's current economic problems. However, infrastructure development remains a key feature in Asia. This is particularly the case in Hong Kong, where a large amount of land has been reclaimed. Extensive infrastructure work, including Kuala Lumpur International Airport, has also taken place in Malaysia. Asian governments regard infrastructure spending as a way to fight rising unemployment and boost the spending power of consumers.

Infrastructure supply has not kept up with the fast pace of economic growth in many ASEAN countries. Infrastructure shortages are quite severe in some countries and may threaten future growth prospects. In response, countries are investing in infrastructure at an unprecedented scale an overwhelming majority of the projects are being built and operated by the private sector. This surge in investment and the massive capital requirements are also contributing to the development of capital markets as project sponsors continue to seek non-traditional sources of finance. This paper reviews the infrastructure needs of ASEAN countries and examines the strategies used in attempting to meet the shortage. (Reprinted by permission of the publisher.), I. Introduction Development economists have long been aware of the role of infrastructure in fostering economic growth. There has been a revival of interest in this issue since Aschauer (1989) [...]

Asian countries turned extensively towards private investors to help fund urgently required infrastructure developments in the late 1980s and early 1990s. However, they are now beginning to realise that private investors are making excessive demands in terms of return on investment and control. Private investors are also becoming disillusioned as they see large infrastructure schemes being exploited by nationalistic opposition politicians as a way of attacking the government.

East Asian countries are competing frantically to create and implement plans for building infrastructure after decades of underinvesting in that sector. Complicating factors include the shortage of people to coordinate efforts, disruptions to existing services, bureaucratic delays, and overly ambitious projects and schedules. Nevertheless, the region will probably dominate the global market for telephone, water, electricity, and road building facilities through 2010.

Infrastructure projects throughout developing Asia lag due to problems with bureaucracy and financing, though some signs show companies have figured out the new environment. Fierce competition has driven down the potential returns on many build-operate-transfer and public-private projects making the final agreement harder to reach and leading to post-agreement changes. Most of the projects in existence in May 1995 were on paper only. To keep up the torrid pace of economic and population growth, more must take solid form.

The financial crisis in Asia has affected several huge infrastructure projects such as mega-power plants, super-highways and high-tech telecommunication networks in the region. The projected demand for new infrastructure in Asia for the period from 1999 to 2008 is expected to drop by 25% to 33%. Several of the mega-projects will be restructured, set aside or cancelled due to lack of capital flows in the region., East Asia's great infrastructure building boom featuring mega-power projects to underpin highly charged economic growth, prestige super-highways to match vaulting regional development ambitions and state-of-the-art telecommunications networks appears to be [...]

The construction industry in Indonesia, South Korea, Malaysia and Thailand has been affected by financial crises in those countries. Public-sector infrastructure projects are likely to be reassessed as a result of the crisis. Private sector construction projects have been halted by the crisis, but basic infrastructure is less affected than residential projects. Hong Kong and Vietnam have been affected, though not as severely as the main countries hit by the crisis. The World Bank and other international institutions could help to provide security for infrastructure projects that are privately funded.

It became increasingly common in the 1980s for Asian governments to call on private companies to undertake a wide range of infrastructure schemes on a build-operate-transfer basis. This was regarded as an ideal way of obtaining new infrastructure without having to use government funds. However, it has become clear that putting such schemes into practice brings a number of serious problems. Across Asia, many build-operate-transfer schemes are still only at the planning stage, with governments and companies unable to agree on details.

Technical and economic developments are making professional work on Asian infrastructure projects more flexible, often saving money while satisfying political concerns. Engineers designing Bangkok's elevated train and road system work in Putney, a suburb of London, England, and send their work via computer networks. Expatriates are needed less as the local expertise rises in Asia and more work can be done off-site. Shortages of skilled workers persist in Asia, though, especially in safety and environmental work.

Infrastructure spending, that on highways, power/utilities, telecommunications, will stabilize recovery in Asia and be especially important in China. Asian countries, according to the Political and Economics Risk Consultancy (PERC), neglected financial aspects of infrastructure and relied on foreign investment in the past, assuming stable exchange rates would prevail. Domestic capital was used on such things as commercial and residential projects inflating asset values. Investment is to be more balanced from 1998 on.

Infrastructure Fund Canadian Foreign Affairs Minister Lloyd Axworthy recently welcomed the establishment of a U.S. $400 million Asia Equity Infrastructure Fund. The Asia Equity Infrastructure Fund will invest in infrastructure [...]

Asian infrastructure projects have attracted little US money, and foreign investors that have invested in such projects are not likely to want to publicize the fact, given the region's economic troubles. Not counting local governments, institutional investors have contributed an estimated $5 billion to Asian infrastructure projects.

The current currency crisis in Asian economies such as Thailand could have a positive impact on the infrastructure industry by boosting development of capital markets and promoting a re-analysis of public-private partnerships. Risks are being reassessed in the light of the devaluation of currencies, so for a time projects could have difficulties attracting investors., The devaluation of Asian currencies has cast a cloud over projects in that region. But developers and financiers are all the wiser going forward. When the Electricity Generating Authority of [...]

Difficulties in 1997 are beginning to influence Asian economies. Power, telecommunications, transportation, water and sanitation sectors will need to be built or modernized in South Korea, Indonesia, Thailand and China. It will cost China hundreds of billions of U.S. dollars just to satisfy and meet projected growth. In addition to infrastructure, their concentration in electronics could prove devastating with a slump in the price of semiconductors.

The World Infrastructure Forum-Asia 96 from Oct 28 to 31 was held in conjunction with the UNESCAP Ministerial Conference in New Delhi, India. Delegates at the forum concentrated on infrastructure requirements and policies needed to attract investment. They contend that unless private and public sectors work together, infrastructure development which will cost an estimated $1.5 tril is not possible.

Infrastructure limitations will prevent most Asian homes from taking full advantage of the information-intensive products now becoming available. Wide- screen high-resolution televisions, video telephones, and other equipment can only operate seamlessly with broadband access of 1.5 megabits per second or more. Even Integrated Services Digital Networks, available only in some countries, is far too slow. A related story discusses Acer's decision to build a huge new facility at Subic Bay, marking a distinct change in strategy.

It has become increasingly common for large public infrastructure and utilities schemes in Asia to be undertaken on a build/operate/transfer (BOT) basis. Such an approach can bring a number of risks, but it is possible to take steps to reduce these. Major risks include currency and foreign exchange and interest rate and inflation risks. The contract should also include provisions dealing with the possibility of a natural disaster, such as a flood or earthquake.

The dramatic changes taking place in the infrastructure and the economies of the countries throughout Asia and its side of the Pacific Rim are unimaginable. Much has been done in [...]

POWER cuts in Manila, traffic jams in Bangkok and clogged phone lines in Kuala Lumpur may create frustration for consumers; but for many companies around the world, they spell opportunity. [...]