Infrastructure Deficit
ASEAN countries have invested heavily in building infrastructure, improving connectivity and utilities considerably. However, large gaps remain, and population growth and urbanization put additional pressure on current capacity.
Infrastructure (including both transport and utilities) boosts competitiveness and inclusiveness by increasing efficiency gains from trade and specialization, reducing transaction costs, access to markets and providing opportunities to people to reach better job and better goods and services.
Although infrastructure capacity has improved tremendously in several ASEAN countries, large gaps persist. In Indonesia alone, congested ports and connectivity bottlenecks have incurred logistics cost of about 24% of GDP.
Infrastructure improvements are needed for connecting people to markets. While ports are central for Indonesia, Malaysia and the Philippines; land transportation is lagging across the board in ASEAN.
The railroad system of any country in ASEAN (with the exception of Singapore) is at least five times less developed than Japan; the road network is at least 30% less capillary than Japan. Utilities also require significant investments as there is still no universal access to these services. In 2013, still 120 million people did not have access to electricity.
To close these gaps very large investments are needed. In transport infrastructures alone, beyond the projects in the pipeline, 250 billion dollars have to be invested to build roads and railroads, 228 billion are needed in power generation and distribution, 26 billion in water and sanitation.
Looking forward, the challenge for ASEAN infrastructure is not only to close its current capacity gaps, but also to prepare for an increase in demand for transport, electricity and water services as the economies develop. ASEAN will be the world’s 3rd most populous economy by 2020 and urbanization is on the rise. Between 1950 and 2011, the proportion of people living in urban areas rose from 10 % to 44.7% and by 2050 it is expected to reach 58.3 %.
Integration can help achieve efficiency in infrastructure services supply. For example, Lao’s hydropower is supplying substantial electricity to neighbouring countries, and could expand capacity to provide power to meet increasing demand.
