Asian Infrastructure Investment Bank: Role and Implications for Emerging Asian Economies
The global financial crisis provides a number of reasons for Asia to develop infrastructure for regional connectivity, to achieve sustainable economic growth, strengthen competitiveness, create opportunities for business and reduce overdependence on the f
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Asian Infrastructure Investment Bank: Role and Implications for Emerging Asian Economies Arindam Banik, Rajashri Chatterjee, and Tirthankar Nag Introduction The Asian-led recovery from the global financial crisis during 2007–09 has increased the significance of the Asian presence on the global front in recent times. The crisis provides a number of reasons to develop infrastructure for regional connectivity, achieve sustainable economic growth, strengthen competitiveness, create opportunities for business and reduce over-dependence on the financial resources of the West. Asia has long been trying to increase its investment in infrastructure and regional interconnectivity to enhance its international trade and foreign direct investment (FDI). The Asia-Pacific Region thus needs to remove all deficiencies that hinder infrastructural development, industrialization and economic integration. The demand for infrastructure is continuously on the rise in the emerging economies with growth in population and acceleration in urbanization. Rapid urbanization also leads to a change in climate which in turn calls for new infrastructure to deal with the consequences of c limate change. A. Banik (*) • R. Chatterjee • T. Nag International Management Institute-Kolkata, Kolkata, India © The Author(s) 2017 A. Banik et al. (eds.), Towards A Common Future, DOI 10.1007/978-981-10-5592-8_16
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It has been estimated that from now until 2030, at least $57 trillion will be needed to finance infrastructural development that is required across the world in terms of transport and logistics, telecommunications, energy and power, water and sanitation, etc. (Garemo et al. 2015). Infrastructural development in case of developed economies calls for the revamping of age-old infrastructure as a priority whereas new construction to support growth should be the priority of the emerging economies. The Asia-Pacific Region is expected to witness nearly 60 per cent of global infrastructure spending by 2025, largely driven by the growth of the People’s Republic of China.1 Spending in the emerging economies is expected to surpass that of the developed nations in future. Interestingly the World Economic Forum projects that every dollar spent on a capital project (utilities, energy, transport, telecommunication, etc.) produce an economic return of between 5 per cent and 25 per cent which will lead to the rapid development of these developing economies. Though billions of dollars of private capital is available for investment in the market, for some key sectors government finances are the key determining factor of future spending prospects. However, private investors may be called upon to participate in the so-called conventional public sector projects. Section “Backdrop of Asia Forming a New Bank” of this chapter explores the background behind Asia creating a new bank, section “Infrastructure Investment in the Asia-Pacific Region” examines the infrastructure investment climate with respect to select emerging countries in the Asia-Paci
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