For developing Asia to maintain its growth momentum and eradicate poverty, the region needs to spend an estimated $22.6 trillion-$1.5 trillion annually (in 2015 prices) from 2016 to 2030-in transport, power, telecommunication, and urban water and sanitation. Factoring in climate mitigation and adaptation costs raises the investment requirement to $26.2 trillion-$1.7 trillion annually-or 5.9% of developing Asia's projected GDP in 2030 (ADB 2017b). The region invested $881 billion in infrastructure in 2015 (for 25 ADB developing member countries with sufficient data, comprising 96% of the region's population). This is well below the estimated $1.2 trillion (baseline) or $1.3 trillion (climate adjusted) annual investment needed during 2016-2020 for these countries to maintain their growth momentum and eradicate poverty.
Just over 90% of funding for infrastructure development in the region comes from public spending. ADB estimates that raising more public funds through improving tax administration or reorienting other budget expenditures could raise additional resources for infrastructure equivalent to 2% of GDP for 24 of its 25 developing member countries (that is, excluding the People's Republic of China). This would bridge 40% of the estimated investment gap during 2016-2020. For the private sector to fill the remaining 60%, it would have to increase investments to $250 billion a year over this period from an estimated $63 billion in 2015. Attracting investments at this level will require highly bankable projects that are perceived to present low or moderate risk to investors.
Indeed, mitigating the sizable risks associated with infrastructure investments in the region could go a long way toward attracting private capital to help fill the infrastructure gap. A PPP project allocates risks to the partners that can best manage them, thereby enabling the public sector partner to mobilize financing from private sources for public infrastructure. Mobilizing these financial resources, however, will require a coordinated effort by governments and private investors, which is the main challenge that policymakers face in attracting private capital to long-term infrastructure projects.