Financing Infrastructure

Justin Lin () and Yan Wang

Chapter 10 in New Normal, New Technologies, New Financing, pp 114-129 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: The world is committed to achieving the 17 Sustainable Development Goals (SDGs) by 2030. Nearly 3 years since the onset of the coronavirus disease (COVID-19) pandemic and amid the ongoing war in Ukraine, the repercussions of both crises – disruptions to supply chains and regrouping of countries – are in evidence around the world. The fallout is exacerbating a large divergence in development due to the uneven recovery from the health crisis, looming stagflation, and the global climate crisis. In the longer term, the outlook for emerging market and developing countries (EMDCs) remains dampened by the lasting legacies of the pandemic – the erosion of skills from lost work and schooling, a sharp drop in investment, higher debt burdens, and greater financial vulnerability. Progress in achieving the SDGs has been derailed in many countries. Economic development is a process of structural transformation, and infrastructure is essential for facilitating this transformation. This paper attempts to address the issues of how to overcome inadequate financing for infrastructure and what resources and institutions should be relied on in the post-pandemic era. Section 1, drawing on the conceptual framework of new structural economics, highlights the importance of development starting at home, i.e., based on a country’s endowments and comparative advantages. Section 2 discusses the critical role of infrastructure for development. Section 3 addresses the challenges of building new and green infrastructure, new sources for infrastructure financing, multilateralism and coordination, the role of patient capital (or ultra-long-term capital), new national and development banks and funds, and new instruments such as real estate investment trusts (REITs). Section 4 concludes with proposals.

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