The Way to Finance Needed Infrastructure Investments in Asian by Inviting Private Investors

Naoyuki Yoshino () and Saloni Lakhia
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Saloni Lakhia: United Nations Institute for Training and Research (UNITAR)

A chapter in Studies in International Economics and Finance, 2022, pp 411-436 from Springer

Abstract: Abstract Due to Covid-19, many governments spent huge amounts of money on medical care, health, sanitation and vaccination. Fiscal budget for infrastructure investment is squeezed. However, infrastructure is an engine of growth in many Asian countries. This chapter will address how to bring private sector funds into infrastructure investment. This would be achieved by using a floating-interest-rate infrastructure bond. In this, the interest of a government bond is paid to investors during the period of construction and the early period of operation. Traditionally, infrastructure investors relied on user charges for their revenues. Users of infrastructure prefer a lower price, whereas investors and operators in infrastructure prefer a higher price, which causes conflicts between them. Electricity, water supply, sanitation, etc. are necessary goods. In order for them to properly be used by low-income groups, the prices of these necessities must be kept low. This is one of the reasons why public–private partnership (PPP) did not work well in Asia. It is important to find other sources of revenue while keeping user charges low. Major aim of infrastructure is to bring businesses to the region and establish connectivity between rural and urban regions. This will enable farmers and fishermen to sell their fresh products in a shorter span of time. Income disparities will be mitigated as new businesses can hire people in the region. New restaurants can be started along roads, railways and expressways. Economic activities and spill-over tax revenues will increase. Earlier all the spill-over tax revenues were collected and were not returned to investors and operators. If these spill-over tax revenues were partly, say 50%, returned to investors and operators of infrastructure, the revenues would come in every year without raising user charges. An increase in rate of return will attract private investors and maintenance costs of infrastructure can be covered. The regional infrastructure floating bond market will accelerate cross-border investment into infrastructure projects. The chapter will also address how to smoothen land acquisition by the land trust mechanism in Asian region which aids in the prevention of corruption associated with land acquisition. This chapter will address global taxation adjusted by green efforts, which will encourage environmental friendly infrastructure investment in Asia.

Keywords: Infrastructure needs; Finance for infrastructure investment; Spill-over effect; Public–private partnership; Regional infrastructure floating bond (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-16-7062-6_22

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DOI: 10.1007/978-981-16-7062-6_22

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