Fiscal Policy Coordination in Asia: East Asian Infrastructure Investment Fund

Mahani Zainal Abidin
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Mahani Zainal Abidin: Asian Development Bank Institute

Macroeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: East Asian countries were seriously affected by the 2008 global crisis through a steep fall in exports. This experience exposed the vulnerability of the East Asian growth model and emphasized the importance of generating regional growth by expanding domestic demand and enlarging intra-regional trade. A key factor to achieving higher regional economic growth and enlarging intra-regional trade is the better connectivity of infrastructure such as roads, ports, airports, and rail links. Although some East Asian countries have made large investments in improving their infrastructures, others still lag behind. In response to the global crisis, East Asian countries have allocated a significant proportion of their stimulus packages to infrastructure development. While these investments have improved national facilities, East Asian countries will only be well connected when there are good cross-border infrastructures in place. This requires a large amount of funding, and funds from both within and outside the region could be mobilized to fulfill these huge financing needs. Hence, an East Asian Infrastructure Investment Fund (EAIIF) is proposed to provide a mechanism to organize this funding and to be a platform for deciding on cross-border infrastructure projects. The EAIIF would be anchored to the existing Association of Southeast Asian Nations+3 mechanism with the leaders summit being the apex of the decision making process. A four-level mechanism is proposed, consisting of cooperation amongst political leadership; a steering committee and secretariat for executing the decisions of the leaders; fund mobilization; and the implementation and monitoring of projects. Projects chosen could be those with a high rate of commercial returns or those with the highest social benefits. The EAIIF would invite the private sector to participate by setting a framework for the sharing of risks between the public and private sectors. Likewise, there would also be a sharing of risks between countries.

Keywords: Fiscal Policy; East Asian Infrastructure Investment Fund; Growth; Southeast Asian Nations+3; economic growth (search for similar items in EconPapers)
JEL-codes: E61 E63 F15 F55 H40 H54 (search for similar items in EconPapers)
Date: 2010-01
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Citations: View citations in EconPapers (4)

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