ADBI series on Asian Economic Integration and Cooperation
Edited by Biswa Nath Bhattacharyay, Masahiro Kawai and Rajat M. Nag
Chapter 11: Foreign direct investment in financing regional infrastructure
There is a growing need to invest in infrastructure projects in the Asia and Pacific region, as discussed in previous chapters. However, there is a big gap in the ability to finance all the infrastructure needs of the region. Consequently, it has long been suggested that the private sector has to be brought in as a financial partner. A large part of private sector investment in infrastructure in the developing world consists of foreign investment. For example, in 2003, one estimate showed that international investment in infrastructure in East Asia and the Pacific formed 3.4 percent of the gross domestic capital. At the same time, because of the increasing integration of the Asian economies through the widening of the regional and global production network, there is also an increasing need to invest in regional infrastructure projects. These projects are expected to be more complex in many dimensions and they are often larger in scale. The need to have foreign investment in regional infrastructure projects may be even more acute. In addition, foreign direct investment (FDI) in infrastructure can bring in not only capital, but also technology and management skills. There is a scarcity of literature on the economic issues related to infrastructure development in emerging countries.
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