Infrastructure development is critical to delivering growth, reducing poverty and addressing broader development goals, as argued in the World Bank Report Transformation through Infrastructure (2012). This paper surveys the literature of the linkages between infrastructure investment and economic growth, discusses the role of infrastructure in the participation of global value chains and in supporting economic upgrades, highlights the challenges faced the least developed countries and provides policy recommendations. It suggests that addressing the bottlenecks in infrastructure is a necessary condition to provide a window of opportunity for an economy to develop following its comparative advantage. With the right conditions, good infrastructure can support an economy, particularly a less developed economy, to reap the benefit through the participation in the global value chains to upgrade the economic structure.

Infrastructure development is critical for sustaining Asia’s economic growth. Unfortunately, huge financing gaps—estimated by a recent Asian Development Bank study to be USD22.5 trillion—constrain the ability of most emerging Asian countries to fully realize the benefits of infrastructure development. For instance, over 70% of infrastructure investments in Asia are still funded by public resources, which pose acute financing challenges for many countries with limited budgets and fiscal constraints. This paper discusses some of the challenges associated with public financing of infrastructure projects in emerging Asian countries, before introducing some new options for alleviating their infrastructure investment needs. In particular, it proposes a new approach to infrastructure financing by utilizing the spillover effects of infrastructure investment, where additional revenues generated from such investment can be channeled back to investors as subsidy to increase the returns to their investment. The paper also argues the need for Asian countries to implement fiscal reforms and to develop a more balanced approach to financing, one that involves both the private and public sector.