Wednesday, 30 September 2009

Study: RP to gain $224.1B if infra gaps addressed

Cai Ordinario
Business Mirror

IF the Philippines will be able to address its infrastructure gaps in transportation, communication and energy, the country stands to gain some $224.1 billion in net income from 2010 to 2020 and beyond, according to a study.

A joint study of the Asian Development Bank (ADB) and the Asian Development Bank Institute (ADBI), titled “Infrastructure for a Seamless Asia,” showed that the Philippines’ gains for transportation alone is estimated at P199.7 billion, while gains for transportation and communications amount to $199.1 billion, and gains from transportation, communications and energy will amount to $224.1 billion.

From 2010 to 2020, the Philippines stands to gain $70.4 billion in transportation; around $69.8 billion in transportation and communications and $77.9 billion in transportation, communication and energy.

For 2020 and beyond, gains for the Philippines will amount to $129.2 billion in transportation; $129.3 billion in transportation and communications and $146.2 billion in transportation, communications, and energy.

“Southeast Asian countries could be significant winners, mainly due to their high dependence on trade and large infrastructure requirements,” the study said.

“The total gains of Indonesia [$1,280 billion], Malaysia [$830 billion], Philippines [$220 billion], Thailand [$1,240 billion] and Vietnam [$400 billion] would be $3,970 billion, higher than both the PRC and India, thanks to improvements in pan-Asian connections,” it added.

Developing Asia as a whole would reap net income gains of $7,840 billion from the expanded regional transport infrastructure; $11,240 billion from the investments in both transport and communications; and $12,980 billion from the investments in transport, communications and energy.

The annual gains, the study stated, would vary from $80 billion in 2011 to $370 billion in 2015 and $900 billion in 2020. On average, annual gains in the second half or 2016-2020, around $670 billion per year, are much larger than in the first half or the years 2011-2015, about $210 billion a year. “The higher growth rate after 2016 can be explained by the effects of cumulative infrastructure investments made during the first half. This trend is visible in every country in the analysis,” the study stated.

However, the report stated that large benefits after 2020 will decline over time with the depreciation of infrastructure stock. This is due to the absence of new or replacement investments taking place.

The report also stated that the accumulated reduction in trade costs resulting from infrastructure investments in 2010 to 2020 as a percentage of trade value for the Philippines is 15.6 percent for transportation alone. “Regional infrastructure projects can boost growth and income, reduce poverty and improve household welfare. Regional energy projects can also benefit the environment by reducing carbon emissions,” the report stated. “The benefits of regional projects often spill over across countries in the region and beyond, illustrating the substantial and positive impact of creating regional infrastructure networks,” it added.

Between 2010 and 2020, Asia will need to invest $8 trillion in overall national infrastructure for energy, transport, telecommunications, water and sanitation, and $290 billion.

The Philippines is one of the economies threatened by the serious implications of not addressing infrastructure gaps. The report stated that the Philippines was one of several developing Asian economies whose infrastructure programs were among the first to be cut.

The report stated that Asia should heed the lessons of the crisis of 1997–1998. At that time, public and private infrastructure investments were substantially reduced in many Asian economies, where in many cases they were already too low.

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