Presentation of the Oecd Report Growing Unequal Income Dot Dot Dot by lbt96193

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									East Asia Infrastructure: Emerging Issues
Brisbane Asia Pacific Summit: September 1-3, 2007
      Christian Delvoie. Director, Sustainable Development
           East Asia and Pacific Region, The World Bank




                                                             1
          East Asia Infrastructure: An Evolving
                      Environment
•   The growth story. East Asia has seen
     – Strong growth and significant progress in poverty reduction, supported by clear
       focus on infrastructure investments
     – Rapid urbanization and rising incomes
     – Increasing regional integration

•   The development issues. At the same time, EAP is witnessing
     – Growing inequality
     – Rural-urban and Coastal-inland divide
     – Unequal access to infrastructure services
     – New governance models, with increased decentralization
     – Increasing pressures on natural resources and the environment

•   Financing. Large needs but global financing is not the binding constraint
•   Involving the need for a new sustainable development model

                                                                                         2
         Strong aggregate growth, supporting impressive
                        poverty reduction
                                  250 million lifted out of poverty in the last 5 years
   Average annual growth (%), 1994-2005

                                                             60
 10.0
                                                                                             Thailand            Malaysia
                                                             30
  8.0
            Population weighted average 7.7                   0




                                                                   1990



                                                                               1994



                                                                                                  1997




                                                                                                                1999



                                                                                                                               2001



                                                                                                                                             2003



                                                                                                                                                    2005
  6.0


  4.0
                                                             85
                                                                                                    Vie tnam             China
  2.0                                                        55

                                                             25
                                                                                      Indonesia




                                                                    1990




                                                                                      1994




                                                                                                         1999




                                                                                                                        2001




                                                                                                                                      2003




                                                                                                                                                    2005
  0.0
                               K irib ati
                       T im or -Les te




                             Va nua tu




                           Indo ne s ia
         M i c ro nes ia, F ed . S ts .
                 M ar s ha ll Is lan ds
                 S olo m o n Is lan ds




                                    F iji




                            Lao PD R

                             Vi etna m
                            M o ngo lia


                               T on ga

                              S am oa

                                Pal au
                            T h aila nd




                          C am bod ia

                                C hi na
                        P hilip pin es
           P ap ua N ew G uin ea




                           M a lay s ia




  -2.0
                                                             85
                                                                                                  Lao PDR
  -4.0                                                       55

                                                             25
  -6.0                                                                                                                 Cambodia
                                                                   1990



                                                                               1994



                                                                                                  1997



                                                                                                                1999



                                                                                                                               2001



                                                                                                                                         2003



                                                                                                                                                    2005
Source: World Development Indic ators, 2005                   Source: Source: Connecting East Asia: A New Framework for Infrastructure, The
                                                                    World Bank                                                            3
  Urbanization as a new driver for productivity and
                   infrastructure

                        … in 20 years, East Asia will be an urban region

      Urban population (% total population)                                       Growth in number of cities over one million inhabitants

100
                                                                                   180                 40% increase
                                                                                                       in number of
                                                                                   160                  large cities
                                                 500 million more
                                                 people move into                  140
75
                                                 Asian cities
                                                                                   120
                                                                           2025
                                                                                   100
50
                                                                    2000
                                                                                    80

                                                                                    60
                                                           1980
25                                                 1960                             40

                                                                                    20

 0                                                                                   0
       SSA     SA     M ENA    L AC    OECD                       EAP                           2000              2005              2010        2015

 Source: World Development Indic ators; Unit ed Natio ns World Urbaniz ation             Source: United Nations World Urbanizatio n Prospects
       Prospects
                                                                                                                                                       4
                     Increased regional interdependence
         East Asian development model has been based on global and regional
         integration
 Interdependence of auto-manufacturing in ASEAN                                 Emerging East Asia (China, ASEAN, newly industrializing
                                                                                economies, Mongolia), share of world exports (%)

                                                                               20.0




                                                                               15.0
                                                                                                                                       Intra-regional exports
                                                                                                                                       increase from 32
                                                                                                                                       percent to 41 % of EAP
                                                                                                                                               trade
                                                                               10.0




                                                                                5.0




                                                                                0.0
                                                                                      1990

                                                                                             1991

                                                                                                    1992

                                                                                                           1993

                                                                                                                  1994

                                                                                                                         1995

                                                                                                                                1996

                                                                                                                                        1997

                                                                                                                                               1998

                                                                                                                                                      1999

                                                                                                                                                             2000

                                                                                                                                                                    2001

                                                                                                                                                                           2002

                                                                                                                                                                                  2003
                                                                                                                                                                                  5
Source: Nomura Research Institute, Reprinted in Connecting East Asia : A New      Source: IMF, Direction of Trade Statis tics
Framework for Infrastructure, The World Bank
                             Inequality – A contrasted picture…
           Poor provinces in the hinterland, but concentration of the poor along the coast
                      Making the next challenge one of domestic integration
  Percentage population living below $2 / day (by region)                            Percentage population living below $2 / day (each dot = 50 000 people)




                                                            % of population living
                                                          below PPP$2/day in 2002
                                                           20% 40% 60% 80%




                                                                                                                                                              6
Source: Poverty Reduction and Economic Management Unit, The World Bank, 2004         Source: Poverty Reduction and Economic Management Unit, The World Bank, 2004
                                                                                                                                        0
                                                                                                                                             25
                                                                                                                                                       50
                                                                                                                                                             75
                                                                                                                                                                                                                                       0
                                                                                                                                                                                                                                           25
                                                                                                                                                                                                                                                50
                                                                                                                                                                                                                                                     75
                                                                                                                                                                                                                                                          100
                                                                                                                        Myanmar
                                                                                                                                                                                                                             PNG
                                                                                                                             PNG
                                                                                                                                                                                                                      Cambodia
                                                                                                                         Solomon
                                                                                                                        Lao PDR                                                                                          Vietnam
                                                                                                                        Cambodia                                                                                       Lao PDR
                                                                                                                          Kiribati                                                                                      Mongolia
                                                                                                                                                                                                                                                                Water supply access (%)


                                                                                                                         Vanuatu
                                                                                                                                                                                                                        Solomon
                                                                                                                           Vietnam
                                                                                                                           Marshall                                                                                    Myanmar
                                                                                                                         Indonesia                                                                                          China
                                                                                                                            Samoa                                                                                      Indonesia
                                                                                                                            Tonga
                                                                                                                                                                                                                            Palau
                                                                                                                        Micronesia
                                                                                                                                                                                                                      Philippines
                                                                                                                          Mongolia




                                                                                                                                                                   Telephone access (subscribers / 100 inhabitants)
                                                                                                                                F iji                                                                                    Vanuatu
                                                                                                                        Philippines                                                                                     Malaysia
                                                                                                                              Palau
                                                                                                                                                                                                                        T hailand
                                                                                                                              China
                                                                                                                                                                                                                          Samoa
                                                                                                                         T hailand
                                                                                                                         Malaysia                                                                                          Tonga




                                                                                                                                        0
                                                                                                                                            25
                                                                                                                                                  50
                                                                                                                                                        75
                                                                                                                                                             100
                                                                                                                                                                                                                                       0
                                                                                                                                                                                                                                           25
                                                                                                                                                                                                                                                50
                                                                                                                                                                                                                                                     75
                                                                                                                                                                                                                                                          100
                                                                                                                                                                                                                                                                                                                              average)




                                                                                                                          Solomon                                                                                      Myanmar
                                                                                                                                                                                                                        Solomon
                                                                                                                        Cambodia
                                                                                                                                                                                                                      Cambodia
                                                                                                                              PNG
                                                                                                                                                                                                                            Timor
                                                                                                                         Mongolia                                                                                        Vanuatu
                                                                                                                                                                                                                                                                Electricity access (%)




Source: World Development Indic ators; IEA; Connecting East Asia : A New Framework for Infrastructure, The World Bank
                                                                                                                         Lao PDR                                                                                           Kiribati
                                                                                                                                                                   Percentage paved roads




                                                                                                                        Micronesia                                                                                      Lao PDR
                                                                                                                                                                                                                      Micronesia
                                                                                                                        Philippines
                                                                                                                                                                                                                             PNG
                                                                                                                          Vanuatu                                                                                      Indonesia
                                                                                                                           Vietnam                                                                                          Palau
                                                                                                                            Tonga                                                                                     Philippines
                                                                                                                                                                                                                               F iji
                                                                                                                             Timor
                                                                                                                                                                                                                         Vietnam
                                                                                                                                 Fiji                                                                                   T hailand
                                                                                                                        Indonesia                                                                                          Tonga
                                                                                                                         Malaysia                                                                                       Mongolia
                                                                                                                                                                                                                          Samoa
                                                                                                                            Samoa
                                                                                                                                                                                                                        Malaysia
                                                                                                                             China
                                                                                                                                                                                                                            China
                                                                                                                                                                                                                                                                                          Service Access (Bars in blue = outcomes above low and middle income country




                                                                                                                          Thailand                                                                                       Marshall
                                                                                                          7
                                                                                                                                                                                                                                                                                                                                                                        …with significant variation in infrastructure service access
              The governance challenge
              A host of new actors are coming to the fore…

                                   Corruption Perception Index 2004

Key issues:
                                              Myanmar
                                             Indonesia
                                               Vie tn am
• Democratization                           Philip pines
                                    Papua New Guinea
• Increased complexity in                     Mongolia
                                                  China
  service delivery                            Thailand
                                              S. Korea

• Corruption                                  Malaysia
                                                 Japan
                                            Sin gapore
• Decentralization                                         0           2             4             6             8       10

                                      Source: Transparency International
                                      Note: The CPI score ranges between 10 (hig hly clean) to 0 (highly corrupt).


                                                                                                                     8
         …with increased decentralization as a key trend

Key challenges:                  Expenditure decentralization – sub-national expenditure (% total
                                 national expenditure)


                                 A ll dev eloping countries (1990s)

• Fragmentation                    All transition countries (1990s)
                                                     China (2002)

• The missing middle                              Vietnam (2002)
                                                 I ndonesia (2002)

• Implementation of                             Philippines (2002)


  integrated vision                               Thailand (2001)
                                                     India (1990s)


• Capacity & leadership at                        Russia (1990s)
                                                 Pakistan (1990s)
  local level
                                        OECD countries (1990s)
• Unclear regulation                               Japan (1990s)

  frameworks                                        USA (1990s)
                                                Germany (1990s)

                                                                      0   10   20   30   40   50     60     70


                                  Source: East Asia Decentralizes—Makin g Local Government Work, The World Bank



                                                                                                              9
                                                 Increasing pressure on natural resources and the
                                                                   environment

                                              Business as usual will result in doubling energy consumption by 2020

                                                                                                                                   Projected no. of automobiles, China
                                                      China's momentous energy demand growth                                       2000 - 2020
                                                         40-year periods of primary energy growth
                                         3,500
                                                                                                 China 1980-2020                                                                                         90
                                                                                                Business As Usual
 M illion tons coal equivalent (M tce)




                                                                                                                                      P ro jec te d n o . o f au t o m o b i le s (i n m i ll i o n s)
                                         3,000
                                                                        USA 1950-1990
                                                                                                                                                                                                         80
                                                     OECD Europe                                                                                                                                         70
                                         2,500        1965-2003
                                                                                                                                                                                                         60
                                         2,000                                                                                                                                                           50
                                                                                                                    China 1980-                                                                          40
                                         1,500                                                                      2020 (Green
                                                                                                                                                                                                         30
                                                                                                                      Growth)
                                         1,000                                               Japan 1958-1998                                                                                             20
                                                                                                                                                                                                         10
                                          500
                                                                                                                                                                                                          0
                                          -


                                                                                                                                                                                                            00
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                                                 0          5      10       15          20         25          30    35       40
S o urc es : B P S tatis tical R eview o f Wo rld Ene rgy 200 4,
G o vt o f J ap an, D RC C hin a, US D ept o f Ene rgy                             Years
                                                                                                                                     Source: International Energy Agency, 2005; World Bank Staff Estimates
                   Source: East Asia Energy Unit, The World Bank

                                                                                                                                                                                                              10
  Water quality in the Philippines                                              Decreasing Forest Cover in Cambodia
                                                                                       Between 1989 (top) and 2000 (bottom)




                                                                                                                                                           11
Source: Philippines Environment Monitor 2003: Water Quality                              Source: Cambodia Environment Monitor 2003: General Environment
Note: Red/pink spots are unsatisfactory, yellow are marginal, green are satisfactory     Note: Forested areas are green and agricultural areas are pink.
               With severe negative consequences on …
              …air   quality                    and climate change

    PM Concentrations (ug/m3)              Countries’ and Country Groups’ Share in Global GHG
                                           Emissions, 2000




Source: ERI


                                             • EAP accounts for 18% of the world
•     Of the 30 most air-polluted cities
                                             total greenhouse gas (GHG) emissions,
      in the world, 20 are in China          with China alone contributing 15%. 12
     East Asia’s infrastructure needs are large and
     increasing…

        East Asia, estimated infrastructure expenditure, actual and projected, 1996 – 2010 ($ billion / year)
                                                                                                     all, excluding China
                                                    $165* bil                         rail
      180
                                  $147 bil
      160
                                                                    water and sanitation                                         Maintenance
      140      $123 bil                                                        telecoms
      120

                                                                                  roads
      100

       80                                                                                                              China
                                                                                                                                    Investment

       60
                                                                              ele ctricity
       40

       20

        0
               1996-2000          2001-2005          2006-2010                               by s ec tor            by country   by economic
                                                                                                                                 c lass ification

•Based on econometric simulations consistent with projected regional growth, and efficiency prices. Due to data limitations, the simulation excludes a
number of key infrastructure services, notably ports and airports, and all but major roads.
•Source: Connecting East Asia, A New Framework for Infrastructure, ADB/JBIC/World Bank Report, 2005
                                                                                                                                                    13
   At the macro level, financing is not a constraint
   in East Asia …

Selected macroeconomic indicators
(US$ billion)

                    Foreign exchange               Current a/c                Gross domestic
                        Reserves                    Surplus                      savings
                          2007                        2006                         2005        In June 2007, China’s
 China                      1333                        160*                      1096
                                                                                               foreign-exchange reserves
 Japan                       893                        170                       1094**       had reached US$1.3trn
 S. Korea                    250                        6.09                       257         Source: IMF Internatio nal Financia l Statis tics database


 Malaysia                     91                       19.9*                       57


Source:
Foreign exchange reserves - IMF International Financial Statistics database
Current a/c surplus - World Economic Outlook database
Gross domestic savings - World Development Indicators
* Numbers for 2005
** Numbers for 2003


                                                                                                                                                            14
                    … supported by a virtuous cycle of savings,
                    investment and infrastructure expenditures
Savings and investment (% GDP)                          Infrastructure investment (% GDP)
1993-2002
                                                                       0-3%                      4-7%                          Over 7%

 Malay sia
                                                                  Cambodia                    Lao PDR                            China
     China

  Thailand                                                        Indonesia                   Mongolia                          Thailand
 Indonesia

  Vietnam
                                                                  Philippines                                                   Vietnam

Philippines

 Mongolia

  Vanuatu
                                                    Expansion of infrastructure stocks, 1990 – 2000
Cambodia
                                                    Total road network                               Electricity generation capacity
      EAP

    MENA                                              Vietnam                                           Vietnam
      ECA                                            Lao PDR                                               China
        SA                                              C hina                                          Thailand
      LAC                                           Philippines                                        Indonesia
      SSA                                            Indonesia                                         Lao PDR
                                                      Thailand                                        Philippines
              0                20              40
          Investment                     Savings                  0%          50%     100%                          0%   50%   100% 150%

Source: World Development Indic ators, 2004           Source: Connecting East Asia: A New Framework for Infrastructure, The World Bank     15
… but, infrastructure needs vary significantly across
                       countries

  Infrastructure financing needs over 2005-2015 in select EAP countries
                               (US$ billion)

                                Energy             Water           Transport              Total


          Vietnam                   32               7.2               14.3                 54


          Philippines               11               6.4                6.9*                24


          Indonesia                 25                8                  10                 43


          Mongolia                  1.7              1.4               0.89                  4


          Cambodia                                  0.3**               1.4*               1.7


          Source: World Bank Country Infrastructure Strategies; Cambodia: Enhancing Service Delivery
                  through Improved Resource Allo cation and Institutional Reform
          * Includes only road transport
          ** 88 Includes only urban water sector


                                                                                                       16
                              Infrastructure finance: Spotlight on Vietnam

                             Investment Needs                                                        Infrastructure Financing Sources
              8000                                                                                        8000
              7000                                                                                        7000
              6000                                                                                        6000
                                                                             Transport                                                   ?
US$ million




                                                                                                                                                          Private




                                                                                            US$ million
              5000                                                                                        5000
                                                                             Electricity                                                                  Users
              4000                                                                                        4000
                                                                             Telecoms                                                                     Government
              3000                                                           WSS                          3000                                            ODA
              2000                                                                                        2000
              1000                                                                                        1000
                   0                                                                                         0
                                2002                      2010
                                                                                                                 2002                   2010



                   •      Potential financing gap of around 5% of GDP by 2010
                          – If ODA stays at roughly the same level, and user tariffs and
                               government finance increase with GDP (7% growth)

               •       2010 “needs” based on: Sept 2005 Min of Transport MTEF;        •    2010 financing requirement based on: Total of sectoral investment
                       Financial model used by EVN; Target of 35 telecoms lines per        needs; ODA grows at 2% p.a. from 2002 level; Government and user
                       100 people by 2010; Targets of 85% access to urban water            payments grow at GDP growth rate (7%); Private sector provides the
                       and sanitation and 75% for rural water and sanitation               remainder                                                         17
               •       “Government” financing includes budget, government bonds &
                       State-Owned Commercial Banks
      Critical to make multiple sources of infrastructure
                     finance work together

     Private sector investment in infrastructure                  Public Sector – incl. budget funding,
                      ($ billion)                                 government bonds, State Owned
40                                                          120   Commercial Banks; but need to
                                   To all developing
                                   countries (right axis)         create fiscal space and incentive
35
                                                            100   framework for decentralized entities
30
                                                            80
25       To EAP (left axis)                                       International Donors – play a small
20                                                          60    financing role in most of the region,
                                                                  but provide catalytic role, leverage,
15
                                                            40    innovation and policy advice
10
                                                            20
 5                                                                Private Sector – great potential, but
 0                                                          0     cyclical; financing is available but
                                                                  regulatory frameworks still missing in
  90
  91
  92
  93
  94
  95
  96
  97
  98
  99
  00
  01
  02
  03
  04
  05
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20




                                                                  most countries
 Source: World Bank PPI Database

                                                                                                  18
    General Business Implications
Diverse region; diverse needs, but general trends:
•    High sustained growth
    – Sustained regional potential
    – Move from exports to domestic markets
    – Increased sophistication as revenues move up


•    Increased Regional integration
    –   Competitiveness and logistics
    –   Hard competitive environment: efficiency


                                                     19
•       Fast urbanization and decentralization
    –     Messy business and policy environment
    –     More demanding civil society (environment, corruption)
    –     Local champions
    –     Local knowledge and partnerships

•       Financing not binding constraint (at regional level)
    –     Value added and technology transfer
    –     Institutional development and management practices
    –     Diversified instruments
    –     Leverage

•       Increasing focus on balanced and sustainable growth
        and on climate change


                                                                   20

								
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