Infrastructure

Comprehensive region-wide infrastructure development, especially to increase connectivity between nations, is key to achieving ASEAN’s objective of economic integration. Sitting between East Asia, South Asia and the southernmost countries of Southeast Asia, the Greater Mekong Subregion is vital to this plan.1

Definition

Infrastructure refers to the underlying physical facilities and structures that enable countries and regions to function. Here we include transport systems (roads, bridges, railways, seaports and airports), telecommunications, energy production and transmission, water and waste management.

Projects that improve, expand and create infrastructure are expected to improve competitiveness, stimulate investment, increase trade flows, and expand tourism.2 As these projects benefit the public and private sector, they may be financed and coordinated by the state, commercial entities or other bodies such as external donors.

The Reunification Express, Da Nang, Vietnam. Flickr, Pigalle, taken 14 October 2005. Licensed under CC BY-NC-SA 2.0.

The Reunification Express, Da Nang, Vietnam. Photo by Pigalle, Flickr taken 14 October 2005. Licensed under CC BY-NC-SA 2.0

The current state of infrastructure in the Lower Mekong

In the last two decades, the Lower Mekong countries—particularly Vietnam, Cambodia and Laos—have seen dramatic improvements to, and expansion of, their infrastructure, with the ADB reporting close to US$11 billion spent on priority infrastructure projects since 1992.3

Source: Asian Development Bank. Project Records (Status: Approved). Created by ODI December 2015. Licensed under CC BY-SA 4.0.

The World Economic Forum’s Global Competitiveness report for 2015-20164 gives some context for the state of infrastructure in the Lower Mekong. Thailand ranked highest out of the Lower Mekong nations on overall infrastructure indicators (covering transport, and electricity and telephony), while Myanmar ranked lowest. In fact, Thailand was the only Lower Mekong country not to fall in the bottom half of the 140-country ranking for infrastructure. Thailand’s transport infrastructure ranking of 34 out of 140 countries placed it with developed economies such as New Zealand and Luxembourg.5

From 2005 to 2015, 163 of the ADB’s 270 projects in Lower Mekong countries were for sectors related to infrastructure—Energy, Information and Communication Technology, Transport, Water and Other Urban Infrastructure. In addition, the World Bank shows 110 infrastructure-related projects in LM countries from 2005 to 2015,6 and the ASEAN Infrastructure Fund has approved three projects in Vietnam, Laos and Myanmar since 2013.7

Infrastructure development plans and financing

Initiated in 1992, the Greater Mekong Subregion Economic Cooperative Program describes an ambitious plan that includes significant upgrades to regional infrastructure, based on three strategic areas: increased competitiveness, improved cooperation, and enhanced community across the region.8 In 1998, an economic corridor approach to subregional development was adopted by member countries to further facilitate cooperation. The priority GMS economic corridors are the East-West Economic Corridor, the North-South Economic Corridor and the Southern Economic Corridor, each supported with plans for transport and power grid expansion.9

Overview of Greater Mekong Subregion transport corridors. Source: Greater Mekong Subregion Atlas of the Environment (2nd Edition). www.gms-eoc.org. Licensed under Creative Commons Attribution-Share Alike 4.0.

Overview of Greater Mekong Subregion transport corridors. Source: Greater Mekong Subregion Atlas of the Environment (2nd Edition). Licensed under CC-BY-SA-4.0.

The Master Plan for ASEAN Connectivity (MPAC),10 adopted in 2010, integrated this approach within a broader ASEAN-wide plan to improve connectivity by 2015, with a strong focus on infrastructure development. Having only achieved an estimated 65% of the plan, a post-2015 agenda was in discussion at the end of 2015. The plan is supported by the ASEAN Infrastructure Fund (AIF), which has US$485.3 million in equity commitments from its members. The AIF doesn’t aim to fully finance all infrastructure projects, however, instead “…mobilizing regional savings, including foreign exchange reserves. All AIF-financed projects are also co-financed by ADB.”11

While the ADB estimates that US$8.2 trillion is required to meet Asia’s total infrastructure needs between 2010 and 2020, together the five lower Mekong countries account for around 3.6 percent of these projections at US$29.9 billion. The most developed economy in the region (Thailand) is also estimated to have the largest need for infrastructure funding, and the majority of that (72 percent) for new infrastructure projects.12 Projects throughout the region may be financed and coordinated by individual countries, commercial entities, external donors, bi-lateral aid agencies or international organizations.

While the ADB has been driving connectivity and infrastructure development in the region since the formation of the GMS, in recent years Japan and China have become more involved in funding infrastructure projects. The first meeting of the Mekong-Japan summit in November 2009, bringing together the heads of state of all Lower Mekong countries with Japan’s Prime Minister, committed to further ODA spending from Japan in the region, with the first priority “further development of both hard and soft infrastructure.”13

In 2014 alone, China’s global overseas investment totalled US$119.6 billion, which included infrastructure projects in all lower Mekong countries, especially Cambodia, Laos and Myanmar, where China is now the top foreign investor. Much of this investment was supported by finance from the China Development Bank and Export-Import Bank of China.14 In addition, the new Asian Infrastructure Investment Bank (AIIB) proposed by China in 2014 and backed by 56 other countries,15 will soon be operational, with an initial capital of US$100 billion. This will support infrastructure development across the Asia region. All five Mekong countries are members of the AIIB. China has also established the Silk Road Fund, which is set to inject another US$40 billion specifically for infrastructure projects within the “One Belt One Road” route it has proposed.16

Challenges in infrastructure development

While infrastructure development is central to increasing trade and investment and expanding tourism, it may also be at odds with efforts to combat climate change and effectively manage environmental resources. The expansion of roads has enabled deforestation through illegal logging and migration, and is also related to land conversion as deforested areas are opened up and converted to agricultural projects or other purposes.

The expansion of power-generation facilities based on large hydropower dams and coal-fired power plants are also disruptive to local environments and communities, as well as contributing significantly to greenhouse gases. Indeed, despite statements to prioritize reusable and sustainable energy sources, the ADB highlights the region’s large fossil fuel reserves as an untapped resource.17

Major infrastructure projects, such as hydropower dams and railways may also displace large numbers of people. In one example, the ADB-funded Cambodian railway rehabilitation project stalled in 2013, to some extent due to the impact it had on up to 4,000 families, many of whom had to be relocated.18 People were still lodging claims against the ADB in late 2015 based on their displacement during the project.19

According to the ADB, 42.4 percent of the infrastructure funding needed by 2020 across the Lower Mekong is for maintenance of existing infrastructure. It can be imagined that building more infrastructure means more maintenance costs in the future, and it is unclear how this will be covered by the developing economies.

While some building standards exist within and across the Lower Mekong countries (for example the “Road and bridge design and construction standards and specifications” that are part of the Cross-Border Transport Agreement),20 how these standards are inspected and enforced nationally is unclear.

Neak Loeung bridge, Cambodia.

Neak Loeung bridge, Cambodia, part of the transport corridor between Phnom Penh and Ho Chi Minh City. Photo: Nesnad, WikiMedia Commons, 15 April 2015. Licensed under CC-BY-SA-2.0 Generic.

The GMS Cross-Border Transport Agreement—ratified in 2003—sets out the need to complement existing physical infrastructure with procedures and systems within each country to allow for the free flow of goods and transport throughout the region.21 Without each country addressing these internal processes in all infrastructure sectors, it is doubtful that they can achieve the goals of inclusive and sustainable economic and social growth.

Created by ODI 3 March 2015. Licensed under CC BY-SA 4.0.

While the ADB and most Lower Mekong governments have lauded the GMS Program’s infrastructure investment as reducing poverty levels, others argue that measuring economic and monetary gains does not tell the whole story. In particular, while indicators such as GDP per capita have increased, wage gaps and financial inequality have also increased, and some sectors of society are worse off now than in the past.22

Last updated 19 January 2016

References

  • 1. Asian Development Bank. “Overview of the Greater Mekong Subregion.” Accessed 15 December 2015. http://www.adb.org/countries/gms/overview
  • 2. KPMG International Cooperative. 2014. “An overview of infrastructure opportunities in ASEAN.” Accessed 3 November 2015. https://www.kpmg.com/SG/en/IssuesAndInsights/ArticlesPublications/Documents/Advisory-INFRA-ASEAN-An-overview-of-infrastructure-opportunities-in-ASEAN.pdf
  • 3. Asian Development Bank. “Overview of the Greater Mekong Subregion.” Accessed 15 December 2015. http://www.adb.org/countries/gms/overview
  • 4. The Global Competitiveness Index presents a set of indicators in three principal policy domains (pillars) and twelve sub-domains (sub-pillars) for 140 countries. The indicators are scored based on data and conversations collected from a number of government and non-government sources in each country. The goal of the index is to provide a comprehensive picture of the competitiveness landscape in countries at different stages of economic development.
  • 5. World Economic Forum. 2015. “The Global Competitiveness Report 2015–2016: Insight report.” Accessed 15 December 2015. http://reports.weforum.org/global-competitiveness-report-2015-2016/
  • 6. World Bank. “Projects and operations.” Search: Cambodia; Lao People’s Democratic Republic; Myanmar; Thailand; Vietnam; Rural services and infrastructure; Infrastructure services for private sector development; Pollution management and environmental health; Water resource management; Other urban development; 01/01/2005; 12/31/2015. Accessed 27 December 2015. http://www.worldbank.org/projects/search?lang=en&searchTerm=&regionname_exact=East%20Asia%20and%20Pacific
  • 7. Asian Development Bank. “ASEAN Infrastructure Fund Projects.” Accessed 28 December 2015. http://www.adb.org/site/aif/projects
  • 8. Asian Development Bank. “Greater Mekong Subregion economic cooperation program: Overview.” Accessed 14 December 2015. http://www.adb.org/publications/greater-mekong-subregion-economic-cooperation-program-overview
  • 9. Asian Development Bank. “Overview of the Greater Mekong Subregion.” Accessed 19 December 2015. http://www.adb.org/countries/gms/overview
  • 10. ASEAN. “Master plan for ASEAN connectivity.” Accessed 15 December 2015. http://www.asean.org/images/2012/publications/Master%20Plan%20on%20ASEAN%20Connectivity.pdf
  • 11. Asian Development Bank. “ASEAN Infrastructure Fund.” Accessed 15 December 2015. http://www.adb.org/site/aif/overview
  • 12. Bhattacharyay, B. 2010. “Estimating demand for infrastructure in energy, transport, telecommunications, water and sanitation in Asia and the Pacific: 2010-2020.” ADBI Working Paper 248. Accessed 19 June 2015. http://www.adb.org/sites/default/files/publication/156103/adbi-wp248.pdf. This study uses top-down and bottom-up estimates to provide an extensive estimate of the infrastructure required throughout Asia “in order to meet growing demands for services and facilitate further rapid growth in the region.”
  • 13. Ministry of Foreign Affairs Japan. “Tokyo declaration of the first meeting between the heads of the governments of Japan and the Mekong region countries.” Accessed 16 December 2015. http://www.mofa.go.jp/region/asia-paci/mekong/summit0911/declaration.html
  • 14. Inclusive Development International. November 2015. “The changing landscape of infrastructure finance in the Mekong region and beyond.” Factsheet 1, notes from conference presentation. Due to be published in working paper: “China and the evolution of development finance in the Mekong region and beyond”, December 2015.
  • 15. The Asian Infrastructure Investment Bank. “Key provisions.” Accessed 3 November 2015. http://www.aiib.org/html/pagefaq/Key_Provisions/
  • 16. Ben Blanchard. “China says AIIB won’t be used for $46 billion Pakistan deal.” Reuters, 17 April 2015. Accessed 3 November 2015. http://www.reuters.com/article/2015/04/17/us-china-pakistan-idUSKBN0N80OX20150417
  • 17. Asian Development Bank. “Overview of the Greater Mekong Subregion.” Accessed 19 December 2015. http://www.adb.org/countries/gms/overview
  • 18. Zsombor Peter. “Railway families recommend fixes to ADB assistance plan”, The Cambodia Daily, May 22 2014. http://www.cambodiadaily.com/news/railway-families-recommend-fixes-to-adb-assistance-plan-59335/
  • 19. Sok Khemara. “Families file new complaint under ADB railway project.” VOA Khmer, September 16, 2015. http://www.voacambodia.com/content/families-file-new-complaint-under-adb-railway-project/2966131.html
  • 20. Asian Development Bank. “Greater Mekong Subregion cross-border transport facilitation agreement”, pages 117-125. Accessed 19 December 2015. http://www.gms-cbta.org/uploads/resources/15/attachment/ADB_TF_CBTA_Full_Text_gms-cbta-instruments-history.pdf
  • 21. Asian Development Bank. “Transport in the Greater Mekong Subregion.”Accessed 19 December 2015. http://www.adb.org/countries/gms/sector-activities/transport
  • 22. Carol Ransley, Jonathan Cornford, Jessica Rosien. Oxfam Australia: “A Citizen’s Guide to the Greater Mekong Subregion.” Accessed 15 December 2015. https://www.oxfam.org.au/wp-content/uploads/2011/08/oaus-citizensguidemekong-1108.pdf
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