Resource Needs for East Asia and Pacific Infrastructure Bali Workshop June 28,2004 Jonathan Walters (econometric analysis: Tito Yepes) The World Bank

1.Projection of physical infrastructure stocks, based on econometric models. 2.Changes in stock levels (investment) is then valued at “best practice costs” – investment is assumed to be efficient 3.Annual maintenance expenditures are estimated as a fixed percentage of stock of infrastructure valued at same prices. Methodology of Estimation

Sector Coverage Included: electricity grids, major roads (paved only), railroads, water and sanitation, telecommunications systems Excluded (for lack of data): off-grid power, gas grids, mass transit, ports, unpaved/minor/urban roads, airports

Projections were made for the 8 countries with sufficient historical data. (China, Malaysia, Philippines, Thailand, Indonesia, Laos, PNG, Mongolia). Those countries account for 98% of EAP GDP Totals for EAP countries outside the sample were obtained by assuming those countries were like sample countries in same class Expanding from Sample to EAP Region

Projection of Physical Stock Levels

Best Practice Costs

Annual Investments and Maintenance in East Asia

Annual Investments and Maintenance in China

Annual Investments and Maintenance in the Rest of East Asia

Annual Investments and Maintenance in East Asia Middle Income Countries

Annual Investments and Maintenance in East Asia Low Income Countries

Headline Numbers EAP bill is US$ 300 billion+ per year Which equals 11% of EAP GDP China alone needs US$ 250 billion or 13.6% of its GDP Middle income countries (w/o China) need 5.4% of GDP Low income countries need 7% of GDP Telecommunications is 55% of the EAP total All numbers are approximations!

How to fund US$ 300 billion+ Three questions: How to keep the bill down to US$ 300 billion? how to make investment efficient (public sector reform or private participation)? How to get the funding up to US$ 300 billion? Cost recovery (tariffs, user charges) Tax-financed subsidies (how much fiscal space?) Loans to postpone the tax or tariff burden (role of domestic and international financial sector?) Donors (US$ 8-10 billion?) Private capital (US$ billion?) How much extra to achieve MDGs?