How Can South Asia Overcome its Infrastructure Deficit?


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Last week, I discussed the two very different South Asias and the need for regional cooperation to bring the lagging regions up to the standards of thriving regions. However, increased market integration by itself will not be sufficient to accelerate growth and benefit the lagging regions. South Asia suffers from a massive infrastructure deficit. Infrastructure is like second-nature geography, which can reduce the time and monetary costs to reach markets and thus overcome the limitations of physical geography.

Improved infrastructure that enhances connectivity and contributes to market integration is the best solution to promoting growth as well addressing rising inequality between regions. The Ganga Bridge in Bihar in India is a good example of second-nature geography. The bridge has reduced the time and monetary costs of farmers in the rural areas in north Bihar to reach markets in Patna, the largest city in Bihar. The Jamuna Bridge in Bangladesh is another good example of spatially connective infrastructure. The bridge has opened market access for producers in the lagging Northwest areas around the Rajshahi division. Better market access has helped farmers diversify into high value crops and reduced input prices.

South Asia suffers from three infrastructure deficits. First, there is a service deficit, as the region’s infrastructure has not been able to keep pace with a growing economy and population.

Power outages and water shortages are a regular occurrence in India and Bangladesh. Rural roads are impassable in lagging regions in India (e.g., Bihar, Uttar Pradesh) and Sri Lanka. India has 6000 km of four lane highways, China in the last 10 years has built 35,000 km of four to six lane highways.

Every month, China adds power capacity equivalent to what exists in Bangladesh. Second, South Asia suffers from a policy deficit, given highly distorted pricing, poor sector governance and accountability, and weak cost recovery. It is estimated that eliminating the financial losses from the power and water sectors alone would provide a substantial chunk of the incremental funds for infrastructure investment that India needs.

Third, South Asia suffers from a cooperation deficit. India, one of the energy thirstiest nations sits next to an immensely energy rich neighbor, Nepal. Yet there is very little exploitation of Nepal’s hydropower potential because of inadequate cooperation with India.

Infrastructure is one sector where the problems of policy deficit and service deficit can not be resolved without addressing the greater problem of cooperation deficit. The benefits of regional cooperation can be huge because it increases the size of the market, unleashes the benefits of agglomeration and economies of scale, ensures equitable sharing of benefits, and integrates landlocked and lagging regions with leading regions.

An example of a regional cooperation success story can be found in the Indus Water Treaty between India and Pakistan. This helped unleash the Green Revolution in the two Punjabs. There are many other potential regional cooperation success stories in IT and IT-enabled services (education and health), energy, road, water management, and climate change; I will discuss these areas in more detail in the following weeks.

Which is your favorite area for regional cooperation? What is holding it back?


Join the Conversation

December 10, 2009

PPPs have dramatically changed the infrastructure landscape. Companies like Reliance, Adani, etc. have enormous projects planned in energy, roads, airports, and utilities. As long as illegal users of these services can vote, politicians won't touch them. Good luck on curbing financial losses in these sectors. Only Gujarat, and the privatized electricity system in Delhi, have made progress here. The solution to the policy deficit is to rope in the private sector, and have the state focus on a framework for projects, competitive bidding, and a plan for land acquisition.

The Bhutan-India dam is another area of regional cooperation. But as long as Pakistan, Nepal, and Bangladesh remain dysfunctional states, there will be little room for regional cooperation here. No other region in the world seems to rely heavily on regional cooperation as a solution for infrastructure (as opposed to trade, which does need much more attention in S Asia). Every country in the region needs to fix the problems within their own borders, and deal with the political conflicts between them, before thinking about infra projects.

December 13, 2009

I think it is appropriate to say that “infrastructure is like second-nature geography” . If a region is geographically at disadvantage, building infrastructure is the only way to connect the region with the outside world. Therefore, I strongly agree that governments should invest on the construction of infrastructure like road, bridge, grid and water supply to make it possible for such remote regions to get rid of poverty by connecting to the outside market. The author of the posting already gave us the example to show the successful cases by overcoming its infrastructure deficit. Also I agree with that appropriate policies should be in place, which calls for coordination with governments at different levels, and cooperation between scholars and policy-makers. Additionally, as the article said, it’s important for the regions along the borders to strengthen the cooperation with neighboring countries.

September 08, 2011

A lot of specialists argue that loan aid a lot of people to live their own way, because they can feel free to buy necessary stuff. Furthermore, banks present commercial loan for different classes of people.

May 16, 2012

Excellent summing up of the three deficits. When you say China has built 35000 km of 4/6 lane highways in the last decade, how much of this was constructed under PPP, and how much as a construction contract given out by state agencies? I understand that in power generation, China flirted with PPPs in the late 80s/early 90s, but then switched to six major state-owned companies that are putting up huge generation capacities. Is there a lesson for South Asia in this?
On another note, India's Union Power Ministry has been talking about Nepal's hydel energy potential, similar to the Laos - Cambodia model. It just needs to move to concrete action.

Henry Markant
January 17, 2013

Too often, occupational accidents are considered a price of progress in developing countries. but they also occur in advanced nations. Whether we challenge nature at thirteen thousand feet underground in a South African gold mine or thirty-nine thousand feet below sea level exploring for oil in the Gulf of Mexico or at three hundred thousand kilometers in space en route to the moon—accidents can and will happen despite the best safety regulations. Human beings make mistakes, and sometimes equipment fails. Mothers often protest that they were only distracted for an instant when their child disappeared. “Pilot error” is still the leading cause of airplane crashes!

Industrial, mining and, consumer safety should never be compromised for profits; neither should margins of safety where food and pharmaceutical products are concerned. Aircraft, space vehicle, and automobile manufacturing as well as the production of power tools and equipment are further examples of industrial safety challenges—as are consumer products, from toasters, to contact lenses, to cribs—especially imported cribs. Then there are procedural and processing standards that require constant upgrading in chemical plants and hospitals as technology advances. There are safety concerns regarding the very frontiers of science. These include the safety of our astronauts in space exploration, the safety of people downrange of sites from which military and civilian rockets are launched, and the safety of offshore and land-based drilling for oil and gas, to name but a few.

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February 12, 2013

There will be an increasing number of failures in critical infrastructure such as dams, bridges, power plants, electrical grids, water, sewer and garbage disposal networks, databases, air traffic control systems, etc. The global lack of adequate disaster warnings and outdated technical systems, (e.g., port security, border violation, air traffic control, etc.) will take decades to correct unless a real tragedy or serious system failure with widespread economic consequences forces a greater sense of urgency. The earthquake in Haiti, the Katrina hurricane, the Gulf oil spill, floods in the Midwest, and the Japanese earthquake and tidal wave catastrophes demonstrate how unprepared we are.

The average age of potable water systems in the United States is seventy-seven years, and every two minutes a major water main breaks causing significant property damage. Yearly, three-hundred thousand water-main failures are already causing water shortages, and the problem will only get worse. It will require hundreds of billions of dollars to replace—not just repair—the thousands of pipelines crisscrossing our continent, but many of our states and municipalities are nearly bankrupt. Just as serious, the United States is in a global race for innovation in this information age yet is last in internet speed and security among developed nations. That is just incredible.

Infrastructure failures will compound the problems caused by an economic collapse but are also one means of employing workers to minimize a depression. When survival is at stake, people can be motivated to secure and improve their own towns and neighborhoods as well as the surrounding areas for a minimum wage. The problem at present is that the country is bankrupt and unless foreigners buy our debt, we can only pay in scrip. During recovery from a national disaster, workers are often paid in food and/or essential supplies so that government funds can be stretched. Idle labor conscripted for infrastructure repair is not paid the high wage scales of better times, but its employment must provide genuine humanitarian aid to stricken families.

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