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Global infrastructure needs

A stocktaking of global infrastructure needs reveals varying numbers and methods, yet all
sources point to a growing global infrastructure investment deficit. Much of the global
investment deficit covers key connectivity sectors important to the BRI, such as
transportation, energy, water and telecommunications. Table 1 presents a selection of
reviewed global estimates, covering different time frames as well as different sectoral
scopes.
Based on these sources, annual investment needs range between USD 2.9 trillion and
USD 6.3 trillion. At current investment trends, this is expected to translate into a
cumulative investment gap of between USD 5.2 trillion until 2030 (McKinsey, 2016), or
as high as USD 14.9 trillion until 2040 when the achievement of the sustainable
development goals (SDGs) is taken into account (GI Hub, 2017). On an annual basis, this
means that global infrastructure investments are, on average, falling short by
USD 0.35 - 0.37 trillion per year (GI Hub, 2017 and McKinsey, 2016).

Globally, by sector, the largest investment needs lie in transport and energy infrastructure.
In particular, road transport and energy supply infrastructure are expected to comprise
around 60% of global investment needs (GI Hub, 2017; OECD, 2017a and
McKinsey, 2016). They are followed by rail transport, telecommunications and water
infrastructure. The highest rates of underinvestment are expected in the road and energy
infrastructure sectors. GI Hub (2017), for instance, expects global investments in road
infrastructure in the coming decades to fall short by almost USD 0.4 trillion annually, along
with an annual investment deficit in energy infrastructure of around USD 0.15 trillion.
Looking in particular at transport connectivity, around USD 0.44 trillion of expected
annual investment needs will not be met (see Miyamoto, K. and Y. Wu,
forthcoming, 2018).
For Asia alone, estimates by the Asian Development Bank (ADB, 2017) point to
investment needs of around USD 26 trillion until 2030 (including climate-related needs).
This is supported by GI Hub (2017) and McKinsey (2016) who see around 50% of their
respective investment need estimates related to the Asian region.7 Spending under the BRI
strongly contributes to financing Asia’s infrastructure needs. Nonetheless, a cumulative
gap of about USD 4.6 trillion, or over four times USD 1 trillion estimated for BRI
foreshadowed projects, is expected to emerge by 2040 (GI Hub, 2017). In particular,
investments in sustainable and quality infrastructure in the region are needed to allow Asia
to maintain its growth momentum, adequately address climate change and bring down high
levels of persistent poverty.
The highest investment needs, in percent of GDP, within the region are seen in the Pacific
(9.1%) as well as in South (8.8%) and Central Asia (7.8%) (ADB, 2017). This compares to
around 5.7% in Southeast Asia and 5.2% of GDP in East Asian economies.8 With current
investment trends not expected to meet these needs, Asia’s annual infrastructure investment
gap will widen to USD 459 billion until 2020, equal to 2.4% of the region’s projected GDP
(ADB, 2017).

In particular, lower-income economies in South Asia are faced with higher
gaps (on average 5.7% of projected GDP) compared to more developed nations in
Southeast Asia (on average 4.1 % of GDP). Distinctively setting itself apart from most of
its Asian neighbours, China’s domestic infrastructure gap is estimated at only around 1.2 %
of its projected GDP until 2020 (ADB, 2017).
On a sectoral level, around USD 14.7 trillion, or over half of Asia’s infrastructure needs
until 2030, lie in the energy and power sector, as 400 million people still lack access to
electricity (Figure 1). Transport infrastructure needs rank second at USD 8 trillion,
amounting to just under one-third of the investment needs in Asia’s infrastructure
landscape. These are followed by investment needs in telecommunications infrastructure
of around USD 2.3 trillion, or 9% of the total. With 300 million Asians also lacking access
to safe drinking water and about 1.5 billion people lacking access to basic sanitation, such
investment needs are expected to account for 3%, or USD 800 billion, of Asia’s total
infrastructure needs until 2030.

Asia’s infrastructure financing needs widely exceed current and planned investments under
the BRI. Addressing these needs will therefore remain an essential priority on the
international development agenda. In particular, regions not lying within the current six
BRI corridors will also require increased investment in infrastructure to support economic
development and avoid the widening of geographical divides. There is some risk that
investment in other critical sectors, such as water and sanitation, could be under addressed

in these countries. It is also critical that investments in low-carbon, sustainable and high-
quality infrastructure, which are a focus of the BRI, are given adequate support elsewhere, along with the maintenance, rehabilitation and upgrading of existing infrastructure. This is going to require the involvement of multiple investors, including China, other government groupings and multilateral development banks, an issue that is returned to at the end of this
report. But there can be little doubt that the BRI is, by far, the most significant contribution to these needs.