Little Speaks at Asia Infrastructure Summit
by Cristy Lytal
Appearing on a panel at the Financial Times’ Asia Infrastructure Summit, Richard Little, director of the USC Keston Institute for Public Finance and Infrastructure Policy, addressed the question of whether private investment in infrastructure could be Asia’s highway to economic growth.
“These are very export-driven economies, and when the world stops buying their stuff, it’s not good,” said Little, a senior fellow at the USC School of Policy, Planning, and Development. “For example, GDP in Singapore is down 20 percent in the first quarter. The main theme of the summit was whether infrastructure programs could counteract this drag on regional economies.”
Held at the St. Regis Hotel in Singapore, Little’s panel focused on Singapore, Hong Kong, Japan, Korea and other “developed hubs” in Asia. More than 100 people, many of whom represented the Asian investment banking community, attended the summit.
In addition to Little, the panel featured Choo Chiau Beng, CEO of the Keppel Corp.; Sharad Somani, executive director of the Global Infrastructure & Projects Group at KPMG Corporate Finance; Lynn Tho, director of project finance at HSBC Singapore; and moderator John Burton, Singapore bureau chief of the Financial Times. In total, representatives from 10 countries participated in the summit.
The panelists noted that the developed Asian hubs have to upgrade roads, water supplies, sewers, power grids, telecommunications and other systems, and some experts estimate that Asian countries will need to spend U.S.$300 billion a year over the next decade to address their growing infrastructure needs.
Because the private sector will foot much of this bill, the panel discussion touched on the risks of investing in certain parts of Asia.
“The investment community looks pretty hard at where they want to put money and is very sensitive to risks that we in the U.S. don’t have to deal with,” Little said. “Although the dollar fluctuates some, in South Korea, they’ve seen their currency go down 40 percent. Political risk is another consideration. We can look at Thailand and ask, ‘Will the government be stable in the long term?’”
Despite these obstacles to attracting private equity, many Asian nations are willing to impose usage fees such as tolls. While there is rarely the political will in the United States to enact such unpopular measures, out of necessity, Asia is more open to these approaches.
In addition, many Asian countries do not employ the same bureaucratic and litigious decision-making procedures that the United States does.
“In any place in Asia I’ve looked at, their process is much flatter and much more top down,” Little said. “And for that reason, it’s faster. There certainly is public discussion. But the fact of the matter is once decisions get made, they tend to get implemented without going through years of court battles about procedure or practice, which is one of the reasons why it’s so difficult to build any infrastructure in the U.S.”
Attending the summit solidified Little’s belief that the drawn-out U.S. decision-making process might be a hindrance to remaining competitive on the global stage.
“Eventually, Asian countries will move beyond export-driven economies and taking the lead in infrastructure investment is one way to do that.”
Little recommended that the United States make “strategic infrastructure investments” in faster, cheaper telecommunications, green energy and high-speed rail – “what the United States is really going to need in 2030 or 2050. This will also help keep the U.S. competitive.”
According to Little, Malaysia’s attempts to diversify and move into a more knowledge-based industry provide an example of one direction that the United States might consider when planning infrastructure improvements. Paying attention to overseas developments like this will help the United States make informed decisions about its own infrastructure policy in the coming years.
“I think the 21st century will belong to Asia at some point,” he said. “And so it’s very important that we know what’s going on in Asia and that we also participate and network with the people who are going to make it happen.”
Photo courtesy of Richard Little
From left: John Burton, Singapore bureau chief of the Financial Times; Richard Little, USC; Sharad Somani, executive director of the Global Infrastructure & Projects Group at KPMG Corporate Finance; and Choo Chiau Beng, CEO of the Keppel Corp.