The road to financing Asia's vast infrastructure needs

IF ASIA'S emerging markets are to avoid the middle income trap, they need to create foundations for the next phase of growth: they need to invest in infrastructure.

In the early stages of development, moving a worker from the land to a factory quadruples their value-added contribution to the economy on average. Much of Asia's extraordinary growth to date has been underwritten by this one-off transition. But the windfall gains of rapid industrialisation are starting to decline and if the region is to continue on the road to prosperity it needs to find ways to boost productivity and encourage new economic activity.

At the moment, inadequate infrastructure is possibly the biggest brake on emerging markets' medium-term growth prospects. It stunts both production and investment: few businessmen will invest in large-scale production capacity when they cannot be guaranteed a reliable supply of electricity. Few farmers will upgrade their land if their crops are going to rot before they get to market because of bad roads and inadequate warehousing.