There is a significant though varying gap between actual and needed finance for infrastructure investment across all developing regions and infrastructure industries. In sub Saharan Africa, this gap may exceed 50%. An estimated annual investment of $40 billion in new infrastructure facilities and maintenance is needed until 2015 to meet the subregion's MDG poverty reduction targets.
This assumes an average annual economic growth
rate of 7% and annual investment in infrastructure
of 9% of GDP (Estache, 2005a; Taylor, 2007), with
roads and electricity requiring the largest investments
(table III.3). Yet only, $16.5 billion is likely to be
forthcoming annually from identifiable internal,
external and ODA sources, leaving an estimated
annual financing shortfall of $23.5 billion (Taylor, 2007).
Box III.5. Estimating investment needs and financing gaps
It is difficult to obtain comparable, consistent and accurate estimates of infrastructure investment needs
and financing gaps. Differences in terms of methodologies and assumptions, data coverage and reliability, sectoral
variations, price movements and other factors mean that different estimates for even the same region often differ
significantly. For example, recent estimates by the Asian Development Bank (ADB) and the Economic and Social
Commission for Asia and the Pacific (ESCAP) of infrastructure financing needs in the Asia and Oceania region for the
period 2006-2010 differ for both the total investment needed and the financing gap (box table III.5.1).
Most estimates are based on a "top-down" approach, in which investment needs are usually estimated on
the basis of infrastructure requirements to support a certain economic growth rate or MDG target, including poverty
reduction. Fewer studies use a "bottom-up" approach, which identifies investment needs for each infrastructure sector
separately. In addition, some studies only assess investment needs in new infrastructure (e.g. the electricity study by
the International Energy Agency), while other studies also cover investment needs for operation and maintenance.
Source: UNCTAD.
The investment needs and financing gap of the
Asia and Oceania region is also large, especially when
considering the significant investment requirements
of China and India (ADB, JBIC and World Bank,
2005).
ESCAP calculated that over the period 2006-2010, the region would need to invest some $608
billion annually in infrastructure development, while
the actual annual investment in recent years has been
only $388 billion - generating an estimated investment
shortfall of $220 billion (box III.5; Heyzer, 2007).
The case of India illustrates some of the financing
challenges facing the Asia and Oceania region (box III.6).