## Estimating Asia’s Social Infrastructure Needs in the time of COVID-19

## Source details

**Canonical URL:** [Estimating Asia’s Social Infrastructure Needs in the time of COVID-19](https://www.imf.org/-/media/files/oap/oap-home/2023/session-1-1-koki-hirota.pdf)

## Other formats

- [Markdown version](/-/media/files/oap/oap-home/2023/session-1-1-koki-hirota.pdf.md)
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### Introduction and motivation
- COVID-19 posed a major challenge to achieving inclusive and sustainable growth.
- Human resources are the key to sustainable growth over the long term, and empirical studies indicate that social infrastructure facilitates the development of human capital.
- Forecasting demand for economic and social infrastructure is essential for sound fiscal management planning; studies estimating social infrastructure needs are very limited compared with demand forecasts for economic infrastructure since the early 2000s.
- JICA conducted case studies of several countries first, then extended the scope of research to 45 Asian countries.

### Study outline and scope
- Researchers: JICA Ogata Research Institute and Institute for Economic and Social Research, FEB, University of Indonesia.
- Study Objectives: To estimate financial needs of social infrastructure (education, health, public housing, government buildings) and propose policy recommendations for 45 Asian countries and regions during 2021 to 2030.
- Contents:
  - Estimates of actual spending of social infrastructure.
  - Estimation of the needs in 2021 to 2030.
  - Estimation of revised needs to respond to COVID-19.
  - Policy recommendations to close the funding gap.
- Result: The annual investment needs are estimated at USD 1.7 trillion in BAU and USD 1.8 trillion under COVID-19 scenario.

### Model for social infrastructure demand estimates and assumed COVID-19 impacts
- General observations:
  - Institutions and people are essential rather than infrastructure, as facilities are just buildings.
  - The breakdown of infrastructure expenditures is highly varied by sub-sector.
  - Different countries have different systems and policy tools; the share of public and private sectors also varies greatly by country.
  - Facility planning does not give much consideration for redundancies (spare capacity).
- Assumed impacts and cost proxies by sector:
  - Education
    - Stricter health protocol; Online education; Additional amenities, Improved cleaning; Expanded Internet.
    - Cost proxy: USD 1.64 per student; 1,15 times O&M; USD110 per student with O&M.
  - Health
    - More medical equipment & beds; Stricter health protocol; No changes of beds standards; Improved cleaning.
    - Increased share of equipment in medical investment (43%->50%).
    - 1.15 times O&M.
  - Public Housing
    - Stricter health protocol; Support social distancing; Improved cleaning; Reliable internet network.
    - 1,15 times O&M; USD110 per person with O&M.
  - Government Building
    - Stricter health protocol; Additional amenities; Improved cleaning.
    - USD 1.64 per employee; 1,15 times O&M.

### Annual investment needs and gaps during 2021–2030 (aggregate and by sector)
- Asia total (annual, in billion USD)
  - BAU Needs: 1,715
  - BAU Gap: -1,412
  - BAU Gap per GDP%: -2.37
  - COVID-19 Needs: 1,842
  - COVID-19 Gap: -1,538
  - Difference of Gap: -126
- By sector (annual, in billion USD)
  - Education: Needs BAU 286; Gap BAU -194; Gap per GDP% -0.22. COVID-19 Needs 293; Gap -201; Difference of Gap -7.
  - Health: Needs BAU 517; Gap BAU -412; Gap per GDP% -0.65. COVID-19 Needs 627; Gap -522; Difference of Gap -111.
  - Public housing: Needs BAU 847; Gap BAU -811; Gap per GDP% -1.65. COVID-19 Needs 855; Gap -819; Difference of Gap -9.
  - Government building: Needs BAU 65; Gap BAU +4; Gap per GDP% +0.16. COVID-19 Needs 66; Gap +4; (Difference of Gap not specified in table text).
- Source: estimated by Institute for Economic and Social Research, FEB, University of Indonesia.

### Annual investment needs and gaps during 2021–2030 (by income group and sub-region)
- By income group (annual, in billion USD)
  - Low: Needs BAU 9; Gap BAU -8; Gap per GDP% -5.08. COVID-19 Needs 11; Gap -9; Difference of Gap -1.
  - Lower middle: Needs BAU 433; Gap BAU -365; Gap per GDP% 2.16. COVID-19 Needs 528; Gap -460; Difference of Gap -95.
  - Upper middle: Needs BAU 1,187; Gap BAU -1,003; Gap per GDP% 2.71. COVID-19 Needs 1,212; Gap -1,028; Difference of Gap -26.
  - High: Needs BAU 87; Gap BAU -36; Gap per GDP% 0.56. COVID-19 Needs 91; Gap -40; Difference of Gap -5.
- By sub-region (annual, in billion USD)
  - Central: Needs BAU 17; Gap BAU -9; Gap per GDP% 0.20. COVID-19 Needs 22; Gap -14; Difference of Gap -5.
  - East: Needs BAU 1,238; Gap BAU -1,026; Gap per GDP% 2.60. COVID-19 Needs 1,262; Gap -1,049; Difference of Gap -23.
  - South: Needs BAU 282; Gap BAU -243; Gap per GDP% 2.74. COVID-19 Needs 358; Gap -320; Difference of Gap -77.
  - Southeast: Needs BAU 177; Gap BAU -132; Gap per GDP% 1.23. COVID-19 Needs 198; Gap -153; Difference of Gap -21.
  - Pacific: Needs BAU 2; Gap BAU -2; Gap per GDP% 1.30. COVID-19 Needs 2; Gap -2; (Difference of Gap not specified in table text).
- Source: estimated by Institute for Economic and Social Research, FEB, University of Indonesia.

### Sector-specific caveats and observations
- Education
  - Large investment gap in low-income countries.
  - Large demand for school building in urban areas.
  - Critical role of municipalities.
- Health
  - Investment gap across all income categories.
  - Substantial increase of gap under COVID-19 scenario.
  - Great diversity of public-private share.
  - Significant role of government subsidy, e.g. UHC.
- Public Housing
  - Great demand to achieve SDGs target related to slum upgrading.
  - Variety of housing policy tools.
- Government Building
  - Relatively less problematic.

### Financing, funding, and project life considerations
- Distinction between Financing (who puts money upfront to build and start operating projects) and Funding (who eventually pays for the full cost of projects).
- Possible funders and payers include Government (Tax), Users (Tariff), and Private sector.
- Project lifecycle considerations:
  - Construction stage: Private finance may provide upfront financing; government support to supply side (e.g., construction subsidy).
  - Operation stage: Users’ fees, government life-time support to private actors, and government support to demand side (e.g., universal health coverage).
- Project revenue and expenditure streams must be matched with appropriate financing and funding arrangements.

### Possible policy responses and instruments
- Public funds
  - Revenue reform, re-prioritizing spending, and proper borrowing as discussed in ADB(2017).
  - Strengthening fiscal capacity of municipalities, e.g. local tax, local bond, special purpose transfer from central.
- Private mobilization
  - Supply side: Enabling environment to attract private investment through subsidy, taxation, government credit, and reform of regulatory framework.
  - Demand side: Institutional support such as medical insurance.
- More integrated funding approaches
  - User charge; Land value capture.
- Investment efficiency
  - Improvement of project-related capacity.
  - Selection of appropriate technology.
  - Efficient use of facilities, such as multi-purpose buildings.

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_Source: https://www.imf.org/-/media/files/oap/oap-home/2023/session-1-1-koki-hirota.pdf_