Infrastructure Development in South Asia: Addressing the Gap
Infrastructure development is a policy priority for all South Asian countries. According to estimates, South Asia will need $6.3 trillion in climate-adjusted infrastructure investments by 2030 to maintain the current levels of economic growth. However, the region faces significant domestic and geopolitical challenges that complicate this requirement.
The Sustainable Development Goals (SDGs) and Infrastructure Development
Building quality infrastructure will require investments from like-minded partners on transparent and sustainable terms. Given their shared interests, the United States and India are well-positioned to mobilize their resources and address the infrastructure gap in South Asia. This effort would enable both countries to harness South Asia’s economic potential, contribute to regional stability, and counterbalance China’s growing economic engagements in the region.
Infrastructure Gap in South Asia
The infrastructure requirements of the region vary by country. Nepal and Bangladesh, for instance, need to annually spend over $1 billion and $25 billion, respectively, to meet their infrastructure requirements., The lack of adequate infrastructure results in regional annual GDP losses of about 3-4% and lost opportunities of approximately $50 billion in trade. The Asian Development Bank (ADB) calculated the infrastructure needs of South Asia spread across various sectors – power (56.3%), transport (31.9%), telecommunication (8.7%), and water and sanitation (3.1%). Approximately 60% of infrastructure development in the region is financed through public sector enterprises.
However, there are multiple challenges for infrastructure financing in the region. First, at the domestic level, South Asian countries lack the institutional, bureaucratic, and fiscal capacity to meet this demand, as evidenced by the recent economic crises in Sri Lanka and Pakistan. At the regional level, geopolitical competition between India, China, and other players in the region sometimes leads countries into a developmental deadlock. Therefore, any investment or cooperation mechanism must cater to these two challenges.
Furthermore, there is also a growing interest from some external players, including bilateral donors or partners, such as the United States, China, Japan, Australia, South Korea, India, and development finance institutions (DFIs) such as the ADB, World Bank, and Asian Infrastructure Investment Bank (AIIB). However, this still leaves a gap in actualizing infrastructure development financing.
South Asia as a Priority for U.S. Investments
In the past, much of the United States’ engagement in South Asia focused on the nuclear-armed countries of India and Pakistan and its post-9/11 involvement in Afghanistan. However, the recent withdrawal from Afghanistan gives the United States a chance to reshape its regional image and priorities. This includes extending support beyond attempts to influence the region’s security dynamics. There are three main reasons why the United States should use this opportunity to invest in infrastructure development in South Asia: 1) the economic potential of the region, 2) geostrategic competition with China, and 3) strengthening regional cooperation with India.
The recent withdrawal from Afghanistan gives the United States a chance to reshape its regional image and priorities.
Leverage the economic opportunities in the region
South Asia is one of the fastest-growing regions in the world. In 2021, it recorded a GDP growth of 8.3%, higher than East and Southeast Asia. The U.S. can capitalize on this economic growth by investing in infrastructure development to reduce costs, improve market access for goods produced in South Asia, and advance its participation in regional and global value chains. This will enable the United States to both support potential regional partners as well as “provide tangible economic benefits back home.” Given that the smaller countries of South Asia prioritize economic prosperity through regional infrastructure development, greater U.S.-South Asia economic cooperation can pave the way for mutual economic dividends.
China as a Geostrategic Driver
China has significantly increased its engagements in South Asia in the last two decades across trade, development cooperation, diplomatic exchanges, higher education, tourism flows, and other areas. For infrastructure projects, the largest recipients of Chinese loans in South Asia are Pakistan, Bangladesh, and Sri Lanka, which received a total of $49.3 billion in 2020. This growing Chinese role in the region has driven the United States and India closer together and has generated increased interest from Washington in the SSAs.
However, despite signing onto China’s Belt and Road Initiative (BRI), the SSAs have made limited efforts to follow through. For example, out of the twenty-seven projects offered by China’s President Xi Jinping to Bangladesh in 2016, only three were subsequently signed. This lukewarm response by SSAs reflects their cautious approach towards BRI and concerns about a potential debt burden. This creates both incentive and space for the United States to engage more with the region. While it may be difficult to match China dollar for dollar, the U.S. can fashion the image of a responsible partner as well as reap economic benefits by providing transparent and high-standard alternatives in the region.
Despite signing onto China’s Belt and Road Initiative (BRI), the SSAs have made limited efforts to follow through.
Engaging India as a Regional Partner
India is increasingly investing in South Asian infrastructure, with approximately 86% of its development assistance for the region directed towards infrastructure building. In the last decade, India has operationalized nine integrated check posts, revived inland waterways, facilitated rail connectivity, and constructed South Asia’s first petroleum pipeline, among many other regional infrastructure projects. India’s renewed engagement with and reorientation towards its immediate neighborhood is also due to China’s growing footprint. In Nepal, India recently took on two hydropower projects abandoned by China. During Sri Lanka’s ongoing economic crisis, India has already provided approximately $4 billion in support, while China has hesitated to restructure its loans.
New Delhi requires support from like-minded partners to balance China’s growing portfolio in the region.
The 2022 U.S. Indo-Pacific Strategy declares New Delhi “a like-minded partner and leader in South Asia and the Indian Ocean.” However, with India’s economic and military resources diverted due to the ongoing border standoff with China, India’s ability to invest in the neighborhood’s development could become constrained. This may affect India’s capacity to become a regional leader. New Delhi, therefore, requires support from like-minded partners to balance China’s growing portfolio in the region.
Thus, it is in the United States’ interest to engage bilaterally with India and support its engagement with the SSAs and the Indian Ocean countries through trilateral, quadrilateral, and other multilateral mechanisms, especially in critical infrastructure development. India’s position on other
SDGs, Targets, and Indicators in the Article
SDG 9: Industry, Innovation, and Infrastructure
- Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure
- Target 9.4: Upgrade infrastructure and retrofit industries for sustainability
- Indicator 9.1.1: Proportion of the rural population who live within 2 km of an all-season road
- Indicator 9.4.1: CO2 emissions per unit of value added in manufacturing industries and construction
SDG 17: Partnerships for the Goals
- Target 17.17: Encourage and promote effective public, public-private, and civil society partnerships
- Indicator 17.17.1: Amount of United States official development assistance (ODA) provided as a proportion of gross national income (GNI)
Analysis
1. Which SDGs are addressed or connected to the issues highlighted in the article?
The article primarily addresses SDG 9: Industry, Innovation, and Infrastructure. It discusses the need for infrastructure development in South Asia and the challenges faced in financing and implementing infrastructure projects. The article also touches on SDG 17: Partnerships for the Goals, as it emphasizes the importance of partnerships between countries like the United States and India to address the infrastructure gap in the region.
2. What specific targets under those SDGs can be identified based on the article’s content?
Based on the article’s content, the specific targets under SDG 9 that can be identified are Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure, and Target 9.4: Upgrade infrastructure and retrofit industries for sustainability. The article highlights the need for investments in infrastructure development in South Asia and the importance of ensuring that the infrastructure is of high quality, sustainable, and resilient.
Additionally, the article mentions Target 17.17: Encourage and promote effective public, public-private, and civil society partnerships. It emphasizes the need for partnerships between countries like the United States and India to address the infrastructure gap in South Asia.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
The article mentions two indicators that can be used to measure progress towards the identified targets:
- Indicator 9.1.1: Proportion of the rural population who live within 2 km of an all-season road. This indicator can measure progress towards Target 9.1 by assessing the accessibility of infrastructure, particularly roads, for rural populations in South Asia.
- Indicator 9.4.1: CO2 emissions per unit of value added in manufacturing industries and construction. This indicator can measure progress towards Target 9.4 by assessing the sustainability of infrastructure development in terms of its carbon emissions.
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 9: Industry, Innovation, and Infrastructure | Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure | Indicator 9.1.1: Proportion of the rural population who live within 2 km of an all-season road |
| Target 9.4: Upgrade infrastructure and retrofit industries for sustainability | Indicator 9.4.1: CO2 emissions per unit of value added in manufacturing industries and construction | |
| SDG 17: Partnerships for the Goals | Target 17.17: Encourage and promote effective public, public-private, and civil society partnerships | Indicator 17.17.1: Amount of United States official development assistance (ODA) provided as a proportion of gross national income (GNI) |
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Source: stimson.org
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