ADBI Working Paper 407 Kawai
This paper examines financing mechanisms to support infrastructure development andconnectivity in Northeast Asia—comprising the Northeastern People’s Republic of China, Japan,the Democratic People’s Republic of Korea (DPRK), the Republic of Korea, Mongolia, and theRussian Far East. Although this subregion has developed the Greater Tumen Initiative, theextent of intergovernmental cooperation for cross-border infrastructure investment is not asstrong as in other subregional cooperation programs in Asia, such as the Greater MekongSubregion Program and the Central Asia Regional Economic Cooperation Program. Usingvarious previously published estimates, this paper finds that the total infrastructure investmentneeds for the subregion excluding Japan and the Republic of Korea (in transport, energy,information and communication technology, and the environment) could be in the order of $63billion per year over the next 10 years, and of this total governments in the subregion will haveto mobilize external funding of $13 billion a year, focusing on national infrastructure projects inthe DPRK and Mongolia and high-priority cross-border projects in Northeast Asia. The paperconsiders three options as a cooperative financing mechanism for the subregion: special and/ortrust funds set up in the existing multilateral development banks (MDBs), a structuredinfrastructure investment fund supported by MDB(s), and a new subregional multilateraldevelopment bank. Then it suggests that the Northeast Asian governments may begin withsetting up special and/or trust funds at the existing MDBs and move to creating an infrastructureinvestment fund, following the good example of the Association of Southeast Asian NationsInfrastructure Fund, once sufficient confidence and trust is built and the DPRK returns to theinternational community. The paper recommends against the establishment of a newdevelopment bank in the subregion.
JEL Classification: F15, F36, F55, O19, Q01