Asia’s Emergent Middle Class

Asia reminds us that building resilient infrastructure is as popular as it is challenging. As a goal, it has been gaining enthusiastic support around the world, from the 2015 UN Sustainable Development Goals to pledges from world leaders to fill the infrastructure gap in developing countries with a comprehensive Financing for Development action agenda.

Institutions and governments are scrambling to deliver. The G20, the OECD, and the World Bank Group, among others, are working to prepare national governments and the private sector for an unprecedented experiment. Over the next ten years, $8 trillion will be needed in Asia alone to address historical underinvestment in infrastructure.

Many insist that governments alone cannot shoulder the financial or operational responsibility, and must enter into public-private partnerships (PPPs), a complicated and controversial form of business relationship. Responding to criticisms about weak legal frameworks and lack of capacity, many Asian governments have enacted or spruced up PPP laws, formed dedicated units, and even created implementation guidance.

But are they ready for the challenging road ahead?

Answering that question requires stepping back and tackling a series of difficult questions: What kind of infrastructure should be built? Where? For what purpose and whose benefit? Who should finance it and how? How do we know it is meeting its purpose? Who pays and accounts for failures?

Anyone seeking answers should begin by focusing on the missing “P” from PPPs – the people. By 2030, two-thirds of the world’s middle class will reside in Asia. The middle class will demand quality infrastructure that meets their needs, without corruption or waste. They will value a clean environment and social justice, for themselves and their children. They will need transparency, accountability, participation, and the rule of law to get what they want. The Asian middle class could be the voice of democratic governance in the region.

Yet today’s accepted norm on PPPs is remarkably thin on democratic governance. Most guidance available for Asian PPPs has in-depth technical specifications, but thin on information about people as stakeholders. They are the infrastructure users with needs and preferences; tax payers who backstop the government; the communities and workers negatively affected by infrastructure projects; and those who are left unserved. In cross-border PPPs, people beyond the borders are easy to neglect. People are not just stakeholders – they are rights holders, too.

To be sure, guidelines often recommend consultation with stakeholders. But they neglect important details: how and when to engage with people, how to build in value for people in the “value for money” assessments, what information to disclose and where, how to reflect feedback, how to receive and address grievances, and how to account and report for successes and failures.

Even the notable exceptions could be improved. To its credit, Hong Kong’s Introductory Guide to PPPs mentions allowing stakeholders “to receive a fair share of the benefits of a PPP” as a potential objective. More systematic criteria for putting that objective into practice and measuring outcomes would be even better.

Financial institutions could help fill the governance gap to a degree. Some apply environmental and social sustainability standards, including requirements on stakeholder engagement. But the new safeguards of the World Bank and AIIB have recently come under criticism for encouraging “rapid infrastructure expansion without tedious assessments.” Moreover, other investors such as private equity, pension funds and sovereign wealth funds, may not apply any international standards at all.

Failing to heed community stakeholders can come with a high cost. In one high-profile example, civil society opposition helped persuade Myanmar’s President Thein Sein to suspend the Myitsone dam in 2011. In the process, the Burmese people realized for the first time in 50 years that they have a voice, and it can have powerful consequences, like stopping a dam on their beloved Irrawady river, or making it right, if the project revives.

Future infrastructure in Asia will be only more complex and sprawling, some crossing multiple borders. Governments must learn quickly how to embrace and work with the rising middle class in the process. Pockets of good practice exist in Asia: a responsible public governance process in PPPs, designing and realizing people-centric infrastructure, and garnering de facto consent of all affected communities. This approach not only benefits the middle class, but also helps with risk management. The challenge is in scaling up these good infrastructure practices to match the audacious visions of Asian leaders.

This essay is a part of our Big Questions series.