ISAS Working Papers

The inadequacy of economic and physical infrastructure - with respect to both financing needs and quality itself - is a common characteristic in developing countries. The World Bank has estimated that developing countries need about US$ 1.1 trillion in annual infrastructure expenditure through the year 2015, of which low-income countries need the greatest share - 12.5 per cent of their GDP. 2 Establishing a comprehensive fina ncing framework - which will meet developing countries' infrastructure needs and in the process cover investment, maintenance and repair costs - poses significant challenges for policymakers. To attract foreign direct investment and achieve long-term growth, it is imperative that there are an efficient transport system nationwide, modern telecommunication systems and reliable supply of energy and water. The investment required for improvin g infrastructure is massive -various estimates have pointed out the need for considerable investment in developing countries. For instance, the International Energy Agency (2003) estimated that developing countries would have needed to invest US$ 120 billion in the electricity sector annually from 2001 to 2010 and US$ 49 billion for water and sanitation from 2001 to 2015.