Conclusions

In this study, I have performed a comprehensive empirical analysis of the linkages between governance and infrastructure development. Our results indicate that governance is crucial for regional infrastructure development, and therefore beneficial to all Asian countries. Good governance helps unlock the full economic potential of a region or nation; more effective policy approaches toward improved governance are therefore needed to complement regional infrastructure development initiatives in Asia.

The results of the analysis show that the linkages between regional infrastructure and governance are multiple and complex. The results also make it abundantly clear that governance reform is a key factor affecting regional infrastructure development: every one point increase in governance would lead to 1 to 1.5 rise in regional infrastructure in Asia.

The findings of this study suggest that, other things being equal, membership in regional organisations is not critical for developing regional infrastructure. What matters is good governance (as in the case of the EU).

Countries and regions with higher income, stronger institutions, better governance, and more open economies are likely to have higher levels of regional infrastructure. The estimated marginal effects calculated in this paper further evince that governance—both national and regional—facilitates regional infrastructure development.

The results of the analysis also imply that our efforts to promote regional infrastructure must not be limited to traditional policy measures aimed at attracting investment in infrastructure, but must also address policy reform across a number of areas. Thus, institutions and governance must play an important complementary role in strengthening Asia's regional infrastructure.

Given the complexity of institutional reform and the slow pace of improvements in governance, progress in infrastructure development is unlikely to be incremental in many Asia countries. As such, improving governance at the regional level may be helpful, given the possibility of regional diffusion: our results suggest that regional institution and governance can have a direct and positive effect on the local governance countries in the region, subsequently leading to regional infrastructure development.

An appropriate institutional and policy framework is required for effective governance and regional infrastructure development. Developing countries face significant constraints in improving governance; at the same time, improving governance requires significant lead time and considerable structural adjustments. Poor governance isolates countries from international best practice. Regional cooperation can therefore play an important catalytic role in improving governance at the national level. By allowing countries to share their experiences, regional cooperation can help developing countries learn and benefit from regional and international governance.

Improved governance, particularly at the sectoral level, can carry huge payoffs at a time when Asia is looking for higher investments in infrastructure and greater free trade within the region. Making Asia “seamless” will thus require complementary policy initiatives by countries, regional organizations, and multilateral development organizations in order to strengthen governance in institutions in Asia and beyond.

This study is not without limitations, and a number of issues require further consideration. First, future studies are needed to understand the relationship between disaggregated governance indicators and regional infrastructure sectors such as power, aviation, ports, roads, and railways. Second, an analysis of the causality between governance and infrastructure would also be worthwhile. Third, the analysis presented in this paper could be verified with new governance indicators from alternative sources. Fourth, it would be helpful to explore the manner in which Asian countries can make a positive contribution to improving governance in institutions that support regional infrastructure. Finally, a more sophisticated dynamic analysis may be attempted to verify the findings of this paper.

Efforts should be made to collect representative governance indicators which contain better information. Developing a capacity building and training tool for policymakers on measuring the impact of regional governance on infrastructure development may also be worth considering.

Download this Paper [ PDF 569KB| 48 pages ].

Comment(s)

There are [0] comment(s) for this entry. Post a comment.