In the aftermath of the pandemic, we’re seeing a change in how governments in Asia are approaching infrastructure development and delivery. There’s growing focus on infrastructure as a service, and shift away from big capex projects or the building of hard infrastructure assets.
While these conversations have been happening for a while, they have gathered steam over the past few months, says Isabel Chatterton, who heads the infrastructure and natural resources practice in Asia for the International Finance Corporation, a member of the World Bank Group that’s focused on private-sector development in less developed countries.
In this first part of the interview, Ms Chatterton speaks about the changes in mindset she’s witnessing, and looks at some of the areas in the infrastructure space that are seeing the most rapid change (and most interesting developments).
Unravel: The shortfall in healthcare infrastructure has been exposed in many of Asia’s economies. Given the paucity of resources—and that government revenues have taken a further hit with the economic downturn—how can governments address this issue?
Isabel Chatterton: When it comes to the healthcare space, we have definitely seen increased awareness among governments in terms of how important infrastructure is and how important supply chains are. We are currently looking at opportunities to support the health space, the temperature control space that will support vaccine distribution, for example.
I can say there has been a big focus by governments and the private sector, but we’re perhaps seeing a bit of an inability to act on that focus. Government revenues have been hit severely. In this situation, what can governments do? They can look at efficiency in spending of government resources – be strategic about it, and they can look to bring in private sector expertise and funding in areas where the private sector is happy to take the risk. We can assist with this.
The second thing governments can do is to take lessons from what has happened and see whether we can bolster our healthcare infrastructure and services, so we are more resilient and less affected if something like this happens in the future.
And third, look at IT innovations, particularly in areas such as telemedicine and the provision of healthcare. There’s no better time for governments to back all this digitalisation of health services, and to make sure that delivery is transparent, and that it gives equal access to everyone.
Unravel: Is the pandemic resulting in a change in infrastructure priorities in the region? Are we seeing governments place greater emphasis on social infrastructure now?
Ms Chatterton: This is a really interesting question, because if you look at the way infrastructure development takes place—development plans, investment plans, to some extent the prioritisation of projects in one sector over another, the selection of projects—all of this takes a long time. But we’ve seen because of the pandemic, there’s been an increased sense of urgency to really relook the absolutely critical areas we must work on.
One of these key spaces is logistics. Supply chains are critical for the supply of medicines, goods for healthcare, food products and the like. There is also a recognition that broader supply chains are changing and will continue to change.
The second is telecommunications. On both the public and private sector sides, there’s a very important realisation that it doesn’t matter how high your GDP per capita is, if internet connectivity is not good enough to cope with social distancing, ensure business continuity, and prevent service interruptions. The reality is that the lack of internet availability and access to these services is an issue. You are as weak as your weakest link. So, what I really have seen is a desire by governments and companies to look at connectivity in a more holistic way, from a regional point of view, and to really acknowledge that we cannot have areas within a region that are not well connected.
The third is the new economy. I think one of the lessons we’ve learnt is that we need to innovate and move to a service delivery economy, where governments and companies are less focused on delivering the physical expenditure assets and to some extent capital expenditure, but instead focused on delivering a service as the ultimate outcome. To give you an example, in the logistics space, we have become accustomed to looking at assets such as warehouses and trucks. But what if we were able to simply look at providing cold chains as a service. That could completely change how we look at the industry. Similarly, if instead of transport infrastructure, we look at mobility as a service, then is our approach of looking at how many kilometres of roads or how many bridges are needed ideal? We should instead look at what mobility means from a consumer’s point of view.
The change I have seen is that infrastructure as a service is now a lot more at the front and centre of everything we do. The focus is not on big capex projects or big bridges that have no connections with an individual, but on putting the customer at the absolute centre of what we are trying to do.
Unravel: What other mindset shifts are we seeing?
Ms Chatterton: We’ve been seeing some signs of moving gradually towards this approach centred on infrastructure as a service, but the pandemic has brought a sense of urgency to the conversation.
Climate is a critical part of the dialogue, and we are all aware that Asia is central to the fight against climate change. This is also reflected in how infrastructure is being thought about. For example, in logistics, we’ve always looked at it from the perspective of changing urbanisation patterns, purchasing power of the middle class and their aspirations, etc., but never from the point of view of climate or of energy efficiency. The pandemic and the urgency of climate change have forced us to layer conversations in a more nuanced manner.
How can we reduce pollution, how can we encourage changes in behaviour? We’re seeing digitalisation efforts and a decentralised approach to infrastructure – this is across the infrastructure space, be it in the logistics space or waste treatment or the storage of data. There is a strong focus on decentralisation such that, for example, energy generation is closer to the demand centres and hence consumption and usage is more efficient. This drive for efficiency in the context of climate is becoming central to infrastructure delivery.
We’re seeing a lot of innovation in Asia, so I think it is a combination of the sense of urgency because of COVID-19, the speed of innovation here in the region and the growing desire to be a responsible citizen with the management of resources that is changing the rules of the game. How can we do more with less?
Isabel is IFC’s regional industry director, Infrastructure and Natural Resources, Asia and Pacific, based in Singapore. For seven years prior to her current role, Isabel was the Regional Manager for PPP Transaction Advisory Services, initially for South Asia based in Delhi, and subsequently in Singapore. Before joining IFC, Isabel held various positions in World Bank operations in the urban sector in the Middle East and North Africa region, the water sector in Latin America, and the transport, power and urban sector in South Asia. Before joining the World Bank in 2001, Isabel worked in emerging markets and Western Europe for WS Atkins in the UK as Senior Management Consultant; working on infrastructure finance in Thailand, Argentina, Barbados, Qatar, the UK and Europe.