So 2020 was truly challenging for many economies. First we had a global pandemic which by itself, was really a healthcare crisis. It threatens to overwhelm the healthcare infrastructure of many countries including the most developed countries. The response of the government to proceed to lockdown mode, which created a bit of an economic crisis as the force shut-downs dampened demand severely, threatening a whole lot of jobs. So they then have to mount a secondary response to the impact of the primary response of lockdowns.
And that was unemployment benefits or at least wage subsidies to large employers to keep jobs and hence businesses breathing. The stimulus became the ventilator for the economy as Covid-19 continued to spread and impacted global supply chains, air travel, jeopardising much-needed tourism industry in many countries.
Being able to put together a giant budget to pump-prime the economy is an opportunity for putting down investments which would have much longer term positive impacts on the economy. For most developing economies which lack infrastructure, there’s a encouragement from the Multi-lateral Development Banks to explore an ‘infrastructure-led recovery’; especially to take advantage of the low-interest rate environments to take on more debt from the international markets.
Most of these points are probably theoretically true but in reality, to invest into large scale infrastructure takes time, political will, and support from population who will not see the benefits of the infrastructure until much later. The immediate job creation angle will be important and there has to be trust that the budget is not being overly strained. The ability to first obtain that supply of capital at low price, while sizing up demand for the infrastructure at a time of lockdowns, uncertain future is extremely challenging. When we lack the alignment of these key ingredients, projects don’t take off. Even when great ideas are there, the financing appears to be available and there is a compelling vision for the infrastructure. And I wonder if this is the reason for how the KL-SG HSR project came to end in a whimper.
Instead of thinking of infrastructure as a ‘means’ of recovery, we should abandon the whole notion of recovery. People die from covid, businesses shut down from the lockdowns. Economies reconfigure. And there really isn’t ‘recovery’ per se. We ought to confess that the original system of the economy that relies on sectors like tourism, aviation, or other face-to-face services have their inherent weaknesses; hence there’s a need for us to keep building up our resilience.
And often, resilience comes from creating slack in the economy, from increasing supply capacity, and making room to grow newer industries. Infrastructure is a good way to do that; especially infrastructure that allows more business activities. In a safe-distanced world, we may move away from trying to exploit agglomeration economies, so building strong connections and logistic networks will be important. The story for the infrastructure needs to be well-thought out and aligns to a greater vision of the district, region, country. Infrastructure need not be part of a recovery or growth. Singapore successfully made infrastructure development part of our story, part of our culture. We’ve build a story around infrastructure as part of livelihood that contributes to the community if the community is willing to contribute for it. Planting that in the consciousness of people is important.