New Structural Economics and Resource Financed Infrastructure
Pacific Economic Review, 21: 1 (2016) pp. 102–117 doi: 10.1111/1468-0106.12154
Posted: 6 Dec 2018
Date Written: October 10, 2016
Two new development banks have been established: the New Development Bank and the Asian Infrastructural Investment Bank (AIIB). However, what conceptual framework will they formulate? This paper addresses infrastructural financing issues from the angle of structural transformation as a strategy for global development. Based on the new structural economics (Lin, 2010, 2012a) we stress the ‘real’ side of transforming natural resources to productive assets using the resource financed infrastructure. As one of the innovative instruments, this approach could, first, combine two otherwise isolated supply chains, resource extraction and infrastructure building, and, thereby, bring developmental results many years ahead of what other conventional approaches could. Second, this could serve as one of the ‘least-cost’ options for developing countries, and benefit borrowers disproportionately due to its feature of ‘non-recourse’ loans. Finally, in a low-yield environment, the rate of return from investing in bottleneck-releasing infrastructure could be attractive to many investors. Future prospects of development financing, including the ‘one belt one road’ initiative are discussed.
Keywords: Infrastructure finance, resource financed infrastructure, new structural economics
JEL Classification: O10, F21, H54
Suggested Citation: Suggested Citation