Can public–private partnerships play a pivotal role in addressing income inequality, educational outcomes, and digital infrastructure in Asia and the Pacific?

by Hazwan Haini

| Photo credit: Asia Pathways

Addressing inequality requires a new strategy. While there have been many moderately successful policies for addressing income inequality, such as increasing minimum wages, expanding taxation, and investing in education (Piketty 2014; United Nations 2020), strong economic growth in Asia and the Pacific has still led to rising inequality due to the dynamic structural changes across the region (United Nations 2018) juxtaposed against increasingly concentrated income and wealth.

The digital divide

Policymakers in Asia and the Pacific need to tackle a new form of inequality—the digital divide. The digital divide relates to the disparities between those with access to technology and those without (van Dijk 2019). While this is not a new concept, the recent coronavirus disease (COVID-19) pandemic, along with its social distancing and lockdown measures, has forced the use and adoption of technologies that require remote learning, working from home, and the use of other online platforms.

This has exposed the region to serious infrastructure gaps and digital inequalities that have further exacerbated social and economic inequalities and educational outcomes for many children in the region. A recent report by UNICEF and ITU (2020) outlines a bleak scenario: “students would walk to their nearest schools and stand outside their gates to obtain access to Wi-Fi.” Thus, digital inequalities must be addressed to tackle income inequality, particularly in Asia and the Pacific regions, where internet penetration rates for developing and least developing countries are lower than 50% (ITU 2019).

Digital inequality and education

The main issue is that addressing infrastructure gaps is traditionally not a common policy prescription for tackling inequalities. Yet, COVID-19 lockdowns and social distancing measures have shown that digital inequalities can affect educational outcomes.

Previous research has shown that educational outcomes and the quality of education matter in addressing persistent inequality, as inequalities can begin at a very young age (Antoninis et al. 2016). Additionally, poorer students are less likely to have equipment such as computer screens and more likely to rely on mobile phones to take part in classroom activities. More importantly, investment in the digital economy can reduce inequality in the long run, especially when there is a continuing trend of demand for new skills related to the digital economy (UNICEF and ITU 2020).

What can governments do?

The obvious answer is for governments to invest in infrastructure. However, this is easy to prescribe but difficult in practice. Governments are increasingly faced with excessive fiscal burdens and cannot support investments in the digital economy (Asian Development Bank 2017). Additionally, governments lack the human capital capacity to develop this modern infrastructure as it is a drastic upgrade from legacy telecommunications infrastructure (ITU 2019).

As a result, many governments in Asia and the Pacific face an investment gap in the infrastructure of around 2%–5% of the gross domestic product, which must be met by the private sector (Asian Development Bank 2017). On the one hand, this infrastructure gap can be met through foreign direct investment. Yet, such infrastructure investment by foreign firms can be difficult as the telecommunications industry is a sensitive industry that concerns national security.

Public-private partnerships as a potential solution

Public–private partnerships are an increasingly common way to finance general infrastructure development. These partnerships are arrangements between a government and a private entity to build and operate a project. A well-structured public–private partnership will ensure that the risks involved in developing a large infrastructure project are transferred to the private sector. This is crucial, particularly for the development of the digital economy. Risk transfer is beneficial for society as it aligns private firms with socially-oriented initiatives. Additionally, as a stakeholder, the government benefits from the technical knowledge of the private sector, resulting in an improved and competitively developed digital infrastructure.

Fiscal burdens and a lack of human capital capacity within the government can result in inefficient digital infrastructure, while foreign investment can raise national security concerns. Public–private partnerships can balance these risks and potentially develop digital infrastructure that is affordable and accessible to marginalized communities. This can potentially reduce economic inequalities in the long run as future forms of education are delivered equally and effectively. However, in the short run, a transition toward the digital economy poses potential risks to jobs in low and middle-skilled categories that can temporarily worsen inequality. Governments must take this into account and ensure upskilling provisions are in place. Thus, public–private partnerships are crucial to addressing inequalities through digital infrastructure investment.

Hazwan Haini

ABOUT THE AUTHOR: Hazwan Haini is a lecturer in economics at the School of Business and Economics, Universiti Brunei Darussalam, Brunei Darussalam. This essay is the third-place winner of the Asian Development Bank Institute’s 25th Anniversary Essay Contest. Entrants were asked to share their views on socioeconomic challenges that will significantly impact Asia and the Pacific over the next decade and should be prioritized by think tanks.

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