Private sector specialists added their backing yesterday to a
proposed infrastructure fund designed to help finance $8
trillion worth of Asian projects over the next ten years
but warned that implementation will be tough.
A fund dedicated to providing long-term capital for projects
would be most welcome at a time when commercial banks are
reluctant to commit liquidity, said Conor McCoole, head
of project and export finance for Asia at Standard Chartered in
A joint report published on Sunday by the ADB and the ADB
Institute called for the formation of a new Asian
Infrastructure Fund (AIF) and argues that 44 Asia and
Pacific region countries would need to spend $7.9 trillion up
to 2020 on projects including installing or upgrading transport
networks, energy networks and communications systems.
It also called for another $287 billion to be spent on
specific regional projects, with the combined
investment to add $1.6 trillion or 10% to developing
Asias GDP by 2020.
The reports projections for spending needs are far higher
than previous estimates, while it also proposed a new range of
But the report is issued at a time when Asian projects are
being derailed by a lack of financing. Singapores plans
for a national stadium complex, which required over $1 billion
of long-term debt have been delayed, raising big questions over
the ability of the planned AIF to attract private sector
The ADB and ADBI propose that the new Fund would mobilize
resources from governments, development banks and the private
sector in order to finance what it calls bankable
regional infrastructure projects. The AIF would be a separate
legal entity capable of issuing bonds and investing through its
It is not yet clear whether any capital raised by the fund
would be guaranteed by the ADB or any other institution, which
bankers said may be necessary if it was to attract private
Bankers cautioned that the issue of respective contributions
from public and private sectors needs to be resolved. Rajeev
Kannan, head of project finance for Asia at SMBC in Singapore,
said: Government agencies have to re-think how they
structure projects. The quantum of funds available from
international banks has been affected [by the crisis].
Projects in China, Thailand and India are still able to access
funding from domestic banks, but developments in other
countries such as Indonesia are more at risk because of their
dependence on international investment, Kannan said.
The ADB/ADBI report also proposes a Pan-Asian Infrastructure
Forum (PAIF), bringing together Asian governments and other
key stakeholders in a grand coalition to plan and
implement regional projects a traditional sticking point
for private sector backers.
Ashley Wilkins, head of capital raising and financing for Asia
Pacific at Societe Generale, said: Cross-border projects
are the most difficult you can ever do. The issue is always how
to make these bankable.
The United Nations Economic and Social Commission for Asia and
the Pacific (Escap) several years ago came up with a grand
design for a Pan-Asian Highway and a Pan-Asian Railway Network.
But what they did was just a vision, says Masahiro
Kawai, Dean of the Tokyo-based ADBI. This sort of vision
was very useful, but how to make it happen is an important
The ADB/ADBI report envisages cooperation among numerous
agencies, including Escap. Escap Under-Secretary General
Noeleen Heyzer told Emerging Markets
: This a
partnership that works, with the comparative advantages of each
institution being leveraged in the best possible way.