From roads to railways, bridges, ports and metros, an unprecedented volume of new infrastructure is being built across South Asia and ASEAN. City centers are being transformed, and so are the prospects of the 2.4 billion people who live and work in these fast-growing regions. Yet, ASEAN and South Asia will need a lot more construction – and the way infrastructure projects are scoped, structured, financed and supported will also need to change – in order to meet their full economic potential. Governments and businesses agree that public-private funding is key to narrowing the infrastructure gap.
A Growing Investment Hub
It’s encouraging that the World Economic Forum (WEF) and Organization for Economic Cooperation and Development (OECD) are to form an ASEAN hub, bringing together governments, banks, pension funds and philanthropists to facilitate infrastructure projects worth USD100 billion, but more needs to be done.
The Asian Development Bank (ADB) estimates that developing Asia will require investment worth USD26 trillion by 2030 to meet its infrastructure needs. Securing this funding is crucial. Improved infrastructure in South Asia and ASEAN will help strengthen regional trade and investment, and drive trade with the rest of the world.
In the current, sustained low-yield global economic environment, infrastructure projects offer investors attractive long-term returns
In our experience, there is no shortage of capital for infrastructure projects. On the contrary, we’re seeing unprecedented demand for well-structured initiatives with the right balance of risk and reward. In the current, sustained low-yield global economic environment, infrastructure projects offer investors attractive long-term returns.
Public-private partnership (PPP) schemes are a valuable means of addressing a lack of public funding for infrastructure, but it also takes strong relationships between banks and investors to make such projects a success. Bank-investor-government collaboration as a three-way partnership is an even more robust and sustainable partnership.
Banks with experience of project financing understand the challenges faced by institutional investors, such as pension funds, sovereign wealth funds and philanthropic organizations, when investing in infrastructure. They use this expertise to ensure that projects are structured and funded to a level where they become attractive for investors to finance.
Striking A Balance
While governments focus their infrastructure agenda on the ‘hardware’ of getting projects agreed, financed and implemented, the availability of the right ‘software’, such as a stable policy and regulatory environment, cannot be underestimated. It’s important for governments to place as much emphasis on this as they do on attracting funding – especially as much of the ‘software development’ needs to happen long before an infrastructure project breaks ground.
When it comes to infrastructure, ASEAN and South Asia are paving the way – literally and figuratively
Skills are another kind of essential ‘software’. Governments need to build a labour force well-trained on new techniques to help make sure South Asia and ASEAN’s roads, railways and bridges are built in an efficient and environmentally-friendly way.
When it comes to infrastructure, ASEAN and South Asia are paving the way – literally and figuratively.
Nothing short of political will and strong partnerships – between governments, investors and banks – will deliver the full potential of this enormous wave of infrastructure investment.