Support grows for Asian infrastructure investment bank
10 October 2013
Category: News, Asia, China, Indonesia
By Asia Asset Management
While the Asia-Pacific does not lack for capital, the region needs platforms to raise funds for financing infrastructure projects, said government, business and academic leaders gathered in a seminar organised jointly by the Pacific Economic Cooperation Council (PECC) and the Boao Forum for Asia in advance of the Asia-Pacific Economic Cooperation (APEC) Economic Leaders' Meeting that started in Bali on October 7.
The Asian Development Bank (ADB) has estimated that Asia needs to invest US$8 trillion in infrastructure to avoid bottlenecks and to maintain the momentum for growth. At the seminar, many participants recognised that, while there is no lack of capital in the region, bankable infrastructure projects are few for various reasons including low returns, poor governance and the lack of technical expertise.
"A fundamental barrier within our region is a lack of willingness for governments to provide strong subsidy in some countries,” Mark Rathbone, Asia Pacific leader of capital projects and infrastructure at PricewaterhouseCoopers said.
To address the obstacles to infrastructure development, Chinese President Xi Jinping has proposed a regional solution. In an October 2 bilateral meeting with Indonesian counterpart Susilo Bambang Yudhoyono and in an address to the Indonesian parliament on October 4, President Xi said China would support the creation of an Asian infrastructure investment bank to provide financial support for infrastructure development in developing economies in the region.
At the seminar, President Xi's proposal received strong support. "An Asian infrastructure investment bank will hopefully lead to multilateral government participation to facilitate the infrastructure investment," Fang Fang, Asia vice-chairman of J.P. Morgan commented.
"It is very important to turn Asia's high savings rate into investment. China is serious about the financing solution for infrastructure in Asia," Zheng Xinli, permanent vice chairman of the China Centre for International Economic Exchanges, told participants.
"I hope that the example and lessons that China has learnt in providing excellent infrastructure for its economy in past 20 or 30 years can indeed be transferred into this infrastructure investment bank," Conor McCoole, managing director and head of project finance at Standard Chartered Bank said. "The proposal of China to initiate the infrastructure investment bank is very exciting."
While welcoming the initiative, others said that fundraising was not the only issue. There should be focus on the project preparation stage. "We need resources for good project development – such as funds for feasibility studies and procurement and draft contracts, which are expensive," noted infrastructure and public-private partnership specialist Laila Horton.
"Infrastructure building generates jobs, fuels growth and lays the foundation for structural reforms," commented Zhou Wenzhong, secretary general of the Boao Forum for Asia, emphasising that smarter and broader cross-border cooperation and more innovative approaches to planning and financing infrastructure projects are needed.
"Nothing moves without finance," concluded Djisman Simandjuntak, chair of the CSIS Foundation and of the Indonesia PECC Committee.