The Asian Development Bank (ADB), in partnership with finance ministers and central bank governors from member countries of the Association of Southeast Asian Nations Plus Three (ASEAN+3), launched a report recently entitled, “Reinvigorating Financing Approaches for Sustainable and Resilient Infrastructure in ASEAN+3.”
The ASEAN+3 is comprised of the 10 ASEAN member states, plus the People’s Republic of China, Japan, and the Republic of Korea.
The report, which was launched on the sidelines of ADB’s 56th Annual Meeting, presents the latest collection of innovative financing approaches for private, public, and institutional investors to collaborate on resilient and future-ready infrastructure.
Its goal is to support sustainable development and post-pandemic growth in the ASEAN+3 economies.
The report also offers an “Asean+3 voice” to the international discourse on infrastructure financing, with a focus on the needs, challenges, and opportunities in developing Asian economies. The full report can be accessed through this link.
The value of innovative financing
“Innovative financing mechanisms are needed to attract private and institutional capital — along with public funds — to fund critical infrastructure that will help create jobs and generate revenue for local economies,” said Woochong Um, ADB Managing Director General, in a press release. “A conducive policy and regulatory framework must be built to reduce risk, offer credit enhancements and de-risking facilities, and provide investment opportunities for all stakeholders to collaborate.”
For his part, Indranee Rajah, Singapore Minister in the Prime Minister’s Office and Second Minister for Finance and National Development, said, “Raising investor awareness of innovative financing approaches will be key to encourage greater investments in marginally bankable projects.”
“The critical success factors from actual case studies in the report provide useful lessons for governments seeking to apply the financing approaches in their respective economies,” he added.
According to ADB, developing Asia will need to invest US$13.8 trillion, or US$1.7 trillion annually, in infrastructure from 2023 to 2030 to sustain economic growth, reduce poverty, and respond to climate change.
For ASEAN economies, the total infrastructure investment need is estimated to be at least US$2.8 trillion for the same period or US$184 billion annually.
Narrowing the infrastructure financing gap will be critical for economies to meet their economic and social goals. Private sector participation is key.
Innovative finance mechanisms to scale up a growing need
Currently, more than US$200 trillion of private capital is invested in global capital markets. Innovative finance mechanisms are needed to catalyze private and institutional finance for infrastructure and to help in scaling them up to meet the growing needs of the region as ASEAN+3 economies bounce back from the pandemic.
An example is the blending of different financing instruments to de-risk investments and lower the cost of capital.
The report also provides a user-friendly policy toolkit on the approaches for public–private partnerships, including how governments can collaborate with companies, investors, and financing agencies through these financing platforms.
With the wider adoption of these financing solutions, governments can strategically employ public funds to attract private investment, accomplish key development goals, meet shareholder expectations for investment returns, and make the ASEAN+3 region a more attractive destination for infrastructure investment.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, the ADB is currently owned by 68 members — 49 coming from the region.