Asia must tap savings, private sector to finance infrastructure -
ADB
Asia must be creative in finding ways to tap its multi-trillion
dollar savings and to mobilize private sector support for new
infrastructure needed to sustain growth in the coming years, said Asian
Development Bank (ADB) President Haruhiko Kuroda.
"The infrastructure challenge for developing Asia is one of the most
daunting we face today. We must work diligently to be innovative, yet
financially responsible, in mobilizing Asian savings to deliver
successful, sustainable and robust infrastructure projects," Kuroda told
delegates at the Infrastructure Finance Forum. The event, jointly
sponsored by ADB, the APEC Business Advisory Council and Japan Bank for
International Cooperation, was held in Yokohama, Japan recently.
Gross domestic savings in emerging Asia reached close to $4 trillion
in 2009. Much of this large cash pile has been underutilized, with
regulatory obstacles, currency mismatches and underdeveloped capital
markets hindering broader financing of essential infrastructure.
The needs are immense with ADB calculating that about $8 trillion in
new infrastructure investments will be required in the region through to
2020 to support current levels of economic growth.
Of the infrastructure needs, energy and electricity will take up 40%
of the total, followed by transport at about 25%. Social infrastructure
for education, health, water and sanitation, and other public goods will
account for another 25%.
The balance will be mainly investments in infrastructure for
telecommunications.
With the public sector unable to meet the immense costs on its own,
public-private partnerships are essential, and governments should look
to strengthen existing legal and regulatory frameworks to attract more
private investors and finance from funds and institutional investors.
"Infrastructure funds and local institutional investors, like pension
and provident funds, can channel Asian savings to help finance
public-private infrastructure projects," said Kuroda.
Further development of domestic capital markets and more local
currency lending will also help address currency mismatches which are a
deterrent to investors in the sector.
Development agencies are central to expanded investment, and here ADB
is actively engaged through activities such as the ASEAN+3 Asian Bond
Markets Initiative which is working to deepen domestic capital markets
and promote local currency bond issues, and a pilot Credit Guarantee and
Investment Facility, which is expected to be operational next year
within ASEAN+3 countries.
ADB also works closely with development partners on initiatives such
as the Asia Infrastructure Project Development Company which aims to
attract private investors to the water sector in the People's Republic
of China, and the Cities Development Initiative which invests in public
transport, methane capture, energy efficiency and eco-industrial estates
and systems around the region.
ADB's infrastructure-related investments are expected to exceed $8
billion annually - or about two-thirds of all its lending - over the
next 10 years.
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