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US$ 8 Trillion Needed to Bridge ASEAN’s Infrastructure Gap

Fon Mathuros, Senior Director, Head of Media, Tel.: +41 (0)79 201 0211, Email:fma3a926a7759@0606cd8dc2aa9weforum.org
  • The primary obstruction to accelerating infrastructure development is a lack of bankable projects
  • Governments need to better determine which projects to fund and which projects can be facilitated through PPPs
  • Decisions made on infrastructure today will either obstruct or accelerate the growth of future generations
  • For more information on the World Economic Forum on East Asia 2014: http://wef.ch/ea14   

Metro Manila, Philippines, 23 May 2014 – With the establishment of the ASEAN Economic Community, countries in East Asia must generate bankable projects to attract the capital required to harness the huge economic potential and meet an estimated $8 trillion in infrastructure needs by 2020, participants were told at a session on strategic infrastructure at the World Economic Forum on East Asia.

Tackling the challenge of accelerating strategic infrastructure in ASEAN, panellists agreed that the underlying problem is primarily financial. “A lot of investors are looking at this region; there is plenty of money,” said Don Lam, Chief Executive Officer and Co-Founder of the VinaCapital Group in Vietnam. “It just depends on what is bankable.”

The problem is not a lack of liquidity in capital markets but a suitable division of projects. Stephen P. Groff, Vice President, Operations 2, Asian Development Bank, Manila, said there is a misconception that the private sector must fund all infrastructure projects. Noting that investment from the private sector and government is about half of what it should be, he also stressed that 60% of infrastructure investment must come from the government.

Describing current conditions as a “golden era of financing for government”, Enrique K Razon Jr, Chairman of the Board and President of the International Container Terminal Services Inc in the Philippines, agreed that governments must accept that not all infrastructure projects were suited to public-private partnerships (PPPs). “It’s hard for the private sector to make a return on building runways at airports, for example, while power plants are better suited to the private sector,” he said.

Michael Whalen, Vice-President, Structured Finance, at the Overseas Private Investment Corporation, USA, said the risk-sharing elements of PPPs would also require regional financial integration and outside help. “If you look at the capital requirements needed to achieve the investments required, it cannot be done solely by the government or financing, or even local capital markets alone,” he said. “It will require FDI, and that needs a sustainable investment climate.”

The diverse 10-nation ASEAN grouping is home to more than 600 million people with a combined GDP of more than $2 trillion, but infrastructure in less-developed countries such as Myanmar presents a huge challenge, not only in terms of hard infrastructure but also supporting regulatory and institutional frameworks.

Undergoing huge transformations after decades of isolation, U Win Shein, Union Minister of Finance and Revenue of Myanmar, noted the country was working to balance the need to develop fast and develop right. “Sometimes we are reluctant to develop rapidly because we want to learn from the lessons available,” he said. “We want to move forward, but we need assistance.”

Participants looked beyond ASEAN’s megacities and called for infrastructure development in remote areas and for a synchronicity between political vision and long-term goals. “Countries need to have a compelling vision and plans, and then make sure their infrastructure plans fit that vision, and that surpasses political cycles,” said Johan de Villers, Regional Division Head, Power Systems, South Asia ABB.

Speaking of the enormous opportunity to make a difference in the region, he said: “The technology is available, the finance is available. We have to act with courage and conviction. We are creating a legacy for future generations. The way we invest in infrastructure projects today will either hold future generations back or accelerate growth.”

The Co-Chairs of the World Economic Forum on East Asia are: Yolanda Kakabadse, President, WWF, Switzerland; Takeshi Niinami, Chairman, Lawson, Japan; Global Agenda Council on the Role of Business; Atsutoshi Nishida, Chairman of the Board, Toshiba Corporation, Japan; James T. Riady, Chief Executive Officer, Lippo Group, Indonesia.

Notes to Editors


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