asean infrastructure gap

China’s Belt and Road Initiative (BRI) is an ambitious undertaking that seeks to revive trade along two ancient land and sea routes, benefitting over 60 countries in the process. The bank is present in 45 Belt and Road markets and has deep insights into how this infrastructure and trade initiative can foster investment and growth in ASEAN. Our capabilities span FX solutions, M&A financing, loan syndication, debt capital markets products, risk structuring, trade and cash management solutions and financial market products. The Master Plan on ASEAN Connectivity (MPAC) outlines a web of mutually reinforcing connectivity dimensions: in addition to efficient physical infrastructure networks, the web includes policy coordination, people-to-people … That way, countries can identify the right financing approach for each project accordingly. More consistency in identifying E&S risks will improve the way these risks are mitigated not only at the planning stage but also throughout the project lifecycle. • Financing gaps prevalent in middle and low-income countries. Financial institutions tuned into the global conversation on sustainability have set sights on ASEAN’s infrastructure sector, which holds one of the largest green finance opportunities in the region – an estimated US$1,800 billion from 2016 to 2030. Financial institutions have either adopted international sustainability standards, frameworks or principles, or developed their in-house policies and guidelines to better identify and mitigate E&S risks. They are a great way of raising long-term money, especially because they are aimed at projects that are innovative and that are in the renewable energy sector. Infrastructure investment in ASEAN from 2016 through 2030 is estimated to be about US$2.8 trillion, according to the Asian Development Bank (ADB). Digital Infrastructure financing gap in Asia is growing significantly, estimated to reach $512 billion by 2040. Singapore, for instance, established the Infrastructure Asia office in 2018 to link up industry players, multilateral development banks, and governments with infrastructure investment opportunities in the region. ASEAN’s Infrastructure Gap: An Opportunity for Sustainable Finance, https://www.gov.sg/~/sgpcmedia/media_releases/mof/speech/S-20190816-3/attachment/Transcript%20of%20Speech%20by%20Minister%20Indranee%20at, %20Singapore%20Regional%20Infrastructure%20Summit.pdf, https://www.dbs.com/iwov-resources/images/sustainability/img/Green_Finance_Opportunities_in_ASEAN.pdf, https://www.adb.org/sites/default/files/publication/227496/special-report-infrastructure.pdf, https://www.mas.gov.sg/news/speeches/2019/keynote-speech-by-mr-heng-swee-keat-at-the-omfif-global-public-investor-launch, https://www.pmo.gov.sg/Newsroom/SM-Teo-Chee-Hean-at-5th-Regional-Business-Forum, Commentary: ASEAN’s potential contributions to climate action, Commentary: RCEP trade deal an important step forward for the region, Commentary: Myanmar’s 2020 vote endorses NLD but does not resolve issues, Commentary: Changing climate risk to opportunity, Commentary: Singapore can help region emerge stronger, better, more sustainable, ASEAN played central role in driving RCEP trade pact, contrary to perception it is China-led (Straits Times), Sustainability and green finance to be factors in Singapore’s new infrastructure (The Business Times), Humanity’s role as environmental custodian offers hope amid Covid-19 gloom, says marine scientist (TODAY), ASEAN 2020: Singaporean experts evaluate RCEP as an important milestone of ASEAN (VNA), Luhut Pandjaitan Invites Singapore to Partner for Hydropower Development (Tempo). Beyond broad policy measures such as designing national sustainability plans or setting renewable energy targets, ASEAN governments need to consider more innovative means of catalysing sustainable infrastructure development. Foreign initiatives such as China’s Belt and Road Initiative and Japan’s Partnership for Quality Infrastructure promise investment into infrastructure-starved ASEAN countries. For example, Indonesian President Joko Widodo’s government plans to spend US$327 billion on a pipeline of 265 projects, and Philippine President Rodrigo Duterte has earmarked US$180 billion for railways, roads and airports. Are governments focusing on the right projects? Increasing population mobility and communication needs, as well as geographical and environmental factors around trade and sustainability, are also significantly driving demand for infrastructure. By putting in place measures to monitor and minimise the E&S impacts, financiers and project developers could enhance projects’ bankability and profitability. Surya: My favourite BRI project currently happens to be not in ASEAN but the Middle East. 1. [4] The city state is already a significant source of funds and expertise for infrastructure projects in the region – an estimated 60 per cent of ASEAN projects have received loans or advisory services from Singapore-based banks. Domestic structural changes and slowing economic growth have prompted many ASEAN governments to make attracting infrastructure investment a top priority. The disparity in approaches suggests that these E&S risks are unlikely to be dealt with in a consistent manner. Surya: Private investors are increasingly open to long-term infrastructure investments. For BRI projects, we provide clients with access to the renminbi market and other global currencies, and offer guidance on ways to leverage liquidity. Banks can add value by looking at the viability of each project and advise how to make it feasible by considering numerous aspects including partnerships, financing and risk management. Especially for megaprojects, like BRI, which need extensive cross-border collaboration and partnerships. Our international network and local market expertise allow us to effectively connect our clients seeking partnerships with local governments, and even multinational companies. Also, if you look at projects which are innovative, like converting plastic waste into renewable energy, you have a huge amount of green bonds that are starting to emerge. Challenges in addressing the infrastructure gap The infrastructure deficit across ASEAN is a very well established fact as a result of many factors, such as policy decisions, lack of bankable projects, weak governance and a lack of transparency. Leveraging its deep market knowledge, as well as industry and product expertise, Standard Chartered works with investors, corporations, and governments globally, advising and connecting them to the right local and international partners. So, that is one opportunity that as a bank and with our deep links in China and ASEAN, we are keen to facilitate more of, and be the conduit for corporates and governments alike. Government financing accounts for 90 per cent of infrastructure expenditure in Asia, compared to a worldwide average of 40 per cent. However, the region may be at a turning point. You will also know that there is a good amount of private equity money in the market, and private equity investors are looking for the right yield for the right kind of assets. ASEAN countries could easily adopt best practices from each other, but this is rarely witnessed, notwithstanding the significant work being done in this area by ADB and the World Bank. In fact, they are currently only able to cover about 50 per cent of the total investment, said the report. The SIIA would like to specially thank HSBC for its generous support (including sponsorship) and our Knowledge Partner, KPMG in making this study possible. The ongoing drive towards an ASEAN Economic Community (AEC) reflects an understanding that deep integration needs more than traditional trade policy. To fill the region's massive infrastructure gap, some businessmen recommend the public-private partnership (PPP) route $60 billion a year needed to address ASEAN infrastructure gap … That trend will be a win for governments too. The long-term nature of many infrastructure projects means that we have no time to lose. Last year, we were involved in close to 100 BRI projects. ASEAN stands to be a key beneficiary with a number of major projects planned in the region. The IAI Work Plan has I think that is going to be a big opportunity. According to the Asian Development Bank (ADB), there is a US$100 billion funding gap that exists in the region today, even with the US$184 billion of infrastructure investments by governments. They can structure, underwrite, and syndicate significant sources of private funds. In 2015, Chinese President Xi Jinping said he hopes annual trade with those countries would outstrip US$2.5 trillion in a decade. The infrastructure gap – the difference in required infrastructure spending and actual investment spending – arises due to rapid urbanisation and population growth. gap in the ASEAN region from 2016 through 2030 is approximately US$2.8 trillion, or US$184 billion annually. All rights reserved. All rights reserved. The different economic and political systems are key to the gaps in ASEAN. Without taking the necessary steps to pursue sustainable infrastructure now, ASEAN’s current infrastructure growth may come at the cost of future generations. 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