Heng Swee Keat: Asean needs to promote itself as an investment bloc

Finance ministers call for more effort in attracting private capital for infrastructure projects

Asean finance ministers demonstrated their powers of persuasion yesterday, as they pitched their countries' infrastructure projects and the measures that mitigate the risks for investors.

Led by Singapore Finance Minister Heng Swee Keat at the World Bank Singapore Infrastructure Finance Summit, they called for a collective effort, which would be more efficient in meeting international investors' concerns.

While Asean countries have been successful in tapping the private capital market for infrastructure financing, it is also time to step up, said Mr Heng, the keynote speaker.

Last year, Indonesia's second biggest power producer, PT Paiton Energy's US$2 billion (S$ 2.6 billion) project finance bond attracted some US$9 billion orders. "The opportunity set is large but much work is needed to mainstream Asean infrastructure financing as an asset class,"he said.

The Asian Development Bank estimates Asean's infrastructure investment needs from 2016 to 2030 will total US$2.8 trillion.

Asean needs to increase the visibility of its investment opportunities and projects, he said, and promote itself as an investment bloc.

In the energy sector, there are about 77 renewable energy projects in hydro, solar, wind, geothermal and biomass. There are tremendous opportunities as demand for electricity in Asean is expected to grow.

In transport, rapid urbanisation and increased mobility have raised demand for infrastructure and more efficient networks. There are 219 road and bridge projects in the pipeline.

Mr Heng said Asean has to improve the bankability of its infrastructure projects. "The goal is to draw in private sector participation on projects that provide reasonable returns with reduced project volatility," he said.

Where the expected revenue may not cover costs fully, governments can step in to increase a project's bankability, by providing co-funding, raising user charges, or extracting additional funding from value created from the project.

Where there are sufficient revenues to cover the cost but exposure to certain risks remains high, risk mitigating measures such as government guarantees and credit enhancements can come into play.

Multilateral development banks can play a role too, he said, citing the World Bank International Finance Corporation Managed Co-Lending Portfolio Program. The programme facilitates the participation of institutional investors in infrastructure by allowing them to invest in infrastructure loans.

Mr Heng also called for standardised documentation, to provide greater assurance to investors in appropriately drafted public private partnership contractual provisions.