A $13-BILLION infrastructure fund has been launched by the Association of Southeast Asian Nations (ASEAN) and the Asian Development Bank (ADB) to finance major projects across the region.
The facility seeks to pave the way for an ASEAN infrastructure boom as well as to provide another avenue for member countries to mobilize their robust foreign reserves.
The infrastructure fund will have an initial equity contribution of $485.2 million, of which $335.2 million is to be provided by ASEAN and the remaining $150 million by the ADB.
Malaysia is the largest ASEAN contributor with a $150-million investment, followed by Indonesia with $120 million, the ADB said in a statement. The Philippines and Singapore reportedly pitched in $15 million each.
The infrastructure fund will be based in Malaysia as a limited liability company. The Manila-based ADB will administer it to ensure that safeguards and due diligence are an integral part of financed projects.
ASEAN has committed to lend $4 billion through the fund until 2020, while the ADB will finance roughly $9 billion. Approximately six infrastructure projects can secure funding each year. The projects will be selected based on their economic and financial rates of return and potential impact on poverty reduction.
The ADB noted that over the next decade, ASEAN countries will need approximately $60 billion a year for capital outlays.
The region has “a fraction” of the roads and railways found in the Organization for Economic Cooperation and Development. ASEAN also has “dramatically lower” electricity and clean water coverage, the ADB added.
“The ASEAN Infrastructure Fund will help ensure the 600 million people who call our region home will have greater access to energy, clean water and sanitation, and better forms of transportation,” acting ASEAN Chair and Indonesia Finance Minister Agus D.W. Martowardojo said.
Malaysia Second Finance Minister Dato’ Seri Ahmad Husni Mohamad Hanadzlah hailed the fund as the “largest ASEAN-led initiative in the association’s history.”
In the future, the fund will also issue debt papers which can be purchased by ASEAN central banks.
“ASEAN nations possess substantial foreign reserves but these funds have largely been invested outside of ASEAN, and outside Asia. By establishing the ASEAN Infrastructure Fund, ASEAN is taking a major step towards investing more of its resources in its own development needs,” ADB President Haruhiko Kuroda said.
ASEAN countries hold over $700 billion in foreign reserves, ASEAN Secretary-General Surin Pitsuwan noted.
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By: Diane Claire J. Jiao
Source: Business World, Sept. 25, 2011
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