AN ASEAN HUB HAS BEEN LAUNCHED BY THE SUSTAINABLE DEVELOPMENT INVESTMENT PARTNERSHIP WITH THE GOAL OF CHANNELING A MIX OF PUBLIC, PRIVATE AND CHARITABLE MONEY – CALLED BLENDED FINANCE – IN ORDER TO FUND ASIA’S US$26 TRILLION NEED FOR INFRASTRUCTURE BY 2030.
The World Economic Forum (WEF) on Asean 2017 saw the launch of a new platform to support infrastructure finance in Southeast Asia, with Cambodia being the first regional government to sign up. The new SDIP Asean Hub was developed by the Sustainable Development Investment Partnership (SDIP), with the goals of supporting infrastructure development in the Southeast Asian region by assisting local projects to achieve funding and promoting blended finance.
Blended finance consists of the public, private and charitable money for investing into development projects, and serves as a key source of funding for projects that commercial or institutional investors are adverse to due to project risks. The SDIP is an initiative by the Organisation for Economic Cooperation and Development (OECD) as well as the WEF, and consists of 35 global governments, banks, pension funds and charitable organisations.
Thus far, the Asean Hub has drawn the involvement of Cambodia, Standard Chartered Bank, Eastspring Investments, global financial institutions the International Finance Corporation and the Multilateral Investment Guarantee Agency.
Karby Leggett, Head of Public Sector, Asia, at Standard Chartered Bank, spoke at the press conference on the Hub’s launch, explaining: “We see the SDIP Asean Hub as an action-oriented platform to see and consider critical infrastructure projects and review them for financing, especially projects deemed by the market to be unbankable.” He further explained that blended finance serves as a “cutting-edge solution” to financing Asia’s infrastructure needs and noted that this new initiative will “have a fundamental impact in unlocking financing.”
An estimated US$26 trillion worth of investment is needed in Asia by 2030 to resolve a serious infrastructure shortage that threatens to stunt the growth of the region’s fast-growing countries, according to the Asian Development Bank.
A key backer of the Asean Hub, Eastspring Investments, which is the Asian asset management business of insurance giant Prudential and manages US$146 billion in assets, was welcomed as the SDIP’s newest member. Donald Kanak, the chairman of Eastspring chairman explained that the insurance industry can also be a good investor in infrastructure, and that the sector looks for projects with “stability, strong economics, past social and environmental due diligence”. At a press briefing in Phnom Penh, where the WEF on Asean meeting was hostedfrom 10 to 12 May, he further noted: “we view SDIP as a platform to bring public and private sector together.”
Support for the Asean Hub has already been expressed by one Southeast Asian country. Cambodia’s vice-chairman of the Supreme National Economic Council and secretary of state of the Ministry of Economy and Finance, Vongsey Vissoth, indicated that country had joined the hub in order to share and learn best practices from financial institutions and governments both globally and regionally.
In a statement, he said that “it (participating in the Hub) will help to pave ways for more sizeable projects and mobilise capital for critical infrastructure, which aims to improve the competitiveness for sustaining the country’s long-term growth.” To begin, the initial activities of the hub will be to engage countries in Southeast Asia and evaluate the project pipelines, as well as offer assistance for their achievement. Vissoth also noted that Cambodia will host the first event of the SDIP this year.
The establishment of the Asean Hub comes nearly one year after the Africa Hub was launched.
In response to a question from Eco-Business on the role of SDIP role in light of the recently established Asian Infrastructure Investment Bank, a China-led development bank, Standard Chartered’s Leggett explained that both entities have “critical” roles to play and described AIIB as a “complementary institution”. He said: “there is a great opportunity to cooperate together between SDIP and AIIB, and the capital resources that AIIB bring to bear through its robust equity capitalisation will be a deciding factor.” He also noted that the need for infrastructure now and in the future is an issue too large for one party to resolve by itself, and each can mobilize resources in distinct ways. Vissoth added: “If there’s competition, it’s friendly competition.”
The 26th World Economic Forum on Asean attracted participation from over 700 business, government and civil society leaders from 40 countries, and the meeting’s theme was Youth, Technology and Growth: Securing ASEAN’s Digital and Demographic Dividends.