Part one of Asia’s solution

GIVEN WHAT THE Asian Development Bank (ADB) has worked out is a $750 billion per year funding requirement for Asian infrastructure over the next decade, a new initiative should be warmly received in that part of the world.

The initiative will see the World Bank expand its Singapore office, growing it to 70 staff over the next three years and providing access to various services including the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which provides political risk insurance for private sector investors and lenders.

Furthermore, the World Bank’s International Finance Corporation (IFC) will team up with the Government of Singapore Investment Corporation to launch a $1 billion global infrastructure fund for non-BRIC (Brazil, Russia, India, China) emerging markets. Many of Asia’s fledgling infrastructure markets will no doubt benefit from this.

Speaking of the initiatives, World Bank president Robert Zoellick expressed the hope that they would “unlock private sector interest” and “bring more investors to the table”.

The announcements come almost a year after Bindu Lohani, a senior figure at the Asian Development Bank, spoke at Infrastructure Investor’s Asia Forum of the various methods that were being used to lure finance to the region. Insurance designed to eliminate political risk (part of the new World Bank offering) was mentioned, along with such things as the development of a municipal bond-type market and local currency bonds, such as China’s panda bonds.

But for many at the event, the lack of finance was not the only – or even the main – issue. In the case of public-private partnerships (PPPs), it seemed that what was really lacking was an efficient interface between public sector procuring authorities and the private sector.

In other words, the more deep-rooted problem was related to process or structure rather than capital.

Specifically, attendees cited complaints such as the following: a lack of communication between different
government ministries (including occasional turf wars between planning ministries and ministries of finance, as well as complications arising from competing priorities); the fact that PPP advisers lacked transactional experience; and high-profile marketing campaigns that ultimately served only to highlight failure rather than success.

Two provisos: it was acknowledged that progress is being made in many locations (Indonesia just one example) and also that Asia is not alone in a global context in having issues such as these to address. The issues raised served as a reminder, however, that Asia’s infrastructure gap is not all about capital.