Eastern promises

By the standards of large inter-governmental shindigs, last month’s Asia-Pacific Economic Cooperation (APEC) summit was remarkably productive. For one, it saw the US and China reach a breakthrough in talks on eliminating duties on IT products, a deal that could lead to the first major tariff-cutting agreement at the World Trade Organisation in 17 years.

The second major announcement also aimed at boosting connectivity throughout the region – albeit in more concrete terms: Chinese President Xi Jinping revealed his intention to deploy a $40 billion “Silk Road Fund”, which will look to drive investment into the transportation infrastructure needed to cement an Asian economic belt stretching to Western Europe and the Middle East.

No details were provided at the time on how the fund would be structured and when it would start its operations. But the official China Securities Journal later said that a “Marine Silk Road Bank” would be established to help revive land routes and maritime links across the region, with a minimum paid-in capital of CNY5 billion (€654 million; $816 million). The $40 billion fund is also expected to work alongside the Asian Infrastructure Investment Bank, a $50 billion lender proposed by China and formally created in October.

This determination to work towards a more cohesive regional approach may reassure Beijing’s Southeast Asian neighbours, which sometimes see ominous signs in China’s increasingly assertive territorial claims in the surrounding seas. But a number of them haven’t been waiting for a pan-continental initiative before launching their own, ambitious infrastructure plans.

In October, the Philippines’ National Economic Development Authority Board, led by President Benigno Aquino, approved 12 infrastructure projects worth over PHP300 billion (€5.3 billion; $6.8 billion). Six of them – collectively budgeted at $3.67 billion, are set to be implemented as public-private partnerships (PPPs). These add to the pipeline of 50 or more deals presented to potential backers over the summer during a global investments roadshow led by the country’s PPP Center, established in 2010 to advocate policy reforms and support the delivery of PPP projects.

Shortly after, Indonesia announced the tendering of three major transportation projects aimed at bolstering connectivity between the capital Jakarta and key areas of growth in the country. These projects, which include the Soekarno-Hatta International Airport Railway, the development of the South Sumatra monorail and Bandung monorail in West Java, all to be run as PPPs, were announced just two weeks after Joko Widodo was officially inaugurated as President. The former Jakarta governor campaigned on a resolutely pro-infrastructure mandate, with promises of 10 new airports and 2,000 kilometers of roads.

A third example of an infrastructure-minded nation is Thailand, which last month launched a pilot infrastructure fund worth more than $600 million. The announcement was made by the State Enterprise Policy Office (SEPO), established in June this year by the National Committee for Peace and Order (NCPO), and paves the way for the creation of the country's first state-owned financing platform. It is part of a $75 billion infrastructure programme focused on transportation infrastructure unveiled last September by the NCPO.

These concomitant developments suggest impetus in the region for creating the long-term conditions needed to sustain economic growth.

Yet the eventual realisation of these ambitious programmes may still face major hurdles. Thailand’s volatile political climate, for instance, could easily derail plans to set up a fund initiated by a junta that seized power from the previous administration through a coup last May. Indonesia’s new president will have to implement his vision for the country’s infrastructure amid fierce legislative opposition. The Philippines’ pipeline, supported by a wider swathe of political forces, is well advanced – but getting large amounts of institutional money to back individual projects may still prove a lengthy exercise.

Such efforts nevertheless show that, across the region, a number of leaders are seeing private investment as key to success. “Under our administration, we get the infrastructure we need quicker than if we remained reliant on our budget process. On top of that, investors can see clear potential for profitability,” said the Philippines’ Aquino during an eight-day European tour in September.