The Monetary Authority of Singapore is now consulting the industry on the launch of an infrastructure debt takeout facility to facilitate the transfer of infrastructure debt from banks to institutional investors.
Singapore Deputy Prime Minister Tharmann Shanmugaratnam said at the World Bank Infrastructure Finance Summit in Singapore last week that infrastructure debt is an underdeveloped asset class in the capital markets, where he saw an opportunity.
The total size of global assets under management by institutional investors is estimated at $57 trillion, with around 3 percent of those assets allocated to infrastructure debt and equity. A small fraction of this, estimated at around $0.1 trillion globally or less than 0.2 percent, is allocated to infrastructure debt.
Shanmugaratnam believes the measure will help ease financing conditions in the medium term. Banks can better optimise and recycle capital to support project financing, while encouraging involvement of institutional investors.
Working with the World Bank Group and other partners, Singapore also announced two other initiatives including the creation of consistent project documentation for its public-private partnership (PPP) projects, and the establishment of infrastructure asset benchmarks.
The former aims to reduce the non-commercial risks in PPP contracts, ensuring project quality and consistency. The latter is set to help institutional investors scale up their infrastructure exposure and provide a clear view on the asset class’s expected performance and risks.