ASEAN launches regional fund for critical infrastructure needs

MANILA: The Association of South East Asian Nation (ASEAN) today announced the region's first and largest financing firm - The ASEAN Infrastructure Fund ( AIF)-- to finance the critical infrastructure needs of the region with an initial equity of USD 485 million.

"This is a watershed moment for ASEAN nations working together to finance infrastructure projects that will boost trade, foster economic growth and create more job opportunities for the half a billion people who call ASEAN their home," said Rajat Nag, Managing Director General of ADB.

The AIF, a regional cooperation exercise that seeks to benefit all, is set to commence operations following its Board's first meeting on the sidelines of the Asian Development Bank's (ADB) 45th Annual Meeting.

The ASEAN Infrastructure Fund will finance the development of road, rail, power, water and other critical infrastructure needs, which are estimated to require about USD 60 billion annually.

This initiative would recycle some of the USD 700 billion foreign exchange reserves of the region for its benefit, Nag said.

The ADB will administer the Fund and will also additionally co-finance every AIF project.

The Fund will be domiciled in Malaysia. The ADB's due-diligence, the social and environmental safeguards, indigenous resettlement safeguards and monitoring of implementation should encourage governments and private sector to participate in these projects, he said

For the first five years, financing would be confined to sovereign projects and once the AIF builds a track record, it could be extended to non-sovereign projects as well.

The ASEAN Infrastructure Fund will finance approximately six projects a year, with a USD 75 million lending cap for each project.

Criteria for investments include their potential to bring down poverty, increase trade and bolster investment.

The ASEAN Infrastructure Fund's total lending commitment through 2020 is estimated at about USD 4 billion which, with co-financing by ADB and other financiers, is likely to exceed USD 13 billion.

With ASEAN countries holding over USD 700 billion in reserves, the Fund could offer an avenue for recycling the region's resources for its growing infrastructure requirements.