One of the challenges to developing sustainable infrastructure projects is funding, and the projected infrastructure requirements in Asia is estimated at $26 trillion from 2016 to 2030, Jin-Yong Cai, a partner at TPG Capital, told a seminar on the sidelines of the AIIB 2nd annual meeting of the board of governors, which runs from Friday to Sunday.
The three-day event focuses on how to help develop sustainable infrastructure projects in Asia, and the government-backed fund needs the private sector to play a bigger role.
"It's not the lack of funding, but the lack of risk financing," Cai said, noting that leverage risks and allocating resources is important.
The underlying issue is not a shortage of capital in Asia, as gross national savings reached $1.36 trillion in 2011 alone, according to a report released by the World Economic Forum in June 2016. However, factors such as inappropriately defined contract performance risks, in addition to the illiquidity of regional bond markets and doubts over the financial reporting of corporations, keep investors away from projects.
To overcome financial challenges, there has to be more cooperation with local partners and multilateral development banks such as AIIB and the World Bank, Sung-soo Eun, CEO of Korea Investment Corporation, said.
However, working with multinational development banks (MDBs) does not mean risk dumping, but risk sharing, Abhay Rangnekar, managing director of Standard Chartered Bank, told the Global Times. He noted that a good example of working together with other investors and financial institutions is Australia's Public-Private-Partnership regime, which is considered of high standard.
Considering the complexity of infrastructure projects, combining commercial banks and MDBs in terms of building risk management is also a solution, Najeeb Haider, AIIB principal strategy officer, said.
This article was first published in the Global Times.
