Asean infrastructure fund all set to aid member nations
AIF money will allow funding for up to six projects a year to cut poverty, increase trade, boost investment
The Asean Infrastructure Fund (AIF) financing initiative is set to aid member nations with their infrastructure needs with an individual project lending cap of US$75 million (Bt2.3 billion).
The money committed to the AIF will allow funding for six or so projects a year to cut poverty, increase trade or boost investment.
“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 home,” Asian Development Bank (ADB) director-general Rajat Nag said in a statement sent to reporters.
Critical infrastructure needs in the Southeast Asia region require $60 billion in investment a year, according to estimates.
In Indonesia, the government is pushing to realise an ambitious plan to propel the nation into the ranks of the world’s top 10 largest economies by 2025, with thousands of trillion of rupiah needed for infrastructure investment.
Poor roads, overcrowded sea ports and airports, and an inadequate railroad system, among other infrastructure concerns, have hindered Indonesia from reaching a potential annual economic growth rate of 7 per cent, economists have said.
The AIF, which pools funds from Asean’s member nations with the ADB, has total lending commitments of about $4 billion through 2020, which might be leveraged to more than $13 billion.
Asean’s members and the ADB have provided $485 million in equity for the region’s infrastructure fund, which was rolled out last year.
The fund will be domiciled in Malaysia. The ADB will provide additional co-financing for every AIF project and will also administer the fund.
Deputy Finance Minister Mahendra Siregar said that pushing for more cooperation among Asean’s members was crucial to ensure financing for infrastructure development amid the ongoing global economic downturn.
Meanwhile, Finance Minister Agus Martowardojo previously said that Indonesia would propose members for the AIF’s board of directors so that funds would be allocated to the most worthy projects.
Asean member nations have already compiled its list of infrastructure requests for the AIF, which the ADB’s management would consider, Agus said.
The AIF has also planned to issue debt instruments, which is designed to target the use of the region’s foreign-exchange reserves in the future.
With Asean’s member nations holding more than $700 billion in estimated reserves, the fund could offer an avenue for recycling the region’s resources for its growing infrastructure requirements.
