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11 Oct 2017 Updated 26 Mar 2021

Asia-Singapore Infrastructure Roundtable 2017

New approaches to Asia's changing infrastructure landscape

Private sector crucial in funding infrastructure investment boom

The surge in demand for infrastructure spending in the region over the next decade is beyond what public funding alone can support it.

If Asia is to keep up with its infrastructure spending, the private sector will have a big role to play, said panelists at the recent Asia-Singapore Infrastructure Roundtable 2017 – held recently on 26 September 2017. This in turn will give rise to massive opportunities for companies to tap on the infrastructure boom, they added.

The numbers are staggering: Asia will need US$1.7 trillion in infrastructure spending a year till 2030 to build infrastructure like power plants, roads, airports and seaports among others.

This will bring about development, helping hundreds of millions of people who are still living without electricity nor have access to sanitation, according to the Asian Development Bank.

Two of the largest economies in Southeast Asia – Myanmar and Indonesia – will require hundreds of billions of dollars in investment to keep up with its infrastructure spending. And both countries are looking for private investment to help support these plans.

Mr Aung Naing Oo, Director General of the Directorate of Investment and Company Administration in Myanmar, said his country is in urgent need of further investment.

He noted that only 20 per cent of his country’s roads are paved while power coverage is just 30 per cent of the country. “The demand for infrastructure development and investment will be huge. The projects in the region will require a lot of expertise as well,” said Mr Aung, adding that this country will need some US$320 billion in investment till 2030.

Mr Victor Edward Sasdiyarto
Mr Victor Edward Sasdiyarto, Head of Loan Syndication and Financial Advisory Division at Indonesian State Owned Enterprise PT Sarana Multi Infrastruktur, noted that Indonesia will require investments of more than US$400 billion over the next few years to boost infrastructure in the country.

The demand for investments stretches across the gamut of infrastructure needs. Specifically, Mr Tan Cheng Guan, Executive Vice President at SembCorp Industries, said the region is in urgent need of further water and energy investments.

In fact, there is an opportunity to not just build energy and water assets but also to move the region towards sustainable solutions such as renewable energy as the “cost is dropping fairly quickly”, noted Mr Tan.

Effective risk allocation and management is key for projects to succeed

For investments to bear fruit, more can be done to lower risks of infrastructure projects, he added, citing pension funds as the ideal investors into such long-term projects. To ensure such projects are ‘bankable’, risks such as sudden changes in policies and regulations need to be managed.

“Investors take a long-term view of the project, 15 to 20 years. If there is going to be a risk of regulation changes midway through, the risk premium goes up,” he observed.

China Construction Bank (CCB) Senior Vice President Yap Poh Seng agreed, saying that governments play a critical role in ensuring that a project can succeed.

Mr Yap Poh Seng
Mr Yap highlighted both governments and the private sector must work in tandem to facilitate infrastructure development, cautioning the importance of commercial viability - there needs to “be some return on the project at the end of it. It cannot be perpetually subsidised by the government.”

Belt and Road Initiative

Another key topic discussed at the roundtable was the emergence of the Belt And Road Initiative, an ambitious infrastructure programme launched by China.

Panelists agreed that the push will benefit countries in the region, as the programme targets infrastructure building. At the same time, China’s push to become a major player in solar and wind energy is also likely to extend into the region, noted the panellists.

“From our perspective in Singapore, there is a lot of opportunity. For Asean as a bloc, there is going to be a lot more focus on connectivity to China and there will projects in transport, power and other infrastructure projects in the region,” said Mr Tan.

Myanmar sees Chinese investment as an important part of their infrastructure plans, said Mr Aung. Since 2010, he noted that more than 50 per cent of foreign investment in his country’s infrastructure comes from China.

Panellists also tackled the role of state-owned enterprises in infrastructure spending. Mr Yap noted that it was almost impossible to ignore Chinese SOEs, because they have both the scale and the resources to pull off huge infrastructure projects in China.

Banks are also more willing to work with them on large infrastructure funding because of lower risks associated with SOEs, he noted.

Local firms to play an important role

But when it came to infrastructure projects in the region, engaging in a partnership with local firms is the preferred model because the laws and norms differ from country to country, said Mr Tan.

Similarly, Mr Sasdiyarto said that Indonesia is encouraging the private sector to take a leading role in infrastructure projects. If they are unable to do so, a preferred model is the public-private partnership, he said.