Member countries of the Association of Southeast Asian Nations will soon benefit from greater access to energy, clean water and sanitation, and better forms of transportation, thanks to a new fund that aims to finance major infrastructure projects in the region.
Nine ASEAN members and the Asian Development Bank have committed to provide an initial equity contribution of $485.2 million to set up the ASEAN Infrastructure Fund. Of this, $335.2 million will come from ASEAN members and the rest from the World Bank.
The fund’s total lending commitment up to 2020 will be about $4 billion. The ADB is projected to provide 70 percent cofinancing. The fund is thus expected to leverage more than $13 billion in infrastructure financing by 2020.
ASEAN economies have an estimated infrastructure requirement of approximately $60 billion a year over the next decade. However, per capita, they only have a fraction of the roads and railways found in Organization for Economic Cooperation and Development countries, and dramatically lower electricity and clean water coverage.
The fund will finance approximately six infrastructure projects each year, which will be selected based on sound economic and financial rates of return, and the potential impact on poverty reduction. The fund will also eventually issue debt eligible for investments from central bank reserves.
The fund is also expected to help mitigate risks on long-tenor infrastructure transactions, which have largely served as a deterrent on private investments in the region. The fund will thus provide financing for a portion of public-private partnerships.
The ASEAN Infrastructure Fund will be based in Malaysia as a limited liability company and will be administered by the ADB.
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