Asean infra fund to start lending to membersBy Ronnel W. Domingo
Philippine Daily Inquirer
The Association of Southeast Asian Nations expects to start giving out within the year loans from the $485-million Asean Infrastructure Fund (AIF), whose governing board met Thursday for the first time.
Administered by the Asian Development Bank, the AIF is meant to meet Asean members’ financing needs for “connectivity” projects such as roads, rail, power, water and other key facilities, which are estimated at $60 billion yearly.
Of the Malaysia-based fund’s $485 million initial equity, the ADB contributed $150 million and the rest came from Asean members such as the Philippines, Indonesia, Malaysia, Thailand, Singapore, Brunei, Cambodia, Laos and Vietnam. The Philippines contributed $15 million to the fund. Myanmar is not a member of the AIF at present.
ADB managing director general Rajat Nag said in a briefing that the bank would be providing co-financing for every project that will be undertaken under this facility, which in the first five years will be limited to government initiatives.
“We hope that from the sixth year onward, when the AIF has already established a track record and has been evaluated by credit rating agencies, we will be able to cover non-sovereign projects,” Nag said.
He added that the AIF was also planning to issue debt paper to raise funds for nongovernment projects and to make use of the region’s foreign exchange reserves in the future.
“With Asean countries holding more than $700 billion in reserves, the (AIF) could offer an avenue for recycling the region’s resources for its growing infrastructure requirements,” Nag said.
“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,” he said.
The AIF plans to finance about six projects a year, with a $75-million lending cap for each venture. However, Nag said the ADB might provide an equal amount of co-funding plus additional financing from the bank’s usual loan facilities.
“Lending will not be based on how much an Asean member contributed to the AIF,” Nag said. “We will accommodate any project that has the potential to cut poverty, increase trade and bolster investment.”
Further, Nag said the AIF was committed to lend a total of $4 billion through 2020. Taking into account co-financing from the ADB and other partners, the amount may reach $13 billion to $14 billion, he said.
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