Pension funds keen on infra projects in Asia

Pension funds and insurance firms in more developed economies of the Asia-Pacific Economic Cooperation are strongly interested in investing in infrastructure projects in developing Asia, the Apec Business Advisory Council (Abac) said.

“There is very strong demand from pension funds for investments. They are keen on investing in infrastructure projects in Asia,” said Hiroyuki Suzuki, chair of Abac’s finance and economics working group.

Besides sharing of best practices in public-private partnership (PPP) across Apec member-economies, governments should also come up with profitable projects and develop capital markets to attract more infrastructure investments, Nomura Institute of Capital Markets Research senior advisor Julius Caesar Parreñas said.

Citing Organization for Economic Cooperation and Development data, Parreñas noted that pension funds and insurance companies in developed countries had some $97 trillion in assets under management which could be spent on the $8-trillion infrastructure requirement in the Asia-Pacific region until 2030, as estimated by the Asian Development Bank.

“But money is not flowing into infrastructure because there are not enough bankable projects,” Parreñas said.

He also said pension funds and insurance firms that invest in infrastructure through capital markets were hindered by “not well-developed” Asian markets.

In this regard, Parreñas said Abac welcomed the initiatives under the proposed Cebu Action Plan aimed at developing the region’s capital markets.

The four-pillared Cebu Action Plan, the drafting of which is being led by the Philippines as this year’s host-economy, will be up for approval by Apec finance ministers when they meet in Cebu on Sept. 10-11.

Under the theme “Building Inclusive Economies, the Road to Financial Resilience,” the Cebu Action Plan “seeks to harmonize or coordinate the policies, rules and practices across Apec economies to support strong, sustainable, inclusive and balanced growth throughout the region,” its latest draft read.

The Cebu Action Plan will recommend policy reforms aimed at integrating the region’s financial sector while enhancing resiliency, fiscal transparency and infrastructure development under a proposed 10-year road map.

Suzuki said the private sector was supporting the Cebu Action Plan, as the financial sector played an integral part in the region’s growth.

He said Abac was pushing for facilitation of easier financing for small and medium enterprises (SMEs) across borders under the Cebu Action Plan.

“SMEs are vital to economies. But for SMEs aiming to expand across their national borders, it’s quite difficult to access financing or working capital due to different regulations in each economies.

Hence, Abac supports the Cebu Action Plan’s proposal to establish credit bureaus and standardize disclosure mechanisms, Suzuki said.

Under the Cebu Action Plan’s “promoting financial integration” pillar, Apec members will be enjoined to develop comprehensive credit information systems alongside the establishment of a regional credit information network dubbed Apec Financial Infrastructure Development Network—composed of governments, private sectors and international organizations—within the Asia-Pacific Financial Forum.

While Suzuki admitted that doing so might be difficult as there were still concerns among economies about secrecy of information and data treatment amid different and differing regulations across the region. However, he said he was hopeful that finance ministers could work out solutions to address these issues.

Under the proposed Cebu Action Plan, Apec economies should also put in place legal and institutional infrastructure that will “facilitate the wider use of movable assets as collateral in the credit markets in order to expand SMEs’ access to finance, including trade and supply chain finance.”