Perspectives

Closing The Financing Gap

Trends, risks and solutions for infrastructure project bankability in Asia

In Asia, the public sector is completely unable to fund the region’s future infrastructure needs on its own. Currently, the sector funds 90 percent of infrastructure development in the region. To meet the anticipated $26 trillion of investment that is required by 2030, this status quo needs to change.

In theory, there is ample private capital available globally to meet this demand. Global institutional investors currently manage more than $50 trillion. Investments in infrastructure, with theoretically stable cash yields over time, can often even be attractive to investors with long-term liabilities. 

In reality however, global investors have global alternatives and infrastructure projects across much of Asia rarely rank as the most attractive option to deploy capital on a risk adjusted basis – there is simply too much uncertainty and projects are deemed not bankable.

The report begins with an analysis of the context for the boom in infrastructure demand in Asia. It then delves into the drivers and challenges associated with infrastructure financing in the region, including the inadequacy of the existing financing model driven by the public sector based on future requirements forecasts. Subsequently, the report illustrates the recommended set of guidelines in enabling infrastructure project bankability. In it are six success levers that reflect the ideal environment (created by governments) and best practice execution (conducted by investors) for infrastructure investment. The report then concludes by looking at the successful application of these levers across key industry sectors and within selected nations with high infrastructure investment growth expectations.

Figure 1: Meeting the investment gaps – Selected ADB Developing Member Countries1

 

Source: Asian Development Bank

Closing The Financing Gap


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