Infrastructure projects focused on cross-border connectivity present significant investment opportunities and are vital for long-term growth in Asia.
This is the main conclusion of the inaugural Asian Infrastructure Finance report developed by the Asian Infrastructure Investment Bank (AIIB). The report emphasizes that cross-border infrastructure including links that promote trade, market integration and the distribution of green energy are necessary during times of market instability and declining economic growth. It also highlights that projects in markets including India and China have the potential to greatly improve much needed connectivity in Central and South Asia.
“We are working to help emerging markets understand that investments in connectivity projects are needed for long-term growth,” said AIIB President Jin Liqun. “AIIB is stepping up with additional capital, practical solutions and data and insights to help drive the necessary level of infrastructure investment needed during challenging economic times.”
Using snapshot analyses of financing cost, financing value and construction costs across eight key markets, the report explores how tensions, rising nationalism and macroeconomic developments are impacting cost drivers and investment potential on a country-by-country basis. The report also identifies where infrastructure opportunities are still largely untapped by investors and are at risk of remaining so with increasing uncertainties.
As governments grapple with the need for macroeconomic stabilization and sustaining a high level of infrastructure investment to meet growing demands, AIIB is developing strategies and projects to help members facilitate long-term investments in and attract private sector investors to cross-border projects:
- Transport Strategy: Directs focus on financing economically viable strategic infrastructure projects with significant economic return that will play a key role in promoting trade and economic growth.
- Information and Communications Technology (ICT) Strategy: This year, AIIB will develop an ICT strategy that will focus on helping members reap economic benefits from investment in broadband and other connectivity-focused projects.
- ESG Enhanced Credit Managed Portfolio: USD500 million approved for a managed credit portfolio that aims to develop infrastructure as an asset class, develop debt capital markets for infrastructure and promote the integration of Environmental, Social and Governance (ESG) principles in fixed income investments in Emerging Asia.
The Asian Infrastructure Finance report recognizes that there has been no significant breakthrough in the region in mobilizing private capital for infrastructure. AIIB believes there is urgent need to redouble efforts to mobilize private capital, and that multilateral development banks (MDBs) need to further contribute towards improving project preparation, improving country policy frameworks and sustaining the supporting conditions such as providing better information for market players.
“Good data can help policymakers and investors track the development of infrastructure markets, allowing them to better respond to both near- and long-term issues,” said AIIB Principal Economist Dr. Jang Ping Thia. “The Asian Infrastructure Finance report is the first of what we expect to be a series of reports that will elevate the level of data quality on infrastructure financing in Asia to facilitate high-quality discussion among key players and further mobilize private sector investment.”
The Asian Infrastructure Investment report 2019 can be found at aiib.org/aif.