Asean creates new infra fund
MANILA, Philippines - The Association of Southeast Asian Nations (ASEAN) is creating a new fund to finance major infrastructure projects across the region.
The ASEAN Infrastructure Fund is being set up with an initial equity contribution of $485.2 million, of which $335.2 million will come from nine ASEAN members. The remaining $150 million is being provided by the Asian Development Bank (ADB).
The Fund’s total lending commitment through to 2020 will be about $4 billion. With projected 70 percent co-financing by ADB, it is expected to leverage more than $13 billion in infrastructure financing by 2020.
“ASEAN nations possess substantial foreign reserves but these funds have largely been invested outside of ASEAN and outside Asia,” said ADB president Haruhiko Kuroda. “By establishing the ASEAN Infrastructure Fund, ASEAN is taking a major step towards investing more of its resources in its own development needs.”
One unique feature of the fund is that it will issue debt targeted at central banks’ in the region who hold substantial foreign exchange reserves.
“With ASEAN countries holding over $700 billion in reserves, the fund offers an avenue for mobilizing the region’s resources for its growing infrastructure requirements,” said ASEAN Secretary-General Surin Pitsuwan. “The establishment of the fund is also timely and appropriate as the region explores various financing mechanisms to support the ASEAN Economic Community by 2015.”
Over the next decade ASEAN economies will require approximately $60 billion a year to fully address the region’s infrastructure needs. On a per capita basis, they have only a fraction of the roads and railways found in OECD countries, and dramatically lower electricity and clean water coverage.
“The ASEAN Infrastructure Fund will help ensure the 600 million people who call our region home will have greater access to energy, clean water and sanitation, and better forms of transportation,” said Agus D.W. Martowardojo, acting ASEAN Chair and Indonesia’s Finance Minister.
Malaysia, which has chaired a series of High-Level Task Force Meetings since July 2010 to establish the Fund is the largest ASEAN contributor with a $150 million equity investment, followed by Indonesia with $120 million.
The Fund will be based in Malaysia as a limited liability company.
Dato’ Seri Ahmad Husni Mohamad Hanadzlah, Malaysia’s Minister of Finance II, said this is the largest ASEAN-led initiative in the Association’s history.
He said the Infrastructure Fund will help forge the road, rail and energy links the region needs to create a greater degree of well-being for its people, and make the Master Plan on ASEAN Connectivity a reality.”
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