ADB announces start of Asean Infra Fund

MANILA, Philippines - The Asian Development Bank (ADB) announced yesterday the start of the so-called Asean Infrastructure Fund (AIF), the largest financing initiative for the 10-member Association of Southeast Asian Nations (ASEAN).

The AIF promises to help fund crucial infrastructure needs in the region such as road, rail, power, water and other critical projects, which are estimated to cost about $60 billion a year.

Asean member countries and the ADB have provided an initial equity of $485 million for the AIF, with the Philippines contributing an initial $15 million, ADB managing director general Rajat Nag told a press briefing yesterday on the sidelines of the 45th ADB Board of Governors Annual Meeting.

Nag said the contribution of a member country would depend on its capability.

Malaysia, for instance, has contributed $150 million while Indonesia has provided $120 million to the Fund.

“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 home,” said Nag.

He said the ADB would provide additional co-financing for every AIF project through long-term loans of 15 to 20 years. ADB will be administering the Fund.

In a separate statement, the ADB said the ASEAN Infrastructure Fund will finance approximately six projects a year, with a $75 million lending cap per project.

Nag said criteria for investments include their potential to “cut poverty, increase trade and bolster investments.”

Possible projects include roads, bridges and other infrastructure needs deemed crucial in spurring investments. These may also be in the area of rail development, power and water.

The AIF’s total lending commitment through 2012 is anticipated to be approximately $4 billion, which with co-financing by ADB and other possible financiers, could reach up to $13 billion.

Nag said that one feature of the AIF is that it plans to issue debt which is targeted to utilize the region’s foreign exchange reserves.

 “With ASEAN countries holding over $700 billion in reserves, the Fund could offer an avenue for recycling the region’s resources for its growing infrastructure requirements,” the ADB said.

ADB, based in Manila, has 67 member countries.