ADB to open debt-financing window for SEA economies

SOUTHEAST Asian countries like the Philippines will be the first to be served by a new debt financing platform to help bankroll sustainable infrastructure projects, the Asian Development Bank (ADB) announced last Thursday.

The Manila-based multilateral development bank announced having signed a memorandum of understanding with HSBC Holdings plc, Temasek Holdings (Pvt) Ltd. and Clifford Capital Holdings (CCH) Pte. Ltd. to create the debt-financing platform, which will initially focus on projects in the Association of Southeast Asian Nations region.

The platform’s current focus will be to finance projects on clean transport, renewable energy and energy storage and water and waste management. Projects linked to climate adaptation, agriculture and land use and technology-led solutions could be included in the future.

“As developing countries in Asia transition toward a greener and sustainable future, ADB is stepping up its engagement with governments and other aligned actors to expand the pool of bankable, sustainable infrastructure projects, increase their risk-return profile, and attract financing from private investors,” ADB Vice-President Ahmed M. Saeed was quoted in a statement as saying.

“[The] ADB will provide technical assistance in project development and sector reforms and work with our partners to use blended finance and other risk mitigation solutions to mobilize sustainable infrastructure financing across Asia,” he added. 

The lender said the platform aims to turn marginally bankable projects into bankable ones by providing concessional capital and addressing policy and regulatory constraints hampering private investments in sustainable infrastructure.

Marginally-bankable projects typically face a range of barriers to accessing private sector finance. These may include a variety of capability, policy and economic issues that can impact a project’s ability to attract commercial financing.

Following an initial feasibility assessment, the ADB said HSBC and Temasek will be equity partners in the platform while the bank and CCH will be strategic partners.

“The initiative aims to bridge the financing gap by helping countries develop bankable sustainable infrastructure projects based on global standards,” the ADB said.

The platform will apply international best practices for environmental, social, and governance, in line with safeguards standards set by international financial institutions. It may also consider emerging initiatives such as the “Fast-Infra Sustainable Infrastructure” label.

Developing Asia needs to invest $26 trillion, or $1.7 trillion a year, from 2016 to 2030 to maintain its growth momentum, end poverty, and address climate change. Southeast Asia is one of the most vulnerable regions to climate change.

The public sector has financed most of Asia’s infrastructure projects, but it cannot meet the rising demand in the region. Increasingly, governments are encouraging the private sector to invest in infrastructure.

However, up to 65 percent of Asia’s infrastructure projects are not considered bankable, and it requires significant upfront cost and time on project preparation to get the projects to a bankable stage.

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