Private sector investment key to Asia infrastructure

Governments in Asia must create a more conducive environment to encourage private sector investment in infrastructure construction, according to experts, who advocate an innovative financing mechanism.

Such a mechanism requires further collaboration between the public and private sectors to enhance partnerships, said Sithanonxay Suvannaphakdy, former lead researcher in economic affairs for the ASEAN Studies Centre at Singapore's ISEAS-Yusof Ishak Institute.

"Greater public-private partnerships should reduce pressure on regional governments, which have experienced severe budget deficits due to large pandemic-related expenditures in the past three years," he said, adding that regional authorities should create a conducive business and investment climate.

On May 2, the Asian Development Bank, in partnership with the Association of Southeast Asian Nations Plus Three finance ministers and central bank governors, released a report entitled "Reinvigorating Financing Approaches for Sustainable and Resilient Infrastructure in ASEAN+3".

ASEAN+3 refers to the 10-member Southeast Asian nations' bloc plus China, Japan and South Korea.

According to the report, developing Asia will require a $13.8 trillion investment in infrastructure from 2023 to 2030 to sustain economic growth, reduce poverty, and respond to climate change. Over the same period, the infrastructure investment needed for ASEAN economies is estimated to be at least $2.8 trillion.

Climate loans

The bank also launched the Innovative Finance Facility for Climate in Asia and the Pacific, which could create up to $15 billion in new loans.

As it comes to the end of the Master Plan on ASEAN Connectivity 2025, there is some realization that things have not gone according to the plan, and the call for more private sector participation is nothing new, said Ruth Banomyong, professor of international business, logistics and transport at Thammasat University in Thailand.

Echoing that view, Watcharas Leelawath, honorary adviser at Bolliger and Co, a public policy and strategic consulting firm in Thailand, said there should be a clear method to provide private entities with the necessary information that they need when investing in projects, including those related to future returns.

"The private sector has increasingly played an important role as an engine of economic growth and job creation," said Thong Mengdavid, a research fellow at the Phnom Penh-based Asian Vision Institute.

Ky Sereyvath, director-general of the Institute of China Studies at the Royal Academy of Cambodia, said it is important for regional governments to ensure funding transparency and accountability when it comes to infrastructure projects.