Conference Presentation, Panel
Bridging Gaps in Global Infrastructure Financing | Asia Summit 2024
Milken InstituteBelinda Chng, Steven Ciobo, Rafael Consing, Andrew Cross, Stefanus Hadiwidjaja, Verena Lim
- Global infrastructure investment gaps are projected to widen due to digitalization, climate change, population growth, and economic expansion, with total needs reaching $94 trillion by 2040, half of which is expected to accrue in Asia.
- Adjusted for cumulative inflation of approximately 23% since 2016, the infrastructure gap in Asia is anticipated to be significantly larger than the $3–5 trillion estimated in 2013–2015 studies.
- Indonesia's toll road network, which quadrupled from under 1,000 to nearly 4,000 kilometers over the last decade, represents only the beginning of massive required investment, with additional opportunities expected in fiber and renewable energy valued in the tens of billions over the next five years.
- The new Indonesian government targets an 8% economic growth rate, a goal deemed possible only through massive infrastructure investment, while similar growth opportunities exist in the Philippines where energy and broadband rollout over the next three to five years is expected to crowd in local capital.
- The Philippines requires an increase in telecom towers from 35,080 to approximately 70,000 to connect 40,000 barangays, with the aim of supporting agriculture, digital education, and healthcare while addressing rural electrification challenges that currently average 83% on three major islands.
- Macquarie Group is targeting "core plus" infrastructure opportunities in Korea and raising funds, while expecting private capital to enter the Philippines and Indonesia once regulatory regimes provide sufficient stability and measurability.
- The Asian Infrastructure Investment Bank (AIIB) plans to continue monitoring the impact of assets on biodiversity, indigenous people, and gender for 24 to 25 years, maintaining a 109-shareholder structure that imposes specific standards on all transactions.
- AIIB aims to maintain a quick origination phase from concept to disbursement within approximately nine months and is considering an "originate to distribute" model to release capital, though converting loan instruments to bonds remains a challenge.
- Multilateral development banks, including AIIB, are expected to focus on catalyzing private sector investment rather than providing direct capital, as MDBs now represent a small percentage of total infrastructure funding compared to 30 years ago.
- Private investors may accept returns lower than 20% plus if risks are managed and investments offer significant economic growth impact, while the Green Climate Fund's willingness to take a first loss on the first $200 million of a fleet electrification initiative in India is expected to make such projects commercially viable.
- The Vitello initiative in India is projected to raise more than $1.5 million over the next several years to advance electrification, while Macquarie raised a European infrastructure fund of approximately €8 billion, with over half of the capital originating from the region.
- The percentage of savings to GDP in Asia is increasing, with Singapore at approximately 40%, and this capital is expected to be invested both domestically and offshore, with the Philippines expected to grow by about 6% in the first half of the year.
- AIIB will manage infrastructure assets on its balance sheet for a generation (25 years) with a $100 billion capital base, navigating a difficult asset class defined by a loan product life of 25–30 years before refurbishment.
- Successful capital mobilization is projected to occur when governments, MDBs, and private capital share a common objective without debating divergent return requirements, with AIIB expecting shareholders to focus on impact metrics such as diversity and connectivity rather than just financial returns.
- The AIIB intends to continue focusing on Asia and infrastructure with a simple operational approach, serving as a taxpayer-funded organization with capital from an extraordinary range of countries while facing the challenge of aligning with 109 countries monitoring every transaction.