KEYNOTE ADDRESS BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY) AT THE 4th ASIA PACIFIC ENERGY & INFRASTRUCTURE FINANCE FORUM, THE WESTIN, SINGAPORE, WEDNESDAY, 21 MARCH 2018, 9:20 AM
Ladies and gentlemen,
1 I am pleased to join you today at the Fourth Asia Pacific Energy and Infrastructure Finance Forum.
Asia needs infrastructure
2 Asia needs infrastructure. This need is driven not only by major undertakings like the Belt and Road Initiative, but also by the growth momentum of ASEAN and Asian countries. By 2030, some estimates expect ASEAN could become the fourth largest market in the world with a combined GDP of US$ 6.7 trillion, and account for a significant proportion of Asia’s middle class and also globally. ASEAN’s urban population will increase by 90 million. This translates to a huge demand for infrastructure to meet power, water, sanitation, transport, telecommunications, housing and other social needs, as well as better connectivity between cities and countries. And as Asia develops, it will also have to respond to the challenges of climate change. Last year, the Asian Development Bank (ADB) estimated that developing Asia would need to invest US$26 trillion to meet infrastructure needs from 2016 to 2030. This is more than double the estimate ADB provided in 2009, and the difference is largely attributed to the inclusion of climate change-related investments. More broadly, I think it is quite clear that Asia’s growth will drive higher demand for power and in that energy mix, there will be a need for a greater share from renewables and other sustainable sources. So this is creating a whole new set of project requirements in terms of scale and their diversity and in turn that means that infrastructure financing and structuring has to respond to those needs and challenges.
The Infrastructure Gap
3 Though this is well-recognised and documented, a significant proportion of Asia’s infrastructure needs remains unmet. And there are a few factors that I would like to share as our perspectives as to why this is so.
4 First, the infrastructure financing needed is significant and governments alone are clearly unable to meet this. To unlock more infrastructure financing, the public and private sectors need to come together. It is noteworthy that public private partnerships have been gaining momentum in Asia. For example, in India, the total private sector investment in infrastructure between 2008 and 2017 was nearly thrice that of the decade before, growing from US$85 billion to US$250 billion, and even these numbers are well short of what is needed in the economy to support their aspirations; in Indonesia, this was US$47 billion, nearly two and half times the US$20 billion invested the decade before. Again, the number is well short of what is needed in Indonesia. Strong, upward trends in private participation in infrastructure have also been seen in the Philippines, Thailand and Vietnam. But more needs to be done to meet the sizable Asian demand for infrastructure. In particular, we have also noticed that whilst project financing is quite readily available for larger scale projects, when we talk about the smaller scale projects, the funding tends to be a bit more difficult to come by. And as a result, many of the smaller businesses have to either put up personal guarantees or put their balance sheets on the table in order to secure funding for the smaller scale projects. And in Singapore we have initiated a set of risk-sharing efforts to help banks work with some of the smaller players in the infrastructure space to pursue such opportunities.
5 The second reason why a significant number of Asian infrastructure projects are not coming to fruition is that they are not structured for bankability. A report by Oliver Wyman in 2017 noted that 55-65% of projects are currently unbankable. Project bankability requires experienced financiers and professionals to structure the project and prepare proper documentation, strong legal frameworks to protect the interests of various stakeholders, the infrastructure for legal and economic recourse, and the technical and professional support for thorough due diligence. The uneven access to such expertise across developing Asia presents yet another challenge in meeting infrastructure demands. Often, fragmented industry segments have to be pulled together to execute complex infrastructure projects, which makes it even more challenging to bring these projects to fruition.
Collaboration is the key to overcoming these challenges
6 To overcome these challenges, we need broader and deeper collaboration amongst governments, multilateral development agencies and the private sector. And Singapore is committed to this important effort.
7 We are home to the World Bank’s first Infrastructure and Urban Development Hub, which brings together expertise from the World Bank, the International Finance Corporation (IFC), the IFC’s Asia Treasury Hub, the Multilateral Investment Guarantee Agency (MIGA) and Singapore’s public and private sectors. This combined expertise can help to draw even more private sector investments to sustainable infrastructure projects in developing countries. Singapore is also a founding partner of the Global Infrastructure Facility, which has supported projects across a wide range of sectors including energy, transport, water and sanitation.
8 We are also working closely with other Asian governments to accelerate Asia’s infrastructure development and economic growth. If I can cite a few examples, China and Singapore are jointly developing the China-Singapore (Chongqing) Connectivity Initiative Southern Transport Corridor (CCI-STC), which will enhance connectivity between Western China and Southeast Asia. In India, we are partnering the Government of Andhra Pradesh to develop the new state capital city of Amaravati. In addition, we have formalised our collaboration with the Government of Bangladesh to accelerate sustainable economic growth through promoting and enhancing Public Private Partnership investment in Bangladesh. This year, Singapore will also be working with the International Energy Agency (IEA) to host a training programme under the Singapore-IEA Regional Training Hub for government officials from the region, which is aimed at helping governments develop the capabilities needed to facilitate energy investments. We are embarking on a similar discussion and effort with IRENA for renewable energy which is also an important component in this space.
9 Our efforts are also focused on strengthening and bringing together the various industry segments together so that they can help to structure and execute infrastructure projects. Our developers, engineers, procurement and construction firms have all cut their teeth with Singapore’s own developmental journey, and have built up strong expertise in planning, executing and operating infrastructure across a range of sectors. We are a regional hub for financial services with an extensive network of infrastructure funds and established international financial institutions, in addition to the multilateral development banks. Many professional service firms of distinction are based here, and our dispute resolution capabilities have grown significantly over the years. Last but not least, a vibrant calendar of regional and international events in Singapore, including this Forum, serves as a platform for the industry to meet, keep abreast of important market developments, and also to advance thought leadership.
10 But we believe that these different threads can be much stronger and mutually reinforcing if they are brought together, if they are intertwined. Therefore, at the Budget this year, we announced the establishment of an infrastructure office in Singapore. The infrastructure office will facilitate greater collaboration by being the convening point if you will, for the different players across the industry ecosystem, the multilateral development banks, as well as the public sector. It will also help to deepen our understanding of the region’s infrastructure needs and project pipeline, as well as provide advisory services to support project preparation, so that more projects can obtain the necessary financing and backing.
11 In other words, whether you are looking to procure, structure, finance, execute or operate infrastructure in Asia, this infrastructure office will amplify your reach to governments in the region, as well as to financiers, professionals and other private sector players, to help you find the right partners and opportunities. This office will be sited within Enterprise Singapore and will work closely with the private sector for mutual benefit.
12 The promise of Asia can be realised only if the region’s infrastructure deficit is addressed to unlock its full potential. We think we can do so by working together – among governments of the region, between the public and private sectors, and across the infrastructure value chain. This event is a good platform to forge such collaborations, and I wish you a constructive and productive time at the 4th Asia Pacific Energy and Infrastructure Forum.