ASEAN Infrastructure Fund to bolster development of infrastructure in Southeast Asia

The financing initiative will fund the building of road, rail, power, water projects with a $75 million lending cap each to increase trade and investments in the region.

In a news release, the Asian Development Bank announced that the Association of South East Asian Nations’ largest financing initiative, the ASEAN Infrastructure Fund, is set to commence operations following its Board’s first meeting on the sidelines of the Asian Development Bank’s 45th Annual Meeting.

The ASEAN Infrastructure Fund will finance the development of road, rail, power, water and other critical infrastructure needs, which are estimated at about $60 billion a year.

“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 Rajat Nag, Managing Director General of ADB.

ASEAN member countries and ADB have provided initial equity of $485 million for the AIF. The Fund will be domiciled in Malaysia.

ADB will provide additional co-financing for every AIF project. ADB will also administer the Fund.

The ASEAN Infrastructure Fund will finance approximately six projects a year, with a $75 million lending cap per project. Criteria for investments include their potential to cut poverty, increase trade and bolster investment.

The ASEAN Infrastructure Fund’s total lending commitment through 2020 is anticipated to be approximately $4 billion which, with co-financing by ADB and other financiers, could be leveraged to more than $13 billion.

One unique feature of the Fund is that it plans to issue debt, which is designed to target the use of the region’s foreign exchange reserves in the future. 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.