With an aim of leveraging more than US$13 billion in infrastructure financing, ASEAN Finance Ministers, the President of Asian Development Bank (ADB), and Secretary-General of ASEAN signed the ASEAN Infrastructure Fund (AIF) Shareholder Agreement over the weekend in Washington, D.C.
Dr Surin Pitsuwan, Secretary-General of ASEAN, calls the AIF "an 'innovative financial architecture,' unique, and appropriate for ASEAN, timely for the region as it explores various financing mechanisms to support the ASEAN Economic Community by 2015."
The AIF is a mechanism in which the ASEAN Member States and ADB work together through pooling funds – and promoting the use of ASEAN savings – to foster infrastructure development within the region and make the Master Plan on ASEAN Connectivity (MPAC) a reality. "It's a pooling of regional goodwill, financial strength and economic resiliency that leverages on our collective credibility and mutual confidence," added Dr Surin.
The MPAC, adopted last year, identifies a series of strategies and actions to enhance physical, institutional, and people-to-people connectivity.
The AIF is being set up with an initial equity contribution of US$485.2 million, of which US$335.2 million is from ASEAN while the remaining US$150 million is from the ADB. About six projects each year are expected to be carried out starting next year. The AIF's total lending commitment through 2020 will be roughly US$4 billion.
"With ASEAN countries holding over US$700 billion in reserves, the AIF offers an avenue for mobilising the region's resources for its growing infrastructure requirements," said Dr Surin. "It's a financial package that leverages on our collective credibility and mutual confidence," he added.
Through the AIF, ASEAN is showing confidence by investing in its own future. The Fund will provide financing for selected public-private partnership projects and hopes to attract even greater foreign capital flows to the region. According to the latest ASEAN Investment Surveillance Report by ASEAN Secretariat, FDI flows in the region doubled to US$75.8 billion last year from US$37.8 billion in 2009, and for the first time more than US$12 billion of those flows were sourced within ASEAN.
For a region with a shared vision, infrastructure development is an important contributor towards achieving sustainable growth and ensuring ASEAN's regional path of progress.
"The ASEAN Infrastructure Fund will help ensure the 600 million people who call our region home will have greater access to energy, clean water and sanitation, and better forms of transportation," said Mr Agus D.W. Martowardojo, acting ASEAN Chair and Indonesia's Finance Minister.
ADB will administer the AIF, and will ensure that safeguards and due diligence are an integral part of financed projects. The AIF will be domiciled in Malaysia as a limited liability company.