NEW DELHI, INDIA - The ASEAN Infrastructure Fund Limited (AIF) is set to begin its lending operations in the second half of 2013, with a pipeline of around $1 billion in projects for the next three years.
At the meeting of the AIF Board of Directors, which took place on the sidelines of the 46th Annual Meeting of the Board of Governors of the Asian Development Bank (ADB), the AIF Board reconfirmed the full operationalization, and also discussed progress on infrastructure projects identified for the pipeline, the development of financial-policy and risk-management frameworks, and efforts to support public-private partnerships (PPP) in infrastructure development.
"AIF's first year was an active one," said Bambang Brodjonegoro, Head of the Fiscal Policy Agency at Ministry of Finance of Indonesia and Co-Chair of the AIF. "What AIF has accomplished this year was to lay the groundwork for projects to come, and the progress to be made, in the years ahead."
Key areas of progress include receipt of all first tranche equity contributions from the shareholders; completion of all legal exemptions and privileges from the Government of Malaysia; and completion of all necessary administrative arrangements for the full operations.
"Malaysia, as the AIF domicile, will continue to support the AIF especially during its early stages through policy and legal incentives. Our commitment for the AIF, and its objectives of ASEAN connectivity, remains very firm," said Mohd Esa Abd Manaf, Under-Secretary at the Ministry of Finance of Malaysia and Co-Chair of the AIF.
The AIF Board approved the project pipeline, whose details will be announced as loan negotiations draw to a close.
"These projects have been carefully selected to reflect the AIF's priorities and to mirror ADB's emphasis on projects that are fundamental to achieving poverty reduction, inclusive growth, environmental sustainability, and regional integration," said Arjun Goswami, Director of the Regional Cooperation and Operations Division of the ADB's Southeast Asia Department, who leads the working group that manages the AIF.
The AIF Board also authorized consultations with Myanmar as a possible new member to be carried out by the ADB.
The AIF was incorporated in April 2012 in Malaysia, and is initially expected to provide loans of up to $300 million a year. Shareholders include Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, the Philippines, Singapore, Thailand, Viet Nam, and ADB. In addition to its investment of $150 million, ADB also cofinances with and administers the AIF and provides technical support.
Southeast Asia has enjoyed decades of strong growth, but even with recent economic gains, its infrastructure coverage lags behind the Asian average and is only a fraction of that of advanced economies. ASEAN's infrastructure needs are estimated to be at $60 billion a year from 2010-2020, and this is in addition to national projects with significant cross-border impacts such as airports, seaports, and roads to borders.