On a per capita basis, ASEAN nations have only a fraction of the roads and railways found in OECD nations, with dramatically lower electricity and clean water coverage.
Over the next decade ASEAN nations will require approximately $60 billion a year to fully address the region's infrastructure needs.
The ASEAN Infrastructure Fund is intended to address the region's infrastructure needs.
The ASEAN Infrastructure Fund's total lending commitment through 2020 is expected to be approximately $4 billion.
With projected 70% cofinancing by ADB, the Fund plans to leverage more than $13 billion in infrastructure financing by 2020.
The Fund will be established with an initial equity contribution expected to be $485 million, of which $335 million is being provided by nine ASEAN members. The remaining $150 million is being provided by ADB.
It is the largest ASEAN-led initiative in the association's history.
ASEAN nations possess substantial foreign reserves, but these funds have largely been invested outside of ASEAN, and outside of Asia.
By establishing the ASEAN Infrastructure Fund, ASEAN would be taking a major step towards investing more if its resources in its own development needs.
Once established, the Fund will help ensure that people living in ASEAN countries - over half a billion - will have greater access to energy, clean water and sanitation, and better forms of transportation.
One unique feature of the Fund is that it will issue debt, which is targeted to be purchased by Central Banks' foreign exchange reserves. With ASEAN countries holding over $700 billion in reserves, the Fund offers an avenue for recycling the region's resources for its growing infrastructure requirements.
Private sector funding is essential for large scale infrastructure financing in ASEAN, but historically the high degree of perceived risk on long-tenor infrastructure transactions has had a chilling effect on private sector investment. The Fund is expected to help mitigate these risks, providing financing for a portion of public-private partnerships.
The Fund is expected to finance approximately six infrastructure projects each year. Projects will be selected based on sound economic and financial rates of return, and the potential impact for poverty reduction.
The Fund is expected to be based in Malaysia as a limited liability company. ADB has been requested by the ASEAN shareholders to administer the Fund.
Malaysia is expected to be the largest ASEAN contributor with a $150 million equity investment, followed by Indonesia with $120 million.