KUALA LUMPUR (Nov 29): ASEAN member states must take steps to promote greater private sector participation in sustainable infrastructure financing in order to help forge an ASEAN economic future that is underpinned by sustainable development for decades to come.
HSBC Asia Pacific head of Belt and Road Initiative and business corridors, Mukhtar Hussain, said a more active participation from industry players would also ensure the demand for infrastructure investment is realised.
In a statement today, he said at present, about 75 percent of green flows come from public finance while only 25 percent is from private finance, largely in the form of commercial loans. This means that the private sector needs to scale up their participation.
On Southeast Asia's infrastructure needs, he said: “What we’re talking about here are not just the roads and bridges, but also more basic necessities like electricity, water, sewerage, hospitals and schools.”
HSBC said the Asian Development Bank (ADB) has cited annual infrastructure investment of US$210 billion until 2030 to respond to ASEAN’s rapid economic growth and challenges posed by climate change.
“The development of sustainability-linked infrastructure, using public and private sector financing, is the only way that ASEAN markets can address the growing threats and opportunities that climate change presents,” Hussain said.
He noted that although ASEAN member states have made several initiatives towards realising a greener and sustainable infrastructure, including Malaysia's pledge to increase the share of its electricity generated from renewable sources to 20 percent by 2030 and Indonesia announcing it will adjust its fiscal policies to incentivise the production of environmentally friendly vehicles, the region is still a long way from achieving this goal as such projects are often not bankable enough.
To ensure the goals are achieved, HSBC made three suggestions, including launching an annual Doing Sustainable Infrastructure Report that industry players can access which evaluates progress on projects carried out.
Secondly, it suggested the creation of an ASEAN Urban Infrastructure Network, including building training modules for officials on key topics in sustainable infrastructure as well as tool kits with templates and financial models for officials to leverage when developing sustainable infrastructure projects.
It also proposed developing an ASEAN Blended Finance Toolbox that seeks to standardise instruments that address common risks associated with sustainability-linked infrastructure projects.
HSBC said Singapore government agency Infrastructure Asia plans to work with the ADB to promote innovative finance solutions for sustainable infrastructure projects in the ASEAN region.
“We believe the above recommendations fit neatly within the frameworks that Infrastructure Asia and the ADB seek to establish. The industry must now step up in bringing these concepts to life,” Hussain added.