Governments in Asia cannot finance their infrastructure needs alone and would require the help of the private sector, according to an economist of the Asian Development Bank (ADB).
ADB Economic Research and Regional Cooperation Department Advisor Abdul Abiad said in a blog post that Asia’s infrastructure needs could reach $200 to $250 billion annually for the next 15 years.
Abiad added there are around $50 trillion worth of global capital from pensions, insurance firms and sovereign wealth funds that can be used to fund the region’s infrastructure needs.
“We believe there’s a large potential for increasing private participation,” he said.
“The reason for this is that infrastructure is fundamentally an attractive asset. It offers good return, low correlations with other assets and stable and predictable long-term cash flows,” Abiad added.
He said, however, that governments need to craft “better and bankable” projects in the region.
This means governments need to improve planning, designing and conducting due diligence to make projects more palatable to the private sector.
He also advised governments to ensure that the regulatory environment is stable and to continue efforts to deepen capital markets.
“It’s not finance that’s fundamentally the problem here,” he said. “The issue is more the limited supply of bankable projects in the region.”
ADB said Asia needs $1.7 trillion a year until 2030, or around $26 trillion between 2016 and 2030, to sustain current growth and respond to climate change. Southeast Asian countries need to invest a total of $3.147 trillion between 2016 to 2030. This translates to an annual investment of $210 billion until 2030.
This also means increasing the infrastructure to GDP ratio to over 5 percent. In the Philippines, infrastructure spending has been increasing and reached 5.1 percent in 2016, from 1.8 percent in 2011.
The Duterte administration aims to continue the trend and increase infrastructure to GDP ratio to 7.4 percent a year by 2022. This translates to nearly P9 trillion for infrastructure under the current administration.
Debarred
The World Bank and the ADB released a new list of Filipino firms and individuals banned from bidding in their projects.
Data obtained from the Washington-based lender showed that it banned or debarred Innogy Solutions Inc. and its president, Lloly Yana de Jesus, in May.
The firm and its president were also banned by ADB under the cross-debarment agreement. The World Bank also debarred another individual, Florencia M. Silvestre, who was banned by ADB last year.
“Cross-debarment in accordance with the Agreement for Mutual Enforcement of Debarment Decisions dated April 9, 2010, which, as of July 1, 2011, has been made effective by the World Bank, the ADB, European Bank for Reconstruction and Development, Inter-American Development Bank, and African Development Bank,” the World Bank said.
Innogy Solutions Inc. will not be able to participate in bidding for World Bank-funded projects from May 2, 2017, until December 1, 2024, while the debartment for its president is effective until May 1, 2028.
Silvestre, who was banned by ADB indefinitely in 2016, was also debarred permanently by the World Bank on January 9.
Meanwhile, the World Bank has issued a conditional nondebarment for two foreign firms as of February 7. The conditional nondebarment is effective until April 17, 2023. The two foreign firms are Canada Inc. based in Quebec, Canada and US Holdco Inc. based in Delaware, US.
“The conditional nondebarment means that so long as the sanctioned entity meets certain conditions, the sanctioned entity will continue to be eligible to participate in bank-financed activities,” the World Bank said.
Based on the public sanctions lists of the two multilateral-development banks (MDBs), the World Bank has already debarred a total of 10 firms and individuals, while the ADB has banned 11 firms and individuals as of June 2017.
ADB has placed sanctions on a total of 1,317 firms and 813 individuals worldwide and prevented them from participating in ADB-financed activities. In 2010 MDBs, such as World Bank and ADB, signed a cross-debarment agreement in Luxembourg, Germany, as their contribution to the global fight against corruption.
Based on the agreement, cross debarments will include only those that have sanctions in excess of one year. Sanctions by MDBs typically include reprimand, conditions on future contracting or debarment—declaring a company or individual ineligible to participate in any future activities it finances, either for a period of time or permanently.
Public debarment, which carries with it both financial and reputational risks, is considered a major deterrent to wrongdoing. Entities debarred by one MDB may be sanctioned for the same misconduct by other participating development banks.