SINGAPORE'S Deputy Prime Minister Tharman Shanmugaratnam on Tuesday launched three initiatives to encourage more institutional investors to put private sector capital into the infrastructure asset class.
Speaking at the keynote opening address at the 6th World Bank-Singapore Infrastructure Finance Summit, he unveiled three initiatives to achieve this:
1) To do further work to promote better and more consistent project documentation to reduce perceptions of risks.
Contracts of public-private-partnership should include clear termination, dispute resolution and other kinds of protection clauses, he said. This is not a fundamental policy change, but it will allow institutional investors to have assurance that there are standards that will be maintained in the asset class, as opposed to bespoke and idiosyncratic standards.
2) To include benchmarks, robust performance measures and other analytics for infrastructure debt and equity instruments, which is what institutional investors need before they will put their money into the asset class.
3) To develop infrastructure debt as a thicker segment of the infrastructure asset class.
Currently, less than 0.2 per cent of the world's total funds under management by institutions goes into infrastructure debt, he said. This asset class is "greatly underweighted", partly due to the lack of benchmarks; but if developed, it will help banks recycle their capital and pass projects on to institutional investors when they have hit the operational stage. Banks tend to fund greenfield projects in their early stages. This move is thus important also to ensure that banks have enough liquidity in the medium term as financial conditions tighten.
Mr Tharman said that the Monetary Authority of Singapore has been actively building such an infrastructure debt takeout facility which will facilitate the transfer of infrastructure debt from banks to institutional investors.