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Increasing 'bankable' infrastructural projects in region is key: Lawrence Wong
AS part of its aim to be an infrastructure hub for Asia, Singapore is looking to increase the number of "bankable" infrastructure projects in the region.
The infrastructural needs of the region are huge but there are not enough bankable projects to attract commercial financing, said Minister for National Development Lawrence Wong on Wednesday.
"Our first priority must be to get more projects bankable. Once we do that, we have more bankable projects to attract sources of funding beyond just bank-based finance," Mr Wong said. "In today's situation, the banks are quite comfortable and happy to lend. But with Basel rules tightening and more constraints on credit especially if interest rates go up, we will need to look out for other sources of funding."
Singapore is looking at various ways to do so, including for projects arising from China's Belt and Road initiative.
Besides having more banks to raise infrastructure bonds, another option that Singapore is studying is having take-up facilities whereby projects financed by banks that have reached brownfield stage can be funded by other institutional funds and insurance companies, thereby freeing up bank capital to fund new projects.
During his keynote speech at the Urban Land Institute Asia-Pacific Summit, Mr Wong told his audience that Singapore can play a useful role as an infrastructure hub for the South-east Asia or even the broader Asia region, a point he had touched on on previous occasions.
Having accumulated expertise and experience in urban and infrastructure planning in its past 50 years of rapid urbanisation, Singapore hopes to help others develop their own long-term urban masterplans and implement infrastructure projects.
The country is now home to high-quality professional services, including project advisory, consultancy, project financing, dispute resolution and legal services - all of which are necessary to bring infrastructure projects into being.
Mr Wong noted that multilateral banks such as the Asian Infrastructure Investment Bank (AIIB) and the World Bank have mechanisms to de-risk infrastructural projects. But project structuring is also critical and in that respect, Singapore-based banks and companies that provide project advisory here can assist in optimising the project structure.
Some 60 per cent of projects in South-east Asia are currently financed through Singapore-based banks, thanks to Singapore's high concentration of banks that undertake project financing and a whole range of services from legal to arbitration to professional services. Almost all AIIB projects have arbitration clauses based in Singapore.
The Asian Development Bank has estimated that developing Asia needs US$1.7 trillion(see amendment) per year in infrastructure until 2030 to meet its growth momentum, tackle poverty and respond to climate change. But the region now invests about US$900 billion(see amendment) annually, suggesting a huge gap to be plugged.
Amendment note: The article has been revised to reflect that the estimates from the Asian Development Bank for developing Asia's infrastructural needs and current investments are in US dollar terms.