ASEAN launches fund to meet Southeast Asia's infrastructure needs.
ASEAN's largest financing initiative, the ASEAN Infrastructure Fund, is set to begin operations this year, an official of the Asian Development Bank said Thursday.
Rajat Nag, the ADB's managing director general, said the AIF, which was launched on the sidelines of the ADB's annual meeting here, will be used to finance the development of road, rail, power, water and other critical infrastructure needs in Southeast Asia, which are estimated at about $60 billion a year.
Nag said that the AIF hopes to fund its first project within the year. They have yet to identify the project, he said.
''This is a watershed moment for ASEAN nations working together to finance infrastructure projects that will boost trade, foster economic growth and create more job opportunities for half a billion people who call ASEAN home,'' Nag said.
ASEAN is the Association of Southeast Asian Nations that groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Nag said ASEAN member countries and the ADB have provided initial equity of $485 million for the fund which will be based in Malaysia.
ASEAN member countries and the ADB have provided additional co-financing for every AIF project. The ADB will also administer the fund, he said.
Nag said the AIF will finance approximately six projects a year, with a $75 million lending cap per project.
''Criteria for investments include their potential to cut poverty, increase trade and bolster investment,'' he said.
The AIF's total lending commitment through 2020 is anticipated to be approximately $4 billion which, with co-financing by the ADB and other financiers, could be leveraged to more than $13 billion.
''One unique feature of the AIF is that it plans to issue debt, which is designed to target the use of the region's foreign exchange reserves in the future,'' Nag said.
With ASEAN countries holding over $700 billion in reserves, Nag said the fund could offer an avenue for recycling the region's resources for its growing infrastructure requirements.
Although Myanmar is an ASEAN member, Nag said the country is not eligible to avail itself of the fund.
ADB President Haruhiko Kuroda has said the ADB is not about to restart financial assistance to Myanmar unless the country settles its almost $500 million debt to the bank.
Myanmar is an original member of the ADB.
However, Kuroda said that in the last 25 years or so the ADB has not provided financial assistance to the country ''partly because Myanmar has accumulated arrears quite substantially.''
''We felt the bank cannot provide financial assistance until these arrears are cleared,'' Kuroda said.
''For a multilateral bank like the ADB there is an established rule to resolve this problem and I hope that in the coming years that problem could be solved,'' he said.
However, Kuroda said the ADB is ready to engage Myanmar in areas like technical assistance, policy dialogue, capacity building and the like.
''We have to make an in-depth study of (Myanmar) economy and sector analysis to identify the areas and the scope of possible assistance by the ADB in the coming years,'' Kuroda said.