JICA: Quality infrastructure funding

The Asian Development Bank is taking commendable steps to position itself as more than just a lender. Faced with rising regional wealth and the arrival of new multilateral institutions, it is right to have one eye on its long-term future. To remain relevant in supporting Asian development, however, it will need to forge new partnerships and show that it can offer more than just its capital. Based on the ADB’s own numbers, Asia needs to invest US$8trn in infrastructure over the 10 years to 2020. It’s probably the most frequently cited piece of...

The Asian Development Bank’s 49th year of operations is shaping up as a calmer period for its president, Takehiko Nakao. Having won support for a groundbreaking capital restructuring last year and weathered the arrival of new players on the multilateral scene, 2016 is a chance to focus on the future. The Manila-based lender is laying the foundations for an expansion that will take its annual approvals from US$13bn to US$20bn by 2020. Green projects and Asia’s poorest countries are set to be the big beneficiaries, but Nakao is also honing the...

The ADB’s treasury department is increasing its funding activities and focusing on local currencies as it responds to growing demands for the bank’s assistance. Pierre van Peteghem, ADB treasurer, said the bank faced higher borrowing costs as a result of distortions in the global capital markets over recent months. “Funding costs with respect to Libor for all MDBs, including the ADB, have increased significantly. This is related mainly to the inversion of the US dollar swap curve,” said van Peteghem, who estimates that the bank has faced an...

Worries over China’s slowing growth were at the centre of the turmoil in global markets at the start of 2016, as a slump in mainland stock markets compounded fears of waning demand from the world’s second-biggest economy. A bleak outlook for China is a big problem for Asia, where many of the region’s economies rely on exports to China and are exposed to any reversal of global capital flows should foreign investors sound the retreat. But recent news has been more positive, with stronger export figures for March adding to a rebound in investor...

The more things change, the more they stay the same. Since Chinese President Xi Jinping first called for the creation of a new multilateral development bank at a speech in Bali in October 2013, the international community has been wrestling with the implications. Would the Asian Infrastructure Investment Bank be an extension of China’s soft power? Would it follow the same governance and sustainability standards as the established MDBs? Would it threaten the US-dominated global financial system that has been in place since the Bretton-Woods...

The next stretch of Pakistan’s M4 highway is set to be the first project to be financed jointly by the Asian Development Bank and the Asian Infrastructure Investment Bank. The ADB and the newly established AIIB have identified the M4 project as their first co-financing initiative and are set to sign final documentation in a matter of months, according to people close to the project. The AIIB listed the M4 as the first “business opportunity” on its website on April 11, referring interested parties to an ADB invitation to tender with a May 23...

The Association of Southeast Asian Nations has long been a slow-burn project. For decades the organisation, which comprises 10 member states from tiny Brunei to sprawling Indonesia, has promised much while consistently underperforming. As an economic and financial entity, ASEAN has managed to be less than the sum of its parts. Yet, could this be about to change? Are the varied and vibrant economies of South-East Asia finally set to realise their vast collective potential by learning to work in harmony with one another – to embrace economic...

A landmark issue in Thailand’s local bond market last year has underlined the challenges in the integration of South-East Asia’s capital markets. Japan’s Mizuho Bank sold Bt3bn (US$85m) of three-year 2.33% bonds in September, completing the first under the ASEAN+3 multi-currency bond issuance framework (AMBIF). Siam Commercial Bank was sole lead manager for the offering. The notes were placed in Thailand and also listed on the Tokyo Pro-Bond market. Mizuho’s long-awaited debut came weeks after regulatory agencies in Malaysia, Singapore and...

In Paris last December, 195 countries agreed on a landmark global plan to tackle climate change by keeping the average increase in global temperature to below 2 degrees Celsius. The pledges from the United Nations Climate Conference, known as COP21, require all signatories to outline their own specific plans to address emissions and report regularly on their progress. Developed nations will make at least US$100bn of climate financing available each year from 2020. The world’s first legally binding climate contract came shortly after world...

A geothermal power project in the Philippines has raised hopes that Asia’s capital markets can play a bigger role in financing sustainable infrastructure projects. Aboitiz Power issued Asia-Pacific’s first climate bonds in March to refinance its Tiwi-MakBan plant, after obtaining Ps12.5bn (US$263.4m) in credit facilities and guarantees. The deal stands out as a rare capital markets financing for an infrastructure project in Asia, where companies have traditionally relied on bank lending to fund long-term developments. The key to maximizing...

Heavy fines for breaches of money laundering regulations are making global banks reluctant to venture into Asia’s frontier markets, even through the traditionally low-risk area of trade finance. That “de-risking” phenomenon is contributing to a global trade finance gap that the ADB estimated at US$1.4trn in its most recent survey, with almost half of the shortfall in developing Asia. The bank’s October 2015 annual survey, based on responses from 253 banks in 86 countries and covering transactions in 2014, found that 45% of lenders had...

Malaysia has been the driving force behind the development of an Islamic capital market in Asia. As much as 25% of all financing assets in the country’s banking system are now sharia-compliant, according to a 2015 review from consultancy EY, with 21% of total banking assets qualifying as Islamic. A common determination on the part of the government, finance ministry and central bank has fostered the creation of a deep pool of long-term Islamic capital, in turn driving local demand for long-term assets such as infrastructure financing. The local...