Singapore Regional Infrastructure Summit: Plugging the financial gap

Creative financing solutions needed to meet the region’s growing infrastructure needs

Asia needs to find ways of financing its infrastructure or risk slowing growth. This was the message to delegates at the inaugural Singapore Regional Infrastructure Summit (SRIS) organised by the Singapore Business Federation (SBF) in August. In 2017, the Asian Development Bank (ADB) estimated the gap between infrastructure needs and available funding in Asia to be around US$459 billion (S$636 billion) each year.

SBF chairman Mr S.S. Teo noted that the region needs to explore and find creative solutions to fill that gap. One solution could be Public-Private Partnerships, while another would be to utilise multilateral funding sources such as the ADB and the Asian Infrastructure Investment Bank (AIIB). However, it is not a one-size-fits-all method, Mr Teo warned during his address at the SRIS, which was held in conjunction with the Singapore Regional Business Forum.

In her keynote address, Ms Indranee Rajah, Minister in the Prime Minister’s Office and Second Minister for Finance and Education, said that public sector financing alone was not a sustainable solution to meeting infrastructure demand. This was especially so in Asia, where public sector financing stands at 90%, compared to 70% for emerging markets and 40% globally.

The burden can be especially heavy for Asian governments, as the continent is slated to represent nearly 60% of global infrastructure spending by 2025, according to a PWC report.

SBF Vice Chairman Pek Lian Guan delivering his keynote speech

The need for bankable projects

The long-term nature and scale of infrastructure projects require the involvement of private sector or foreign investors. However, these players will only be attracted to projects that are sufficiently bankable, amid concerns that expected returns may not commensurate with the risks, said speakers at a panel session.

“Governments like to be conservative and would prefer more risk to be taken up by the private sector, but too much risk is not bankable,” said Mr Tonny Yeap, Director, Commercial at MyHSR Corp. Malaysia.

Additionally, infrastructure projects have a failure rate of more than 20%, added Mr Pang Yee Ean, Director General for Investment Operations, Energy and Urban at AIIB. To make projects more bankable, the panellists said governments need to share the benefits fairly with private investors, as well as ensure stability in terms of laws and regulations.

SBF forms sub-committees for infrastructure

To boost Singapore’s involvement in regional infrastructure projects, the SBF announced the formation of two new sub-committees at SRIS under its Infrastructure Committee which was set up last year to foster greater collaboration between Singapore companies for regional infrastructure projects.

The two bodies comprise the Built Environment sub-committee to be led by Surbana Jurong Group CEO Mr Wong Heang Fine, and the Water sub-committee to be headed by Ms Cindy Lim, Managing Director at Keppel Urban Solutions.

Said SBF Vice Chairman Mr Pek Lian Guan, “Singapore can play a key role in effective infrastructure delivery, which supports economic development and financial inclusion, as well as greater connectivity across Asia.”

In his speech, Mr Pek urged Singapore companies to “have a radical mindset change and venture out of their home ground”, adding that if companies focus only on opportunities in Singapore, “we are competing in a small pond, and a business cannot grow to be bigger than the pond it is swimming in.

To be competitive, collaboration is key. He said, “If we don’t come together, we will not have the scale required to compete in the infrastructure space where the projects tend to be large scale in nature.

To find out more about the SBF Infrastructure Committee, join the SBF Infrastructure Committee Interest Group here.