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Funding Asean’s infrastructure demand

The region’s businesses are being held back by weak transport links, while markets are underdeveloped because of lack of infrastructure. Will Asean’s economic fusion in 2015 give southeast Asia the injection of funds it so desperately needs?

During a recent oath-taking event hosted by president Benigno Aquino at Malacanang, the Philippines presidential palace, proceedings were interrupted by a power blackout. Indeed, blackouts have become so widespread on the island of Mindanao that social-media users have taken to calling the energy secretary the secretary of darkness.

Infrastructure needs more energetic development in the region as a whole; the trouble is that investment in the sector has been the preserve of government and attempts to harness the private sector have achieved limited success. Meanwhile, as the US Federal Reserve tapers its quantitative easing programme, emerging markets are maintaining prudent reserve policies that might limit infrastructure investment. However, changes in the macroeconomic environment are forcing a rethink of financing, with innovations that might lead to greater private-sector participation. Still, the twin ogres of governance and transparency loom large.

The Asian Development Bank estimates that Asean (Association of Southeast Asian Nations) infrastructure projects will require sustained annual investments of approximately $60 billion a year to 2020, in addition to investment in projects with large cross-border impacts such as airports, seaports and roads to borders. HSBC estimates that demand in Asia as a whole might reach $11.5 trillion by 2030.

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