A guest has a few words with Zhou Li (left), publisher and editor-in-chief of China Daily Asia Pacific during the China Daily Special Forum - Unleashing Asian Dragons: Infrastructure Investments for the Asia Century in Admiralty on Monday. Parker Zheng / China Daily

Economic growth in Asia is increasingly tied to more efficient and more interconnected infrastructure but financing and the difficulties inherent in public private partnerships (PPPs) are creating new challenges.

South Asia needs $250 billion per year in infrastructure investment to keep its rate of growth. East Asia, including the Association of Southeast Asian Nations (ASEAN), needs another $600 billion.

"The 21st Century has been dubbed Asia's century and will see Asia, and ASEAN in particular, experience unprecedented economic growth with massive investments in infrastructure projects and other sectors such as energy, telecommunications and education," said Zhou Li, publisher and editor-in-chief of China Daily Asia Pacific during a China Daily Forum yesterday co-hosted by the newspaper and the Asia Society.

A proposal by Chinese President Xi Jinping to develop a maritime Silk Road could lead to "enormous investment opportunities for Asia, specially (Chinese mainland) and ASEAN in such areas as trade, infrastructure and cultural exchanges."

Important as these projects are, the question of funding remains. And it is one that cannot be ignored.

"Without infrastructure no country can achieve sustainable growth," said Li Yao, chief executive officer at the China-ASEAN Investment Cooperation Fund. "Infrastructure is the key for an economy to achieve efficiency."

One key proposal, put forward by China, would be to create an Asia Infrastructure Investment Bank. South Korea, Pakistan, Kazakhstan, Mongolia and the 10 ASEAN members, along with Canada, Australia and New Zealand have all shown interest.

But more public funding is only part of the puzzle. Private participation is also important. And over the last year, private sector participation in infrastructure PPPs has dropped. In India, where the drop is particularly pronounced, the number of PPP projects fell from 119 in 2012 to 31 last year. A big challenge is a lack of trust in regulatory environments.

"That is the name of (the) game, consistency in terms of the rules of engagement," said Cledan Mandri-Perrott, lead finance officer and PPP specialist at the Singapore Infrastructure Hub of the World Bank Group. "The reality, whether we like it or not, is that in the ASEAN region regulatory risk faces uncertainty."

Banks are reluctant to participate because there are concerns in terms of the cash flow and the size of the investment, said Jason Yeung Chi-wai, deputy chief executive at Bank of China (Hong Kong), which is involved in just one PPP project in the Chinese mainland.

"We need to work on a framework that can give confidence for banks," said Yeung.

Ultimately, the need for more and better infrastructure also creates opportunities, said Geert Peeters, group director and chief financial officer at CLP Holdings.

"These days, project financing goes around the world in different formats," said Peeters, "But with PPPs it is important to look not just at individual projects but also about how they fit with the socio-economic priorities in each economy."

For China Daily

(HK Edition 09/23/2014 page5)