The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian

Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent.
ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use.
Terminology used may not necessarily be consistent with ADB official terms.

Infrastructure Funding in Developing

Asia: Opportunities and Challenges
Dr. Bokhwan Yu
Deputy Dean of Asian Development Bank Institute

Outline of the presentation

1. Overview of infrastructure funding
2. Case studies of infrastructure financing:

lessons and challenges

3. Overcoming challenges and moving forward
4. Conclusion
2

1. Overview of
infrastructure funding

1.1 Why does infrastructure matter?

Arguments on growth
Infrastructure means

connectivity
Bringing together firms and

consumers which were

previously unconnected enables
new trade
Infrastructure is a key driver for

the growth of GDP and

productivity
4

1.2 Why does infrastructure matter?

Arguments on development
Enhanced connectivity helps to

integrate isolated members of

the economy
In light of increasing urban-rural

inequality, infrastructure can

ensure a basic standard of living
for all, including access to water
and healthcare
5

1.3 The need for greater physical

connectivity in Asia is huge
A joint ADB/ADBI study estimated that Asia and the

Pacific needs $750bn of financing every year to 2020 to

help meet the regions infrastructure needs
Infrastructure can be a key driver for growth it was a

significant factor in East Asias economic rise (World Bank)

Physical connectivity is also important for enhancing

productivity, as well as reducing inequality and poverty

6

1.4 What are the options available

to finance infrastructure?
Public financing

Infrastructure
project
Public-private
partnerships (PPPs)

Development loan and

aid

1.5 Financial constraints limiting

public provision of infrastructure
The burden of infrastructure provision has typically fallen

on governments
However, with many countries experiencing high debt

levels and macroeconomic uncertainty, public

expenditure is constrained, limiting the development of
infrastructure
8

2. Case studies of infrastructure

financing: lessons and challenges

Different types of case study

1. Case studies on projects involving multilateral

development banks (MDBs)

2. Case studies on projects involving the private

sector
3. Case studies on projects involving

environmental issues
10

2.1.1 Delays to railway regeneration

project in Uzbekistan
ADB provided funding for the

rehabilitation and modernization

of railways in Uzbekistan
The project covered the route

from Tashkent to Samarkand,

covering 320km and connecting
Uzbekistans 2 largest cities
11

2.1.1 Delays to railway regeneration

project in Uzbekistan
The project was delivered over 1

year later than scheduled

Delays related to public

procurement procedures, which

allowed for renegotiation on the

pricing of contracts this is not

allowed under ADB loan rules

12

2.1.2 Road improvement project

through World Bank funding
At the end of 2009, the World

Bank pledged $190m to fund a

large road improvement project
in Uganda
Upgrading and rehabilitating

Ugandas road network should

have meant safer roads, with
better access for public transport
13

2.1.2 Road improvement project

through World Bank funding
6 years later, after severe delays,

the project was suspended

The World Bank deemed the

performance as unacceptable
after contractual breaches to
workers, environmental issues
and allegations of abuse by
contractors
14

2.1.3 Specific issues for projects

with MDBs
A lack of domestic institutional capacity: government

departments may not be big enough or have adequate

human capital to support smooth delivery of projects
this is a large burden on experts within the MDBs
Procedural clashes on procurement, land acquisition and

the resettlement of residents MDB rules are often

incompatible with bureaucracy in recipient countries

15

2.2.1 PPPs to help the public sector

Together with the help of MDBs,

there is an increased drive to

incorporate the private sector in
infrastructure projects
The private sector can

contribute, both in terms of

finance, but also through
industry expertise
16

Private
sector

Infrastructure
project

Public
sector

2.2.2 Regular suspensions to

monorail project in Jakarta
In 2004, work started on a

monorail PPP in Jakarta

Funding withdrawals and design

changes caused numerous

suspensions during the 2000s
In 2013, a new agreement was

signed by the governor of Jakarta

to restart the project
17

2.2.2 Regular suspensions to

monorail project in Jakarta
In 2014, the project was

suspended due to issues on

design and land acquisition
In 2015, a new governor came to

power and soon cancelled the

project as the city decided the

route was not feasible

18

2.2.3 Project allocation problems

for a water PPP in Africa
The local government in Dar es

Salaam in Tanzania invited

proposals for water and sewage
services in the city
The bidding process failed twice,

with most firms dropping out

and only one remaining firm left

to receive the contract

19

2.2.3 Project allocation problems

for a water PPP in Africa
Local government demands implied too much risk for the

private sector
All economically viable proposals were rejected, with only

an underprepared and unsuitable firm left in the bidding

process
Ultimately, the PPP contract was terminated, with

multiple obligations unfulfilled and losses of over $10m

20

2.2.4 Specific issues for projects

with the private sector
Public and private interests are

often misaligned
Structuring payoffs for both sides

is complex where one side

gains another side loses
The cheapest bidder may not be

the best partner low tender

prices can imply an inability to
deliver on contracts
21

2.2.4 Specific issues for projects

with the private sector
Insufficient guidance from

governments on regulations and

legal feasibility can cause
enforced changes to the plan

after the initial contract is signed

Political change often

exacerbates these problems

22

2.3.1 Green infrastructure is the

future
MDBs, including the World Bank

and ADB, are increasing funding

for green projects every year
Pressure from shareholders is

also encouraging the private

sector to be greener
Funding in the future is likely to

be dependent on the
environmental impact of projects
23

2.3.2 Two tales of fundraising for

energy infrastructure in Bangladesh
Bangladesh is a country with

large parts of the population

lacking access to electricity
Projects to resolve this lack of

supply through coal power

plants financed by MDBs have
often been rejected due to
environmental concerns
24

2.3.2 Two tales of fundraising for

energy infrastructure in Bangladesh
However, providing solar power

as an alternative has proved very

successful, with significant funds
contributed by international

organizations
Over 16m homes have gained

access to power
25

2.3.3 Opportunities in Asia for

railway connectivity
Connectivity projects provide

more environmentally-friendly
alternatives to road transport
The Singapore Kunming Rail Link

aims to build rail links between

ASEAN and China
Upon expected completion in

2021, the route will cover

6,600km
26

2.3.3 Opportunities in Asia for

railway connectivity

Source: UNESCAP

27

2.3.4 Specific issues for projects

related to the environment
Asia has an urgent need for stable infrastructure
Governments may aim for projects which are not green if

they are believed to be quicker/cheaper to deliver

The current political climate is very sensitive to

environmentally damaging projects resistance will cause

setbacks to projects which do not satisfy green criteria
28

3. Overcoming challenges and

moving forward

29

Providing solutions
1. Enhancing government capacity to smoothly

deliver on projects
2. Building trust with MDBs and the private

sector
3. Improving project viability through greener

infrastructure
30

3.1 Enhancing government capacity

to smoothly deliver on projects
Higher levels of human capital

can ensure successful projects

Capacity building and training

through domestic initiatives and

cooperation with IOs is key
Governments should look to hire

industry experts to work

alongside existing staff
31

3.1 Enhancing government capacity

to smoothly deliver on projects
Improved human capital implies

a greater ability to research and

plan projects
This can reduce changes to a

projects timeline or budget

Related departments should take

responsibility for specific

elements of a project,
encouraging accountability
32

3.1 Enhancing government capacity

to smoothly deliver on projects
Case studies highlight the many

ways government procedures

can slow projects down
Infrastructure projects require
Land/building permits

Procurement contracts etc.

The volume and complexity of

procedures must not harm the

ease of doing business
33

3.2 Building trust with MDBs and

the private sector
It is important to deliver on

initial contracts delays

jeopardize profitability and
therefore trust
For example, with PPPs the

payoff to the private partner may

be agreed in the initial contract
delays therefore cause a direct
reduction in project profitability
34

3.2 Building trust with MDBs and

the private sector
Infrastructure projects are

typically long term they often

extend beyond one election
cycle
This can mean uncertainty and

changes in policies post-election

Steps must be taken to ensure

projects are election-proof

35

3.2 Building trust with MDBs and

the private sector
Our cases highlight that

successful collaboration with

partners can encourage further
cooperation, whilst failed
projects may damage a countrys
reputation and dry up funding
The public sector must make

sure to consider external

partners interests
36

3.3 Improving project viability

through greener infrastructure
Governments must focus more

on evaluating the environmental

impact of infrastructure projects
This should be across the

infrastructure spectrum,
including power plants, railways
etc.
Green infrastructure will play a

massive role in the future

37

Conclusion
Infrastructure is a key driver for

economic growth and

development
The need for infrastructure in

Asia will be huge in the coming

years
In order to fund projects,

governments, MDBs and the

private sector must work
together
38

Conclusion
Improved government capacity

implies better planning and

smoother projects
Governments building trust with

external partners can create

long-term relationships and
reduce the burden on public
financing
Countries proposing green

infrastructure will succeed

39

THANK YOU!

40