Speech by Ms Indranee Rajah, Minister in the Prime Minister's Office, Second Minister for Finance and Education, at Asia Infrastructure Forum 2019 on Wednesday, 2 October 2019, at Sands Expo and Convention Centre
Your Excellency Anisul Huq, Minister, Law, Justice and Parliamentary Affairs, People’s Republic of Bangladesh,
Your Excellency Mr Lattanamany Khounnyvong, Vice Minister of Public Works and Transportation, Lao People’s Democratic Republic,
Your Excellency Vongsey Vissoth, Permanent Secretary of State, Ministry of Economy and Finance, Kingdom of Cambodia,
Ladies and gentlemen,
1. A very warm welcome to all of you, especially our friends from overseas, to this inaugural Asia Infrastructure Forum today.
2. We are very privileged to have with us Ministers and senior officials from Bangladesh, Cambodia, Canada, Lao People’s Democratic Republic, as well as senior representatives from our Asian neighbours, including the Japan Bank for International Cooperation and Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development (JOIN). A warm welcome too to colleagues from the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the World Bank Group, as well as leaders across the private sector. Thank you all for making a special effort to be here.
Sustainable Infrastructure Development and Financing in Asia
3. Let me start first with sustainable infrastructure development and financing in Asia. Infrastructure development remains a critical driver for economic and social growth. The Global Infrastructure Hub estimates that developing Asia requires US$51 trillion in infrastructure investment through 2040, to maintain its current growth momentum.
4. Many countries are proactively taking steps to address their infrastructure needs. For example:
a. Bangladesh announced in its 2019 Budget that to improve the transport system, the government is taking steps to gradually upgrade all national highways into four lanes or more. It is also constructing the first Metro Rail in Bangladesh;
b. Cambodia will be building a 100-megawatt solar power park, as part of its efforts to develop renewable energy resources and diversify its energy mix. It is also looking for international partners to address upcoming needs in wastewater, waste management, and logistics and connectivity; and
c. Lao People’s Democratic Republic, under its 8th National Socio-Economic Development Plan, will be focusing on inclusive, sustainable, and green growth development, amongst other priorities.
5. Even as Asia pursues its infrastructure development and growth, however, it is imperative that the right balance be struck with sustainability. Climate change poses the greatest existential threat of our time. Deforestation, ecological damage, and carbon emissions resulting in global warming and rising seas are critical considerations that must be taken into account even as countries develop. It cannot be business as usual. As our Deputy Prime Minister Heng Swee Keat has said, “the infrastructure of the future cannot be the infrastructure of the past”. In other words, the infrastructure we build and how it is built, should not contribute further to climate change. We need to build green infrastructure that is sustainable, and fights against or at the very least mitigates climate change even as it allows countries to pursue their developmental goals.
6. But what is sustainable infrastructure? It refers to infrastructure with a specific focus on better management of energy, water, and land; it incorporates green areas; uses innovative solutions and technology, as well as responsibly-sourced, durable building materials. It can also refer to existing infrastructure that has been retrofitted, rehabilitated, redesigned, and reused. Whichever definition we use, sustainable infrastructure is how we approach development from a holistic viewpoint. It is based on sustainable development goals and takes into consideration social, financial, political, economic, and environmental concerns. Such infrastructure projects are more likely to perform as expected in normal circumstances, and be more resilient in times of disruption. Sustainable infrastructure aids climate resilience, which ultimately helps economic resilience. This is reflected in the Asian Development Bank forecast which indicates that, if left unaddressed, climate change could reduce the region’s gross domestic product by 11 percent by the end of the century.
7. Green finance is becoming increasingly available to support sustainable development. Green finance refers to any financial instrument or investment issued in exchange for positive environmental externalities, and is an important tool for financing sustainable infrastructure.
8. However, there is a green finance gap. The United Nations Environment Programme and DBS estimate that the current annual flow of green finance supply in ASEAN is US$40 billion, against an average annual demand of US$200 billion between 2016 and 2030.
9. Singapore is a small country. However, in line with our belief that everyone can play a part, we have introduced various initiatives to encourage green financing. The Monetary Authority of Singapore launched a Green Bond Grant Scheme in June 2017 to support the issuance of green bonds. This scheme was expanded to include social and sustainability bonds, and accordingly renamed the Sustainable Bond Grant scheme. The scheme aims to offset the additional costs of issuing green, social and sustainability bonds as compared to conventional bonds issuance, and to promote the adoption of internationally accepted standards on sustainability. To date, some S$6 billion worth of green bonds have been issued in Singapore, by both local and foreign players.
10. Both financial and real economy players find Singapore a conducive market for green finance:
a. In April this year, the Industrial and Commercial Bank of China in Singapore launched the first Green Belt and Road Inter-bank Regular Cooperation Bonds, with a total equivalent amount of US$2.2 billion.
b. In the same month, Singapore solar developer Sunseap sealed the first green loan in ASEAN that is compliant with Loan Market Association Green Loan Principles for a portfolio of rooftop solar projects.
11. This work is supported by Singapore-based professional and legal firms, many of which have built their capabilities in this field and can contribute to the region’s sustainable infrastructure development. For example, some offer environmental, social and governance advisory services, including sustainable finance.
Partnerships are Key to Driving Infrastructure in the Region
12. Next, partnerships. Singapore takes the view that partnerships are key to driving infrastructure in the region. To that end, Singapore has formed many different partnerships, including at the multilateral and government level.
13. Singapore believes in the role that development finance institutions and supranationals play in infrastructure.
a. This is why we were one of the first countries to support the establishment of the AIIB;
b. In April this year, Infrastructure Asia signed an MOU with the Overseas Private Investment Corporation (OPIC) from the US;
c. Enterprise Singapore also signed an MOU with JOIN in August this year.
d. At the same time, we have a strong partnership with the World Bank Group, with its first Infrastructure and Urban Development Hub being in Singapore. The World Bank is a strategic partner for our event today, which was born out of the memorandum of understanding that Infrastructure Asia signed with the World Bank Group in October last year.
e. The ADB will be opening an office in Singapore to support the expansion of its private sector operations. Infrastructure Asia has also signed a collaboration agreement with the ADB, which will be exchanged later, to develop an Innovative Finance Lab for Sustainable Infrastructure. This will help municipal governments and state-owned enterprises to improve access to credit for projects.
14. Singapore also values our relationships with other country partners. I am grateful to each of the leaders here today who have taken valuable time to be with us today to participate in the Leaders’ Panel. Other Government leaders will also be speaking in the other sessions or showcasing their projects. In addition, we have various MOUs with the infrastructure government agencies in regional countries.
Bankability and Investibility: Prerequisites for Attracting Private Sector Capital
15. Now, a few words on bankability and investibility. Given the lumpy and high cost of infrastructure projects, few Governments will have sufficient resources to fund everything from their own budget. Private sector capital provides a viable supplementary or alternative source of funding. In order to crowd in private capital, infrastructure projects need to be bankable and investible.
16. Singapore, through Infrastructure Asia, is creating runways to contribute to the infrastructure development process and thereby enhance bankability and investibility. These include, first and foremost, Infrastructure Asia’s efforts to:
a. Connect partners by matching solution providers and financing to ready projects;
b. Build capacity in demand markets; and
c. Provide high-level advice to improve project viability.
17. In addition, Infrastructure Asia will embark on two initiatives in this coming year. First, it will work with established legal service providers to standardise 50% of the terms in project finance documents. The use of standardized tools, where feasible, can significantly reduce project development timescales and bring transparency into procurement and contracting processes for host governments and procuring bodies. These have often been cited by Infrastructure Asia’s counterparts as key challenges in the infrastructure development process. Standardized tools will therefore help to reduce the cost and time at the planning stage. As an additional benefit, we hope this will over time contribute to a more vibrant secondary market in infrastructure debt, and start attracting non-bank investors into this asset class.
18. In case you wonder why 50%, the reason is because all projects, to some extent, have features which are particular to themselves and may have to be customised. So the 50% really refers to the clauses that will be applicable to all infrastructure projects, and then you can customise the part that is relevant to your country or to your particular project.
19. Second, recognising the importance of the various stakeholders in the project development process, Infrastructure Asia will work with the World Bank Group to develop a capacity building programme for regional government officials. This programme will be titled “Growing Infrastructure – Enabling and Structuring for Private Sector Participation”. This curated programme will address the oft-cited needs of key project officials in terms of developing capabilities in designing and implementing projects, and also in creating an enabling regulatory environment for PPPs. The programme therefore aims to build capabilities both in preparing infrastructure projects for private sector involvement, and in sourcing for international private sector financing and innovation. It will also provide networking and peer-to-peer learning opportunities. Specifically, this course targets senior- and mid-level government officials, who carry out the bulk of the approving and execution work for infrastructure projects respectively.
Bold Reimagining of the Future of Infrastructure
20. Next, a bold reimagining of the future of infrastructure The second part of the Asia Infrastructure Forum’s theme is “Reimagining Infrastructure”. Let me share my views on how technology can help to revolutionise the infrastructure landscape and bring us to the next level of infrastructure development with some examples of what Singapore has done.
21. Asia’s growth is driven in part by rapid urbanisation, and the creation of cities. Yet the design of cities involves highly complex systems, incorporating planning, architecture, engineering, transport, water, power, commercial, urban design, and community needs, to name a few. That’s why we chose Jewel, which some of you visited last night, for the slide because it is an example which combines all of the above considerations.
22. To get the most out of infrastructure, Singapore government agencies have started to employ technologies in their work, from planning and design through to operations and maintenance, and down to better outcomes for consumers. The Singapore Land Transport Authority is looking to adopt drones for the future of rail maintenance. This will enable the inspection of mass rapid transit tunnels to be carried out more quickly and safely, while giving engineers more time to focus on data analysis and problem solving. The Public Utilities Board (PUB), Singapore’s national water agency, is planning to roll out the first phase of its Smart Water Meter Programme, to install 300,000 automated water meters by 2023. This will benefit consumers, who can track their daily water usage through a mobile application and become more water efficient. Through these meters, PUB will also be able to detect leakages early and reduce wastage of precious water.
23. We are also creating testbeds to promote research and development. One example is the region’s first hybrid micro-grid on Semakau Landfill. The National Environment Agency (NEA) is experimenting with the integration of solar, wind, tidal, diesel, and power-to-gas technologies, to study how effectively these energy sources can work together.
Call for cooperation between ASEAN, Asia, MDBs and private sector players
24. In closing, I would like to stress that while there are several challenges to deliver infrastructure projects, we believe that they can be overcome if the various players in the ecosystem work together. The opportunities for infrastructure are exciting. Through greater collaboration between regional governments, multilateral development banks, and the private sector, we can reimagine and create sustainable, bankable, and investible infrastructure of the future, for our people and economies.
25. There is much to be done, and I hope that today’s event will be another step in contributing to our region’s development. I encourage all participants to make full use of this platform to make new connections, and contribute ideas on how we can work together to build a better future for the region. Thank you. Published on : 02 Oct 2019