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Opening Remarks by Mr Yee Ping Yi, Deputy Secretary (Policy) of the Ministry of Finance, at the G20/OECD Singapore High Level Roundtable on Institutional Investors and Long Term Investment

28 May 2015

Distinguished guests,

1.Good morning and welcome to the G20/OECD Singapore High Level Roundtable on Institutional Investors and Long Term Investment. We are deeply honoured to have with us today many esteemed thought leaders from the public sector, the private sector, and multilateral organisations. Your participation at this Roundtable will certainly add significant value to our discussions.

2.Today’s Roundtable marks the culmination of an exciting fortnight for Singapore on the infrastructure front.

a. Just last week, the Chief Negotiators of the Asian Infrastructure Investment Bank successfully concluded our discussions on the Articles of Agreement in Singapore. This is a significant milestone, and we look forward to the signing of the Articles of Agreement in the near future.

b. This week, Singapore plays host to the G20 for a series of important infrastructure-related meetings. These meetings bring together stakeholders from the public sector, private sector and multilaterals to discuss challenges and opportunities in the investment and infrastructure space.

3. Infrastructure remains high on the G20’s priorities. The G20 is focused on facilitating long-term investment in infrastructure, both to meet the huge infrastructure needs in countries, and as part of the G20’s agenda to promote strong, sustainable and balanced growth.

4. Closing the infrastructure gap is also a critical issue for Asia. By 2025, infrastructure needs in Asia are expected to reach US$5.36 trillion annually. This forms close to 60% of the global infrastructure demand. Public resources are certainly not sufficient, and private investments will be critical in filling the infrastructure gap.

5. In particular, there is a need to mobilise the resources of non-bank institutional investors for infrastructure investment. An estimated US$50 trillion worth of assets is held by institutional investors such as pension funds, sovereign wealth funds, and insurance companies. Today, only 0.8% of these assets are allocated to infrastructure. With tighter banking liquidity for long tenor loans due to new regulations, there is a need to do more to mobilise the resources of non-bank institutional investors.

6.Indeed, with the right elements in place, infrastructure can be an attractive asset class that complements the existing portfolios of these institutional investors.

a. Infrastructure is a good asset for diversification, as its returns are typically uncorrelated with those of other asset classes.

b. It provides attractive yields compared to sovereign or corporate debt, and can serve as a hedge against inflation.

c. The long-term nature of infrastructure projects also matches the long duration of pension and insurance liabilities.

7. To this end, more has to be done to develop infrastructure as an asset class. The G20 is working on initiatives such as addressing data gaps, developing a consolidated database of infrastructure projects, and improving the quality of infrastructure projects through rigorous project prioritisation. Rigorous project prioritisation will not only ensure that the right projects are selected to bring the most economic and social benefits to the country, but will also ensure that the projects are bankable and able to draw in private sector investment. With more of such projects, we can establish infrastructure as a mainstream asset class of its own. This in turn paves the way for a more sustainable financing for infrastructure in the future.

8. Unlocking infrastructure investment requires a multi-stakeholder approach across governments, multilateral agencies, and private sector players including asset managers and institutional investors. This week’s events, which include an industry networking dinner and our Roundtable today, are thus critical in bringing together the relevant stakeholders to address this issue.

9.I hope you will have an enriching discussion today, as we work together to find win-win solutions to facilitate greater long-term infrastructure investments. Thank you.