August 25, 2023
JAKARTA – Singapore’s Deputy Prime Minister and Minister for Finance Lawrence Wong named the top three items on his wish list for sustainable infrastructure projects – identify who pays for them, how to reduce their risks, and how to have more innovative financing.
In his opening remarks at a high-level dialogue on promoting sustainable infrastructure development in Jakarta on Thursday, Mr Wong underlined the need to identify more projects, as well as understand who pays for them as they are not free.
“It (the project) is not going to be free of charge, somebody must pay, and usually, there are only two parties that pay – user pays or government pays. And when the government pays, it does not mean people do not pay because government money also comes from taxpayers. So, in fact, it is either the user of the infrastructure that pays or taxpayers that pay,” he told the forum, which is part of the 10th Asean Finance Ministers’ and Central Bank Governors’ Meeting.
“If we can identify projects, design the payments for these projects, then we have a healthier pipeline of infrastructure projects,” he said, adding that the projects can be both within Asean countries and cross-country projects across the region, such as an Asean power grid or a high-speed rail across two countries.
During the session, the panel of Asean finance ministers was asked to list three items it considered urgent in producing more sustainable infrastructure projects and allowing more financing to flow to infrastructure projects in all Asean countries to significantly reduce the gap between financing needs and investment in the infrastructure sector.
Mr Wong noted that bankers may not want to finance the projects and investors may not want to plough money in due to a gap in terms of returns. Hence, reducing the risks of the projects is important to make them bankable.
Some of the ways that governments can reduce the risk premium, he said, is by having greater contractual or regulatory certainty, or even by providing some basic guarantees in order to reduce risks.
Mr Wong also raised the need to explore ways for more innovative financing to make the projects more bankable. One way is through blended financing, which can be done by combining concessionary financing that may be available from multilateral development banks with that of private banks, so that the interest rate that is required from the financer will be lower.
“I think if we can unlock more of these blended financing solutions, we can make many more infrastructure in Asean bankable as well,” he said.
Over the two-day event, which ends on Friday, Asean finance ministers will discuss the state of the global and regional economies, the progress of the Asean Economic Community Blueprint 2025, as well as key initiatives to deepen Asean finance cooperation and regional financial integration, according to a press statement from Singapore’s Ministry of Finance (MOF).
Mr Wong was accompanied by officials from MOF and the Monetary Authority of Singapore.
On Thursday, he met regional ministers including Malaysian Deputy Finance Minister Steven Sim, and they affirmed the deep and multi-faceted ties between the close neighbours.
In his meeting with Thai Finance Minister Arkhom Termpittayapaisith, Mr Wong thanked Mr Arkhom for his efforts in nurturing deep people-to-people and economic ties between both countries. He also noted that Singapore and Thailand are longstanding close friends with robust cooperation in cross-border payments, and infra and sustainable finance.
Mr Wong also met Indonesian Health Minister Budi Gunadi Sadikin and underlined the need to strengthen global and regional health systems to prepare for future pandemics.