Asian lead­ers cite con­nec­tiv­ity gaps

Business World - - FRONT PAGE - By Krista An­gela M. Mon­teale­gre Na­tional Cor­re­spon­dent

AL­LIES of South­east Asian na­tions are ready to help foot the mam­moth bill needed to plug the re­gion’s in­fra­struc­ture gaps, with home­grown busi­ness lead­ers bring­ing to the fore the im­por­tance of pub­lic-pri­vate part­ner­ships (PPP).

Dur­ing the sec­ond day of the ASEAN Busi­ness and In­vest­ment Sum­mit 2017 in

Parañaque City, Prime Min­is­ter Dmitry Medvedev said the Rus­sian Fed­er­a­tion wants to deepen ties with the re­gion, ex­press­ing will­ing­ness to pro­vide in­fra­struc­ture ca­pa­bil­ity for air­ports, rail­roads, high­ways and high speed com­mu­ni­ca­tion chan­nels to im­prove re­gional con­nec­tiv­ity.

“We have not been able to tap fully the po­ten­tial that we see. Trade is rather mod­est. The po­ten­tial is much greater, tens of times greater. We have to do what we can to de­velop these re­la­tions and bring them to a new level,” Mr. Medvedev said.

For his part, South Korean Pres­i­dent Moon Jae-In pointed out there are “in­fi­nite ar­eas of co­op­er­a­tion” with ASEAN, while iden­ti­fy­ing trans­porta­tion, en­ergy, wa­ter re­source man­age­ment, and in­for­ma­tion and com­mu­ni­ca­tion tech­nol­ogy as the four main sec­tors.

“South Asia and South­east Asia will be the growth en­gine of the world. Hence, build­ing con­nec­tiv­ity with ASEAN is a key ob­jec­tive for In­dia,” In­dian Prime Min­is­ter Naren­dra Modi said.

South­east Asia is in the midst of an in­fra­struc­ture boom, as gov­ern­ments move to re­verse decades of un­der­in­vest­ment in the sec­tor.

Asian De­vel­op­ment Bank ( ADB) Vice- Pres­i­dent Di­wakar Gupta es­ti­mated that the bloc must set aside $60 bil­lion in an­nual in­vest­ments for road, rail, power, wa­ter, and other crit­i­cal in­fra­struc­ture to en­sure sus­tained rapid eco­nomic growth.

“This kind of money will not come from the gov­ern­ment ( alone). You have to source it from the pri­vate sec­tor and PPPs are an ex­cel­lent way for­ward be­cause they can lever­age the rel­a­tive strengths of both par­ties,” Mr. Gupta said.

The Philip­pines has adopted a “hy­brid” in­fra­struc­ture fi­nanc­ing scheme in­volv­ing of­fi­cial de­vel­op­ment as­sis­tance mostly from China and Ja­pan and pub­lic fund­ing for the con­struc­tion phase and then auc­tion­ing off the op­er­a­tion and main­te­nance con­tracts of these projects to the pri­vate sec­tor.

Ayala Corp. Chair­man Jaime Au­gusto Zo­bel de Ayala said PPPs are cru­cial in build­ing an “ecosys­tem” that will har­ness gov­ern­ment fund­ing for longer- term in­fra­struc­ture projects and the cap­i­tal and in­no­va­tion pro­vided by the pri­vate sec­tor.

The Ayala group, an ac­tive par­tic­i­pant of the PPP pro­gram un­der the pre­vi­ous ad­min­is­tra­tion, has ex­panded to power and wa­ter util­ity in other South­east Asian na­tions.

“It takes time to bring down these in­vis­i­ble walls. It takes cor­po­ra­tions and busi­nesses to take this wall down. We can­not just ask gov­ern­ment to do it them­selves,” Ai­rA­sia Chief Ex­ec­u­tive Of­fi­cer (CEO) Tony Fer­nan­des said.

Mr. Fer­nan­des pushed for “more PPPs,” while urg­ing gov­ern­ments to look be­yond big cities and con­sider build­ing in ter­tiary cities to ac­cel­er­ate the roll out of in­fra­struc­ture projects.

“We have a lot of catch­ing up to do. There are cer­tain in­fra­struc­ture which gov­ern­ments have to do and other in­fra­struc­ture projects that pri­vate sec­tor can do and par­tic­i­pate,” In­ter­na­tional Con­tainer Ter­mi­nal Ser­vices, Inc. Chair­man En­rique K. Ra­zon, Jr. said.

The Philip­pines is ahead only of ASEAN neigh­bors Cam­bo­dia and Laos in the Global Com­pet­i­tive­ness In­dex 2017-2018, the an­nual com­pet­i­tive­ness rank­ing of the World Eco­nomic Fo­rum. “My hope is that this ad­min­is­tra­tion can change the cul­ture of how things get done in this coun­try. Un­til some­thing hap­pens, we’ll still be ahead of only Laos and Cam­bo­dia in terms of in­fra­struc­ture in­vest­ment,” Mr. Ra­zon said.

Thomas R. Hardy, di­rec­tor for con­gres­sional af­fairs and pub­lic re­la­tions at the US Trade and De­vel­op­ment Agency, said it all boils down to trans­parency, sanc­tity of con­tracts and com­mit­ment from both the gov­ern­ment and pri­vate sec­tor re­gard­less of the model in pur­su­ing in­fra­struc­ture projects.

“If you look at the eco­nomic curve, as coun­tries move up on per capita ba­sis, cor­rup­tion also de­clines… If we fo­cus on get­ting economies to grow, get­ting peo­ple em­pow­ered, and get­ting per capita in­come to go up, I think nat­u­rally, cor­rup­tion will de­cline,” Ayala’s Mr. Zo­bel said.

For the Ayala ex­ec­u­tive, in­vest­ment is key to push­ing growth above 6-7% — a level at which eco­nomic gains are per­ceived to be felt by a greater ma­jor­ity of the pop­u­la­tion.

Ad­e­quate in­fra­struc­ture and col­lab­o­ra­tion are also key to ad­vanc­ing fi­nan­cial in­clu­sion in the re­gion, with dig­i­tal tech­nol­ogy pre­sent­ing op­por­tu­ni­ties to over­come in­vest­ment bar­ri­ers.

“The fu­ture is go­ing to be dig­i­tal… Cer­tainly, dig­i­tal has en­abled reach we could never have dreamed of be­fore,” said Nazir Razak, who heads CIMB Group, one of the largest banks in South­east Asia.

Speak­ers in the same sum­mit noted that South­east Asian firms are in­creas­ingly re­ly­ing on fi­nan­cial tech­nol­ogy ( fin­tech) to im­prove ac­cess to fund­ing to spur re­tail and small busi­ness ac­tiv­i­ties, while prod­ding banks to ease lend­ing stan­dards. — with

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