Funding Organization: ASEAN Infrastructure Fund (AIF)

PROFILE

Total Amount USD 485 million in initial equity contribution
Financing Mechanisms Loan
Qualifying Projects Adaptation , Mitigation , Technology, Energy , Energy Efficiency , Infrastructures , Renewable Energy , Transport , Urban , Waste Management , Water , Water efficiency
Eligibility National and sub-regional projects in Developing Country Members of ASEAN (also AIF shareholders) are eligible for AIF funding. Those countries are: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, The Philippines, Singapore, Thailand and Viet Nam.

Funding Objectives

The objective of the AIF is to finance projects that promote infrastructures of development within ASEAN developing country members. AIF aims at providing loans up to USD 300 million a year to finance projects contributing to poverty reduction, inclusive growth, environmental sustainability and regional integration. Projects should ensure that the local population can have improved access to energy services, clean water and sanitation as well as better transportation systems.

With respect to energy infrastructures, projects are guided by the ASEAN Plan of Action on Energy Cooperation and its priorities in renewable energy, energy efficiency and conservation as well as regional energy policy and planning.

The fund is expected to finance 6 projects a year for a total of USD 13 billion leveraged by 2020. 

Financing Mechanisms

Shareholders of AIF contribute in equity to the fund. The initial equity commitment of developing country members for 2012-2013 is USD 335.2 million. The initial equity commitment of ADB (also a shareholder of AIF) is USD 150 million. 

Under the AIF, debt will eventually be issued to leverage 1.5 times the equity, with around $162.0 million in hybrid capital (perpetual bonds), targeting high-investment grade credit ratings. It is expected that central banks and other institutions, including private sector investors, will purchase the debt after the AIF has established a clear track-record and sufficient lending volume.

The AIF will lend to relevant ASEAN countries (see eligibile countries above), based on ADB’s country partnership strategy, and regional pipelines. Lending initially will occur only on sovereign and sovereign-guaranteed projects and public portion of PPP projects. Later the Fund could also make loans to private sponsors after formal determination by the AIF managers.

Application Procedures

As a shareholder of the AIF, ADB has been entrusted with the administration of the fund, therefore, it proposes a project pipeline based on ADB’s Country Partnership and Strategy (CPS) with the member countries. For each, ADB defines a Country Operations Business Plan, which consists of the projects eligible for AIF funding that fall under the CPS. The Country Operations Business Plan is the basis for identifying projects to receive AIF funding. 

Project Types

Projects eligible for AIF funding are infrastructure projects in the sector of transport, energy, and water such as: renewable energy plants, communication infrastructures (roads, highways, etc.), transmission projects and power grid projects.

Projects with opportunities for sub-regional cooperation initiatives are also considered in the perspective of improving regional integration between developing country members. 

Decision-making structure

The AIF board is the ultimate decision making body of the AIF (each shareholder is represented on the board) and it has appointed the ADB to act as administrator of the AIF. ADB also provides technical support to AIF. 

To select projects ADB will apply criteria approved by ASEAN members (and thus AIF shareholders), ADB’s choice is based on sound economic and financial rates of return and a positive impact on poverty reduction. The AIF board has approved the following criteria for the selection of projects: 

  • Projects must promote regional cooperation to the extent possible
  • Projects that promote private sector participation, and especially PPP
  • Projects with credit rating diversification (ADB recommence a maximum limit of 30% exposure per country, 40% limit for each sector and a single project limit of USD 75 million per project). 

Additionally the project has to be ready from a technical, economic, financial and social dimension.