Asean launches $650m fund to build infrastructure

WASHINGTON - South-East Asian nations launched a nearly US$500-million (S$651-million) fund last Saturday to build infrastructure, pooling resources in the hope of closing the gap between the dynamic region and major wealthy economies.

In a step towards an ambitious goal of regional economic integration by 2015, finance ministers of Asean said the fund would offer loans to build roads, railways and other projects without direct foreign assistance.

"Our community is now being built with speed. This is a milestone," Asean secretary-general Surin Pitsuwan said after ministers signed the pact here on the sidelines of the annual World Bank and International Monetary Fund meetings.

"The time for donations, the time for just gifts, is over. We have to be very innovative, we have to be very collaborative in our approach."

Despite booming growth rates and world-famous buildings, Asean on a per-capita basis lags behind major advanced nations in access to highways, railways, clean water and electricity.

The Asean Infrastructure Fund will start with US$485.2 million and aims to finance six projects a year. By 2020, Asean hopes the fund will offer US$4 billion in loans and that its total leverage will be worth more than US$13 billion.

The fund will be based in Malaysia, the biggest contributor with a US$150- million initial investment. Indonesia is the second-largest contributor with US$120 million.

The Asian Development Bank (ADB), the Manila-based regional financial institution to which Japan and the United States are the largest contributors, will provide US$150 million and eventually offer 70 per cent of financing for the fund.

The ADB will administer the fund and ensure that all investments are financially sound, said the bank's president, Mr Haruhiko Kuroda.

Asean also includes Brunei, Cambodia, Laos, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The initiative comes as China, which has uneasy political relations with a number of South-east Asian nations, increasingly exerts influence through infrastructure projects, long a hallmark of Japanese foreign policy.

Asean officials said China, Japan and South Korea had voiced interest in taking part in the initiative, but added that the region has decided to keep it internal for now.

"Our position is that, at the initial stage, it should be in Asean," said Malaysian Second Finance Minister Ahmad Husni Hanadzlah.

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