In many ways, Asia has become a growth engine for the world economy, with developing Asia currently driving 60 percent of global growth.1 Southeast Asia will see the fastest growth in vehicle ownership globally in 20172 and the broader Asia region as a whole leads in air passenger growth3 as well. Average Gross Domestic Product (GDP) growth in developing Asia is expected to be 5.7 percent in 2017 and 2018, compared to just 1.9 percent in the Euro area, the US and Japan.1
The expected GDP growth is driven in part by an estimate of one million young people entering the workforce each month in South Asia,4 and in part by countries like Vietnam, which is forecast to experience a record year of foreign direct investment.5
Given this overall boom, it is no surprise that the Asian Development Bank forecasts that the region requires $26 trillion of investment in infrastructure over the period 2016-2030. However this expected demand is tempered by a reality in which there are significant uncertainties over where the money to fund this development will come from. The financing requirements are so large that a fundamental shift will be needed in how infrastructure projects are financed in a region where the public sector has historically covered over 90 percent of needs. Countries in the region that want to meet their required investment needs over the next decade and beyond, will have to attract funds from global institutional investors who, to date, have generally been wary of infrastructure investment in emerging markets.
Project bankability in Asia has been a key concern for investors in infrastructure for many years. Marsh & McLennan Companies' Asia Pacific Risk Center estimates that between 55-65 percent of projects in Asia are not bankable without support from government or multilateral development banks. This report seeks to address the many challenges of project bankability in the region, by introducing a set of guidelines based on the combined expertise of Marsh & McLennan Companies' operating companies: Oliver Wyman, Marsh, Mercer and Guy Carpenter.
Section 1 sets the context for the boom in infrastructure demand in Asia. Section 2 looks in more detail at the drivers and challenges associated with infrastructure financing in the region, including the inadequacy of the current public sector driven financing model based on forecasted future requirements. Section 3 sets out the bankability guidelines which consist of six levers that reflect the ideal environment (created by governments) and best practice execution (conducted by investors) for infrastructure investment. The report concludes by looking at the successful application of these levers across key industry sectors and within selected countries with high infrastructure investment growth expectations.