It is clear that the expected demand for infrastructure in Asia far exceeds the public sector's ability to finance them. Private sector investment into infrastructure is as critical an imperative now as it has ever been. If no action is taken, economic growth in the region will stall and the social implications will be profound.
Governments in the region must take responsibility to change their local legal, financial and regulatory environments to support fair and transparent infrastructure development. Not surprisingly, it is often the countries with the largest need for foreign investment in infrastructure which have the most work to do to create such an environment. Public-private partnerships will play a key role in changing the infrastructure landscape in the region. Where these are structured effectively and with appropriate risk allocation, the value will come not just from the supply of private sector capital, but equally from broader private sector expertise in deal financing and efficiency gains from the improved management of operational assets.
Ultimately, projects need to be seen as bankable, and also provide competitive returns on a risk-adjusted basis when compared to global alternatives. The guarantees offered by governments and multilateral development banks will continue to be important in this regard, as will the use of broader risk mitigation and transfer mechanisms.
Despite the known challenges, it is an exciting time for the infrastructure industry in Asia.
The future demand for power in the region is unquestionable. What remains to be seen is how the concept of the Energy Trilemma (achieving a balance between energy security, cost of supply and environmental impact) affects the investment and technology decisions taken by governments in the region.
China's Belt and Road Initiative has a long way to go before it can be considered a success, but the scheme undoubtedly has great potential. However, questions remain as much around the geopolitical implications of the investments, as around financing and bankability concerns. The initiative is therefore ripe for further cross stakeholder collaboration and research.
Increased regional cooperation will not just be led by China. Discussions continue around a potential ASEAN Power Grid, while India, Nepal, Bangladesh, Bhutan, Myanmar, and Thailand are progressing with a scheme to link the countries through a highway network. The outcome of the Regional Comprehensive Economic Partnership (RCEP) trade agreement, due in 2017, will likely have a knock-on impact on infrastructure development in the region too.
While governments in Asia must take the lead in creating a more transparent and conducive environment for infrastructure investment, other stakeholders should not wait patiently in the background. Those who start building their local knowledge, capabilities and partnerships now will be best placed to benefit from future changes that this report has outlined.