IFC signs up insurance giants to tackle Asian infrastructure needs

The IFC yesterday announced that it had teamed up with the Prudential’s Asian asset management business  Eastpring Investments and Germany’s Allianz in an arrangement that will see the two insurance groups commit $500m each to a portfolio of emerging market loans, mostly for Asian greenfield infrastructure projects.
The investment arm of the World Bank Group, the IFC hopes that the deal  will help bridge the enormous funding gap that Asian governments face as they struggle to build much-needed infrastructure and give China –  which has been looking to use its policy banks to lead infrastructure investments across countries covered by its One Belt One Road initiative – an alternative form of funding that will not add to the country’s national debt at a time when it is seeking to purge its banks of non-performing loans.
In January 2016, China launched the  Asian Infrastructure Investment Bank (AIIB) to address Asia’s infrastructure crisis. 80 countries have now signed up to the bank,  which has so far extended loans to a total of US$2bn for a number of infrastructure projects in the region, including for improvements in the safety and functionality of the water supply from large reservoirs in Indonesia; increased operational flexibility and supply integrity of  gas transmission networks in Bangladesh;  and, last week, for the construction of a reliable, quality and affordable power supply in the southern Indian state of  Andhra Pradesh.
IFC is also optimistic that the deal will pave the way for other institutional investors to join in and raise $5bn for future infrastructure projects across emerging markets. “The regions infrastructure problems won’t be solved by the governments taking on more dent,  IFC VP and Treasurer Jingdong Hua told Finance Asia
According to an ADB report published in February, $1.7 trillion  would need to be invested each year between now and 2030 per year in infrastructure to maintain economic growth,  tackle poverty, and respond to climate change.

  • The Philippines has just committed to spend as much as 7.4% of its GDP annually on Infrastructure between now and 2020, up from an average of just over 2% between 2011 and 2014.
  • Indonesia needs around $1.23 trilllion of infrastructure spending between now and 2030.
  • In India, the combined resources of public and private investment barely cover half of the  country’s $261bn annual funding needs.
Source: financeasia