Asia's hefty infrastructure needs 'require innovation'

Innovative thinking in finance and policymaking key to matching needs, says IE S'pore chief

Financial innovation is needed to match more funds to Asia's trillion-dollar infrastructure needs, but governments can also bring costs down through more innovative policymaking, suggested International Enterprise Singapore chief Teo Eng Cheong yesterday.

"Government policies need to be better coordinated, need to be much more flexible for us to bring down the cost of infrastructure development," Mr Teo told some 200 delegates at the Asia-Singapore Infrastructure Roundtable at the Shangri-La Hotel.

Infrastructure spending can be more efficient, he said, if policymakers encourage more coordination across various sectors in their plans.

For example, the low temperatures generated by liquefied natural gas terminals can be used for cooling purposes.

"Similarly, a lot of industrial activities - steel plants, cement plants - generate a lot of heat, and this heat can also be used for other purposes - perhaps incineration plants."

Flexibility should also be a feature of infrastructure policies, so that projects do not have to be redeveloped as the population grows and technology advances, he said.

Singapore's Electronic Road Pricing system is a good example of "built-in flexibility", he said, as it taxes drivers differently at different times of the day.

This week, Singapore played host to a number of infrastructure trade events. On Tuesday, Deputy Prime Minister Tharman Shanmugaratnam reaffirmed that the nation would support more infrastructure investment in the region, by making it more attractive for institutional investors to lend to the sector.

Business leaders welcomed Mr Tharman's comments.

Mr Tang Kin Fei, chief executive of Sembcorp Industries, told reporters that for most of its projects, up to 80 per cent of funding comes from debt, and 20 per cent to 30 per cent from equity.

"So you can imagine, the success of each project depends heavily on the lending institutions."

Ms Olivia Lum, founder of water treatment firm Hyflux, said that governments in many developing nations could help firms lower their financing costs by strengthening the countries' legal frameworks.

"Infrastructure projects require a lot of borrowing from the banks and so on. If public-private partnership laws are not robust, it is very difficult to structure our projects. We have to structure in the risk premium by buying political insurance... and lenders are also looking for higher premiums if the legal frameworks are less ideal," she said.

"Make the rules more clear, so that we don't have to step on mines."

A version of this article appeared in the print edition of The Straits Times on October 22, 2015, with the headline 'Asia's hefty infrastructure needs 'require innovation''. Print Edition | Subscribe