Multilateral financial institutions like the Asian Infrastructure Investment Bank (AIIB) play a unique role in filling the infrastructure gap that cannot be fully met by the public sector or the private sector, said Singapore's Finance Minister Heng Swee Keat yesterday.
While infrastructure is critical in spurring growth, such investments are by nature lumpy and costly, and yield positive returns only over many years, he noted in a speech at the bank's inaugural board of governors' meeting yesterday.
"Full private sector funding of infrastructure projects is hence difficult, given the long project duration and complex risks. Fiscal constraints also limit public sector funding," said Mr Heng, who is also Singapore's governor at the AIIB.
But while the new lender is a significant initiative in pushing regional infrastructure development and connectivity, more steps can be taken to maximise the bank's impact in fostering economic and social development in Asia, he said.
Mr Heng, who is on a two-day visit to Beijing that ends today, suggested four areas that the Beijing-led bank can look into. First, it can strengthen capabilities of policymakers by providing technical assistance and practical advice to more governments. Second, it can make efforts to leverage its financing and attract funding from the private sector.
Third, the AIIB can explore innovative mechanisms to spur the development of infrastructure as an asset class. And lastly, it can actively collaborate with other multilateral institutions such as the World Bank to promote sustained growth in Asia and set high standards in governance, procurement, environmental and social safeguards.
"I am confident that the AIIB is well placed to make impactful, positive contributions in this region to build better lives for our people," said Mr Heng.