Lim Hng Kiang: Increasing and broadening private sector participation in infrastructure development Opening remarks by Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman of the Monetary Authority of Singapore, at the World Bank-Singapore Infrastructure Finance Summit, Singapore, 29 May 2013. *  *  *  Ms Sri Mulyani Indrawati, Managing Director of the World Bank Group Mr Cesar Purisima, Secretary of Finance of the Philippines Mr Sergey Storchak, Deputy Finance Minister of Russia Mr Areepong Bhoocha-Oom, Permanent Secretary of the Ministry of Finance of Thailand Distinguished guests Ladies and gentlemen Introduction – infrastructure financing is crucial to maintain sustainable growth for countries A very good morning to all of you. It gives me great pleasure to join you at the opening of this year’s World Bank-Singapore Infrastructure Finance Summit. Let me extend a warm welcome to all our guests, and especially to our overseas guests. This is our fourth meeting, and we are meeting under more stabilised circumstances. Emerging market economies have experienced a strong rebound in capital inflows post global financial crisis. McKinsey estimates that some $ in foreign capital went to emerging markets in 2012. These flows are due in part to institutional investors’ hunt for yield in the shorter term, and in part also to the longer-term shift in liquidity from the advanced to the emerging world. The G30 Working Group on Long-term Finance has estimated that infrastructure spending must increase nearly 15% for countries to achieve even moderate levels of economic growth.

Hence the balance of financing sources will eventually have to shift. Policy makers have recognised the need for broader private sector participation. Long-term investors such as insurance companies, pension funds and sovereign wealth funds can be alternative sources of financing, as the life cycles of infrastructure assets match their long-term liabilities. However, these investors are not participating actively enough in the infrastructure space, especially in debt financing. I am sure we all recognise that there are many reasons including a lack of familiarity with the asset class and bespoke nature of infrastructure projects. Some see higher perceived political risks in Asia, and a limited range of investment instruments relating to infrastructure. To catalyse broader private sector participation to complement the traditional bank lending space, a few things could be considered. Firstly, we recognise that investors have varying risk appetites, and that the expertise to evaluate and undertake greenfield project risks still resides mainly with banks. Banks should therefore consider bringing in different types of capital at different stages as the risk profile of a project changes over time. For instance, transactions could be structured such that banks finance the construction stage of projects using their balance sheets, and the bank loan is then refinanced in the bond market post-construction. This way, institutional investors gain exposure to a steady stream of cash flows from operating projects, while banks can recycle capital to lend to new greenfield projects. There have been precedents in other parts of the world.