MANILA, Philippines — The Asian Development Bank (ADB) is urging developing member countries to explore innovative partnerships to fund crucial infrastructure projects at a time when government resources are challenged by pandemic response.
In a new entry on the Asian Development Blog, Yesim Elhan-Kayalar, advisor to the ADB’s Economic Research and Regional Cooperation Department, said developing economies in Asia have relied on partnerships with the private sector to finance infrastructure projects but this could be “in jeopardy” amid the prevailing crisis.
She said while governments are skill keen on using public-private partnerships (PPPs), many investors are now reluctant to pursue long-term infrastructure investments because of uncertainties over economic recovery.
Many private companies are now preserving cashflow to manage the delays in existing project timelines and are not taking on new investments.
Governments have also had to reallocate funds to prioritize support projects for furloughed workers, struggling businesses and health care systems.
“This approach will not be financially sustainable over an extended period,” said Elhan-Kayalar.
“Diverse economies will need customized solutions to sustain their public infrastructure pipelines, generate jobs and keep private sector investors engaged in infrastructure investments.”
Among the approaches put forward is to ensure that existing infrastructure PPPs continue construction with increased government support such as extending the concession term, providing credit guarantees, purchase agreements, tax holidays or deferrals, and providing refinancing options.
Another is to issue contracts to private construction companies to build fully government-funded public works and at the same time, help them remain in business until they are once again able to obtain institutional finance.
Economies are also urged to support investments in the so-called new normal such as mass transportation reconfigured for social distancing, as well as digital infrastructure which can drive private sector investments later on.
Countries are also urged to explore tax reform and prudent borrowing strategies to finance priority infrastructure investments in the short term. After economic recovery gains momentum, public expenditures can be streamlined.
Elhan-Kayalar said regional economic alliances such as the Association of Southeast Asian Nations also present opportunities for innovative infrastructure financing.
By: Czeriza Valencia
