Re-visit, Re-frame, Re-orient: Key Takeaways from the Asia Infrastructure Forum 2024

This edition of Finger on the Pulse covers key insights and ideas discussed between industry stakeholders at the Asia Infrastructure Forum (AIF) 2024. Finger on the Pulse is a content series from Infrastructure Asia that offers insider insights on key developments and trends shaping Asia's infrastructure landscape.

Urgent climate action is needed to secure a sustainable, liveable future for all. But the window of opportunity for action is rapidly closing as the acute impact of climate change escalates globally. In the past year, global temperatures have already surpassed 1.5°C above pre-industrial levels, exceeding a critical threshold set by the Paris Agreement.

AIF 2024 served as a crucial platform for infrastructure players to discuss strategies for accelerating our collective journey towards net zero. Convening over 1,000 participants, including government officials, financiers, developers, and sustainability experts from across 26 countries, the forum tackled pressing issues within the region's infrastructure landscape.

Despite the significant challenges that lie ahead, there are opportunities to better enable greater sustainable infrastructure development in Asia. Southeast Asia alone holds the potential to unlock a staggering US$300 billion annually through green investments by 2030 . Recognising this potential, AIF 2024 connected industry players to cultivate a robust pipeline of projects across various sectors, including urban infrastructure, renewable energy, circular waste and water management, and transport and logistics. ?

During the forum, over 30 projects valued at US$20 billion across the region were presented, showcasing the region’s readiness for sustainable development. A few of these projects are also ready for private participation as early as within the next 3 to 12 months. To bring these projects to fruition, a robust framework for regional cooperation is essential. Governments must join forces to strengthen regional grids and carbon markets, incentivise the adoption of clean energy, and establish clear regulations for green financing.

This article explores the insights and ideas discussed at AIF 2024, focusing on how Asia can re-visit, re-frame, and re-orient its approach to sustainable infrastructure development.

Re-visit the current state of infrastructure in Asia

One of the themes throughout AIF 2024 was the persistent mismatch between bankability and the amount available for financing. Discussions emphasised the need to prioritise bankability from the outset. Structuring projects with clear risk allocation and exploring models like Public-Private Partnerships (PPPs) from the start emerged as a key learning point for future projects which could increase the amount of available financing. Furthermore, it was advocated that projects should be structured such that risks are assumed by the party best equipped to manage them.

Collaboration between countries and multilateral development banks (MDBs) was also highlighted as a crucial factor for improving project bankability. Credit enhancements tools such as guarantees can also help improve bankability and increase a project’s attractiveness to financiers. For instance, GuarantCo's provided a US$24 million guarantee for an innovative dual tranche bond issued by Royal Railway Cambodia. This guarantee significantly improved the project's bankability, enabling Royal Railway Cambodia to secure financing from the private sector. The funding will help enhance the company's capacity and efficiency to address the substantial unmet demand for freight and public transportation services in Cambodia.

AIF 2024 also stressed that it was not necessary to re-invent the wheel for successful blended finance transactions, but investors will seek a return on both equity and effort. Once enabling regulatory frameworks are established, investments will naturally flow. The Karian-Serpong Regional Water Supply project in Indonesia was shared as an example of blended finance. This collaborative effort between DBS Bank and the Asian Development Bank (ADB) marked the first time a mix of public and private sector funds have been used in Indonesia’s water sector . Stakeholders in this project are keen to establish a replicable template for future blended finance projects.

Re-frame the future of infrastructure development

Recognising the diverse landscape of Asia, AIF 2024 acknowledged the multifaceted nature of green transitions across the region. With countries at varying stages of urban development, and possessing distinct priorities alongside unique environmental conditions, green transition roadmaps will naturally differ.

To effectively navigate this complex regional landscape, a common theme highlighted across the panel discussions was the importance of close regional cooperation. By working together, countries can collectively address challenges, propose policy adoptions, and establish frameworks for efficient regional cooperation. However, achieving this level of collaboration hinges on several crucial factors, including a shared vision, mutually agreed-upon goals, clear regulations (particularly for financial structures and project alignment), and inter-governmental agreements.

The forum also highlighted the lack of grid connectivity and supporting infrastructure between Southeast Asian countries, despite the region's abundance of renewable resources. While the industry is witnessing a surge in investments around long-duration storage solutions like batteries and hydrogen, grid stabilisation was identified as the next crucial step. A case was made that grid privatisation could unlock even greater investment opportunities in this area.

Energy transition was another key focus during AIF 2024, with discussions addressing the challenges of phasing-out existing and new coal plants as part of the decarbonisation pathway. Acknowledging the financial challenges associated with retiring coal plants, the importance of upfront, inclusive transition plans that identify alternative energy sources to meet future demand was critical, particularly for older plants slated for early retirement.

AIF 2024 expressed optimism about the role of technological advancements in delivering infrastructure as a service. Traditionally, infrastructure has been a conservative sector, prioritising stable cash flow and long-term contracts with little incentive for innovation. However, the growing focus on sustainability, efficiency, and inclusivity is driving innovation to facilitate the transition towards low-carbon and climate-resilient infrastructure.

Re-orient strategies for sustainable and resilient infrastructure

The forum also discussed the critical role of public buy-in for a successful green transition. Panellists acknowledged that the green transition, in itself, presented a unique opportunity for job creation as it necessitates the development of new processes, departments, and even industries. However, to harness this potential and foster public support, education, skills upgrading, and clear career progression pathways will be essential. Effective communication strategies were also highlighted, drawing from the experience of overcoming initial public resistance during a dam project in Sarawak. In today's media-saturated environment, where rhetoric and hype can dominate, clear articulation of government goals and project deliverables is paramount. To achieve this, communication strategies need to be carefully crafted to cut through the noise and effectively reach stakeholders through both traditional and social media channels.

Cost competitiveness remains a hurdle for some clean technologies. Achieving economies of scale was identified as a solution to bridge the cost gap and accelerate adoption. Strategic economic incentives that encourage investment in clean technologies for infrastructure projects were identified as a potential approach. Blended finance was once again highlighted as a valuable tool, as aggregating capital from diverse sources can help achieve a lower accepted rate of return, making these emerging clean technologies more financially viable.

The transition to sustainable infrastructure will require investments in new capabilities and innovative solutions. While there will be costs involved, these are necessary growing pains on the path to a more resilient future. Infrastructure Asia will continue to work closely with our partners to highlight a promising pipeline of infrastructure projects across Asia and connecting them with public and private sector players seeking financially viable investments that align with their risk-return profiles.

Stay tuned for the post-event report, which will dive deeper into the individual sessions at AIF 2024.