The Market Monitor Minding the Nation's Business
The Asian Development Bank (ADB) has entered into an agreement with the Japan International Cooperation Agency (Jica) to establish a new fund to support private infrastructure investments across Asia and the Pacific.
The fund, Leading Asia’s Private Infrastructure (LEAP), will be capitalized by $1.5 billion in equity from Jica, and will be managed by ADB’s Private Sector Operations Department.
Infrastructure development currently accounts for about 65 percent of ADB’s private-sector operations. ADB aims to expand large-scale private infrastructure operations by leveraging Jica’s resources and risk-bearing capacity.
LEAP will invest in projects at different stages of development through a variety of modalities, including public-private partnerships, joint ventures, infrastructure concessions, and corporate financings, using a range of debt, equity and mezzanine instruments.
LEAP will target a wide range of quality, private-sector infrastructure transactions in energy and power generation—with a strong focus on renewable energy and improvements in energy efficiency—as well as water and urban infrastructure, transport, information and communications technology, and health.
The establishment of LEAP originated from a new collaboration package announced by the Japanese government on Nov. 21, 2015, as one of the follow-up measures of “the Partnership for Quality Infrastructure.” Jica and ADB have been discussing the creation of a trust fund for supporting private-sector infrastructure projects and public-private partnerships in Asia and the Pacific. The two organizations signed a memorandum of understanding (MOU) on a framework for the partnership last Dec. 17, and have now reached an agreement on the terms and conditions for the trust fund.
According to the ADB, Asia’s infrastructure financing needs are estimated at a massive $800 billion per annum, and tapping the resources of the private sector and development organizations is crucial to bridging this gap.
Through this equity investment in LEAP, which will be financed from its Private Sector Investment Finance, Jica aims to further expand its private-sector investment activity in quality infrastructure projects in developing countries in Asia and the Pacific.
“The creation of the LEAP fund demonstrates the commitment of the ADB, the government of Japan and Jica to providing substantial new resources for infrastructure development in Asia and the Pacific,” said ADB President Takehiko Nakao.
“Quality and sustainable infrastructure supports our core mission to achieve poverty reduction and sustainable development in Asia and the Pacific. We expect the fund will generate at least $6 billion in total financing in this important sector, combined with ADB’s own capital and that of commercial cofinancing partners.”
Jica will continue to promote the Partnership for Quality Infrastructure and will continue to support activities to achieve the Sustainable Development Goals (SDGs) pledged in the United Nations General Assembly last September by strengthening collaboration with the ADB and other multilateral development banks.
The ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members, with 48 of these from the region.