The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute

(ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in
this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Infrastructure
Development
through PPP
ADBI Bersama Dewan
Pertimbangan Presiden Republik
Indonesia

Session II: Innovation in Delivering PPPs for Infrastructure

Development
Ramesh Subramanian
Director General
Southeast Asia Regional Department
Asian Development Bank 1
 Infrastructure investment needs, 2016–2030
($ billion in 2015 prices)

Baseline Climate adjusted

Total % of GDP Total % of GDP

Central Asia 492 6.8 565 7.8

East Asia 13,781 4.5 16,062 5.2
South Asia 5,477 7.6 6,347 8.8
Southeast Asia 2,759 5 3,147 5.7

- Indonesia 1,108 5.5 1,229 6.0

The Pacific 42 8.2 46 9.1
Asia and the Pacific 22,551 26,166
5.1 5.9
Annual Average 1,503 1,744

Sources: 2030 population projections from UN Population Division; others are ADB estimates.
2
 Infrastructure
How investments andinvestment
big are infrastructure gaps, 2016–2020
gaps?
($ billion in 2015 prices)

Estimated Climate adjusted

current
investment Annual Gap as
Gap
(2015) needs % of GDP

Total 881 1,340 459 2.4

Total without PRC 195 503 308 5.0

Indonesia 23 74 51 5.1

Note: Gap = Investment Needs – Current Investment 3

 Bridging the gap
Infrastructure investment by financing source, excluding PRC,* 2016–2020,
(annual average, $ billion in 2015 prices)
600
$187 $503
500
Equity
($ billion in 2015 prices)

$47
400 Debt
Investments

$121 $140
300

200
$195
Private
$62.5
100
Public
$132.6
0
Current Additional Public Additional Investment
Investment Private Needs
* 25 countries minus the PRC
Note: Numbers may not add up to total due to rounding.
Source: ADB estimates based on data from country budget documents, NAS data from national statistic offices, IMF
Investment and Capital Stock Dataset, Asian Development Bank Key Indicators 2016, World Bank World Development 4
Indicators, World Bank Private Participation in Infrastructure Database.
 Bridging the gap
Infrastructure investment by financing source, Indonesia, 2016–2020, (annual
average, $ billion in 2015 prices)
80 $74
$22
Equity
70 $16.8
Debt
($ billion in 2015 prices)

60 $5.6
$29
50
Investments

40

30
$23 Private
20 $2.6
Public
10
$20.1
0
Current Investment Future Public Future Private Future Investment
Need
Source: ADB estimates based on data from country budget documents, Asian Development Bank Key Indicators 2016,
World Bank World Development Indicators, World Bank Private Participation in Infrastructure Database.

5
 MDB/Bilateral Support and Impact:
Policy and Climate
Medium-term Sector Development Massive
Transactions Infrastructure
Demand

“Accelerate “Reduce
Spending” the Gap”
Likely
$ Spending

Outcomes envisaged
Help Conserve Public Resources for
Time Social Development and Poverty
Reduction
Impact on Economic Growth 6
 Policies to close the gap

• Fiscal reforms
– Tax reforms
– Spending reorientation
– Prudent borrowing
– Nontax revenues
• Promoting private participation
– Create conducive investment climate
– Make greater use of pubic-private partnerships (PPPs)
– Deepen capital markets
• Financial market development and deepening
• Better planning, preparation, design and execution
7
Options for Public & Private Roles

8
Private Sector Demand for Risk Mitigation

Source: WEF 2016. Risk Mitigation Instruments in 9

Infrastructure – Gap Assessment
Southeast Asia – Private Sector Perception of
Risk Mitigation Instruments

Source: WEF 2016. Risk Mitigation

Instruments in Infrastructure – Gap
Assessment
10
South Asia – Private Sector Perception of Risk
Mitigation Instruments

Source: WEF 2016. Risk Mitigation

Instruments in Infrastructure – Gap
Assessment
11
 ADB’s Role – One Roof Solutions
Public Sector Operations PPP Solutions Private Sector Operations
 Technical assistance &  Full spectrum PPP  Non-recourse Loans
Capacity development transactions advisory and Equity operations
 Project development services  Direct and indirect
 Overall investment  Neutral advisory role credit enhancement
climate reforms  Project/issue specific through participation
 Infrastructure sector advisory services
policy, institutional,  Region- and Bank-
legal and regulatory wide knowledge
reforms support on PPP
 Sector/Project lending
 Credit Enhancement
 Innovative finance
solutions
 SOE engagement
 Regional connectivity
 “Missing Middle”
 Global best practices on all fronts (e.g. environmental and social safeguards;
credit risk assessments and management; fiduciary/financial management;
anti-corruption and good governance etc)
12
Green Finance Catalysing Facility (GFCF)
Concept

Private
Strategic
Capital (PPP)

AIM:
Private
Leverage Public Funds
for RISK MITIGATION Institutional
Finance
To CATALYSE Private (pensions
Capital for /insurance)
Green Infrastructure

Commercial
Finance (banks /
equity/capital
markets)

13
 GFCF Key Principles
Facility financing
Leverage linked to PCP
Fostering Environmentally Sustainable financing in every
Projects by Creating Achievable Green
1….2….3… project
Targets
Provide
Innovate Alternative
Revenue model
Environmental Sustainability Bankability approaches

Blend Match risks and

Country X Finance per reduce cost of
capital of project
Risks
GFCF
Facility Create Pool
For providing a
diversified risk
Projects vehicle for
institutional
Vehicle investors

Financial Bankability
Attract Results focus for
best technology
Technology incorporation
Fostering Financially Sustainable
Projects by Creating Bankable Project
Structures

14
 GFCF Structure & Mechanics
Government

Ownership

ADB. Ministry / FI / SPV

Other Donors. $
Ownership

Climate Funds.
Country X Project
Sovereign Funds. Preparation CAPEX
GFCF Unit 40-50%
Financing Average – 7
Private, Institutional, $ $500 million Unit yrs., 2 step
pricing
commercial Pilot Facility
Funds & Commitments
FIRST LOSS GTEE
GTEE REVENUES
Green GFCF Bonds
& 3 years of
REFINANCE Operations
for 14% IRR
Yr. 7
Private, Institutional, $
commercial Projects
Direct Funds 15
 Thank you!

For details/information:
Ramesh Subramaniam, rsubramaniam@adb.org

16