AIF allocates 10% annual financing to non-sovereign projects

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AIF allocates 10% annual financing to non-sovereign projects

The Second Minister of Finance of Malaysia, Ahmad Husni Hanadzlah, has announced that the Asean Infrastructure Fund (AIF) will allocate up to 10% of its annual financing to non-sovereign projects in the ASEAN region starting in 2017.

The AIF currently provides financing to sovereign or sovereign-guaranteed projects in the ASEAN region. A central goal of the AIF is ensuring that investments are environmentally sustainable and socially inclusive.

The AIF is structured to be financially self-sustaining. In addition to equity contributions from its members, the AIF plans to raise additional funds for its operations by issuing debt from 2017.

AIF has (until December 2014) financed three infrastructure projects for a total of US$165 million,including

  • US$25 million for the Java-Bali 500kV power transmission project in Indonesia,
  • US$40 million loan for a sanitation project in Indonesia, and
  • US$100 million loan for a power grid development project in Viet Nam.

A Shareholders Agreement for the establishment of the AIF was first signed in September 2011 among ASEAN member countries and ADB, outlining the contributions and equity participations of each member. The AIF was incorporated as a limited liability company in Malaysia in April 2012, and became fully operational in 2013.

Shareholders include Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Viet Nam, and ADB. Shareholders’ total equity commitment is US$485.3 million.

ADB is a shareholder in AIF with US$150 million equity, and it acts as the overall administrator of AIF. In this role, working closely with the AIF shareholders, ADB provides support in a number of areas such as establishment of various frameworks to guide AIF operations; formulation of project pipelines; design, processing and implementation of projects; cofinancing of all projects; and technical and advisory support.

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