Southeast Asia Bankers Want Deeper Capital Markets for Projects

(Bloomberg) -- Southeast Asia must further develop its capital markets to help fund infrastructure projects, bankers say, even as billions of dollars pour in from China’s Belt and Road Initiative.

Global investors such as pension, sovereign and private equity funds are looking for high-yield investments that could finance the projects, Amol Gupte, head of the region for Citigroup Inc., said at the Bloomberg Asean summit in Bangkok on Thursday. They would need assurances that projects are commercially viable and contracts are awarded in a transparent manner, he said.

“On the one hand you have this large infrastructure project and on the other hand you’ve got many investors looking for yields,” Gupte said. Broader capital markets will help match them up, he added.

McKinsey estimates deeper capital markets in emerging Asia could unlock about $500 billion in the private and $300 billion in the government sector every year. Economies across Southeast Asia will need to spend about $2.8 trillion on roads, bridges and ports from 2016 to 2030 to boost economic growth and reduce poverty, according to the Asian Development Bank.

Read: Thai Junta Eyes Chinese Investment for $51 Billion Spending Plan

In Thailand, authorities are seeking Chinese investment to help galvanize a $51 billion plan to develop the eastern seaboard. The Thai military government views this so-called Eastern Economic Corridor as well placed to link with China’s Belt and Road Initiative.

Improved connectivity will benefit trade and investment within Asia as U.S. President Donald Trump escalates a trade war with China and Europe, according to Kanit Sangsubhan, secretary general of the EEC. U.S. tariffs on $200 billion of Chinese goods are scheduled to take effect after Aug. 30, and China has vowed to retaliate.

“Whenever Trump applies pressure to Asia, what we will see is more cooperation inside Asia, including Asean,” Kanit said at the Bloomberg summit.

The region has learned several lessons from the Asian financial crisis and Thailand’s recent enactment of EEC regulations will help attract funding, said Chartsiri Sophonpanich, president of Bangkok Bank Pcl. The country’s largest lender by assets sees enough liquidity to fund large infrastructure projects.

“The liquidity in the system is quite significant,” Chartsiri said in a Bloomberg Television interview with Haslinda Amin. “We will be able to provide funding to many of these projects. Most importantly, these projects have been well structured to make sure the economic viability is there and the risk sharing is well structured."

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