23 July 2015 | Iloilo City—The Department of Finance opens the APEC Workshop on Infrastructure Financing and Capital Market Development today with the theme, Fostering APEC’s Infrastructure through Long-Term Investment and Capital Market Development at The Royal Garden Hall Convention Center.

Finance Secretary Cesar V. Purisima welcomed private and public sector participants from 21 member economies saying, “Making growth sustainable for the long-term benefit of our people involves making smart regional investments now on the future of our economies. We want our economies to work for our people: better connectivity and mobility to better support our growing, upward-moving populations.

Growing the size of our economies exacts a high demand for quality infrastructure to support such growth. Together, we can unlock smarter ways to keep moving forward as we keep growing.”

Organized in collaboration with the APEC Business Advisory Council, the Asia-Pacific Financial Forum, and the Asia-Pacific Infrastructure Partnership, the 2-day workshop addresses key challenges and opportunities that come with the region taking the driver’s seat in the global economy.

Development of quality infrastructure has not kept pace with the rapid growth of APEC economies. Consequences such as increased traffic congestion, power shortages, and inadequate public services severely threaten hard-won economic gains for many member economies. Insufficient expansion of infrastructure to less-developed areas leads to uneven growth, contributing to regional and social inequalities threatening to hinder a sizable slice of the population from moving up.

Meanwhile, a large amount of capital worldwide is seeking profitable investment opportunities that can complement public sector resources. The OECD estimates institutional investors’ assets among its members at US$92.6 trillion as of 2013, most of which is conservatively invested.[1] Almost two-thirds of these are in insurance firms and pension funds whose long-term liabilities could potentially be matched by long-term assets such as infrastructure. More importantly, the pension industry must seek such higher-yielding investments in order to finance the needs of the region’s rapid urban development and aging population.

Discussions held under the auspices of the APEC Finance Ministers’ Process (FMP) in previous years have identified two major obstacles. The first is the lack of a pipeline of bankable infrastructure projects in developing economies that can attract capital from institutional investors. The second is the lack of appropriate financial instruments and enabling policy frameworks for pension funds and insurance firms to expand their investment in emerging market infrastructure. The Philippines’ hosting of the APEC FMP addresses these two major obstacles to the advancement of APEC’s vision of sustained, balanced and inclusive growth.

Key areas of discussion will include capacity building to expand the pipeline of infrastructure projects. The FMP’s work in the past years include the establishment of the Asia-Pacific Infrastructure Partnership (APIP) to serve as a platform for public-private sector dialogue, which also dealt with how bankability of projects can be enhanced. The FMP has likewise begun to build a regional network of PPP Centers among interested developing economies to help improve cross-agency coordination and to serve as channels for technical assistance and private sector advice on how to develop bankable projects across sectors. To provide technical assistance and advice with a view to enhancing these Centers’ capacities, the FMP has also established the APEC PPP Experts’ Advisory Panel that brings together resources and knowledge in key international organizations and the private sector. Sessions will look at how initiatives can be further developed with innovative tools designed to accelerate the creation of a pipeline of bankable projects in the region.

The development of capital markets, widely viewed as one of the most important channels for investing long-term funds in infrastructure, will be highlighted in the sessions. Encouraging both the active participation of pension funds and insurance firms and the performance of local currency bond markets reaps dividends for financial stability and for economic growth. The rapid growth of Asian government bond markets must be followed with increasing market depth and liquidity for capital markets to serve as effective channels for infrastructure investment. Sessions aim to accelerate this development by mobilizing the resources and knowledge of participating international organizations and the private sector in the APFF, especially in enabling the effective use of hedging instruments and risk management tools and fostering a more diverse investor and issuer base, which are key elements for promoting market depth and liquidity. Sessions in this seminar will help identify concrete initiatives to address these issues.

Initiatives to mobilize long-term investment will also be discussed, including collaboration among institutional investors, financial institutions, multilateral development agencies, and private equity funds. One example of a partnership among parties including a multilateral agency, a foreign and local pension fund and an infrastructure asset management firm is the Philippine Investment Alliance for Infrastructure (PINAI), which is now investing in energy projects. Discussions from the seminar will support the infrastructure financing and development pillar of the Cebu Action Plan.