Public-Private Partnership (PPP) mechanism is one way to build infrastructure in the ASEAN, especially in member-states where public funds are insufficient to finance infrastructure development.

In a book published by the Economic Institute for ASEAN and East Asia (ERIA) titled `Financing ASEAN Connectivity,` the authors, composed of 13 ASEAN scholars and experts, stressed the important role of PPP in achieving the objectives of the Master Plan on ASEAN Connectivity.

ASEAN has a goal to create an economic community by 2015. To achieve this goal, connectivity among the member-states needs to be given due importance. In 2010, ASEAN adopted the Master Plan on ASEAN Connectivity (MPAC), which looked at physical, institutional, and people-to-people connectivity.

However, there are certain obstacles that are unique to each member-state when it comes to financing infrastructure projects. This book provides a comprehensive picture of the infrastructure situation and policy in 10 ASEAN member-states. It takes into account innovative ways of financing infrastructure development that suit specific countries.

ASEAN member-states have different levels of infrastructure policy, financing method, and financial capacity. For example, the PPP program has been significantly developed and used in Malaysia, Indonesia, Thailand, and the Philippines, and recently, in Singapore. Cambodia and Vietnam, meanwhile, have not yet formalized the PPP although private sector participation has become increasingly important in infrastructure development in these countries. Laos and Myanmar have potentials, although are facing multiple challenges from lack of fiscal sources to lack of fiscal sustainability. Meanwhile, PPP still takes less significant role in Brunei, which has abundant public financial resources to build infrastructure.

The country report for the Philippines, authored by Philippine Institute for Development Studies (PIDS) President Gilberto Llanto and Senior Research Fellow Adoracion Navarro, identifies some infrastructure development challenges and provides policy recommendations on how to improve financing and implementation of these projects.

Challenges include underinvestment in infrastructure development, with infrastructure spending as a share of GDP averaging at only at 1.40 to 2.09 percent in 2008 to 2012. At the same time, government’s dependence on official development assistance as source of financing for infrastructure projects has declined in the past few years. As a result, the country has lagged behind most of its ASEAN neighbors in upgrading the quality of its infrastructure.

Llanto and Navarro also noted some delays in the implementation of PPP projects in the Philippines mainly because government units lack the capacity to ensure project quality-at-entry and efficiency in the processing of PPPs. In addition, the PPP law is inadequate in dealing with competition and implementation problems.

Despite these obstacles, the authors gave a positive outlook for the Philippine government’s fiscal health as well as the opportunities presented by new sources for financing infrastructure projects. However, they noted that it is not really the availability of financial resources that is primarily restraining infrastructure development in the Philippines but the pace at which investments are being pursued.

`An effective infrastructure financing strategy must not only focus on resource availability for the hard infrastructure but also on means to facilitate the way projects are identified, designed, proposed, reviewed, and implemented.` Llanto and Navarro concluded.

The book on Financing ASEAN Connectivity is available at PIDS Library (Open from 8 a.m. to 5:00 p.m., Mondays to Thursdays), 5/F NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, Makati City###

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