AIIB opens up large-scale projects to private sector

SINGAPORE — Singapore’s participation in the China-led Asian Infrastructure Investment Bank (AIIB) will encourage private sector participation and hopefully benefit small and medium enterprises, said Members of Parliament (MPs) at the second reading of the Asian Infrastructure Investment Bank Bill this afternoon (Aug 17) in Parliament.

With much infrastructure needs in the growing Asian region, the AIIB, which will have an initial capital of around US$50 billion (S$67 billion), and raised to US$100 billion later, will provide opportunities for projects that SMEs can participate in, they said.

“In the area of infrastructural development, government-linked companies are in the forefront, and have a very credible track record. In bidding for AIIB projects, they have a higher success rate compared to the SMEs. We hope that government-linked companies would also lead the way to open up opportunities for local SMEs with good credentials and with the high potential to participate in AIIB projects,” said Nominated MP Mr Thomas Chua.

He added that the large scale and size of the projects make them “beyond the reach of any single company”, but any government support and lead from government-linked companies would make for a higher success rate for local enterprises in bidding for the projects.

MP Ong Teng Koon noted that the financing demand for infrastructure across the region remains “massive”.

Quoting a recent Asia Development Bank report, that cited the need for up to US$8 trillion of investment in infrastructure in Asia over the years 2010 through 2020, he said that the AIIB can plug this demand.

“The ambition and scale of this project has the potential to promote economic development and closer trade ties across Asia for many years to come. Singapore and Singaporean companies need to be alive to the opportunities that this may bring,” he said.

Mr Ong also pointed out that this common interest of closer economic integration may mitigate concerns about “geopolitical uncertainties that a newly assertive China may bring”.

Senior Minister of State (Transport and Finance) Josephine Teo agreed, saying that risks will be reduced in larger scale infrastructure projects, and draw in private sector participation.

“Better infrastructure and connectivity will facilitate regional economic development, and in turn provide positive spinoffs for the Singapore economy. It also creates opportunities for Singapore companies seeking to tap Asia’s growth. For example, Singapore-based companies will have the opportunity to participate in the AIIB’s projects in the transport, water, logistics and urban development sectors, to name a few.”

A total of 50 countries have signed the AIIB Articles of Agreement, with another seven countries expected to sign by the end of this year.

Singapore signed the AIIB charter on June 29, and plans to subscribe to US$250 million of the AIIB’s total authorised capital of US$100 billion. This will give it a 0.48 per cent of the total voting share in the AIIB.

Among ASEAN countries, Singapore will be ranked sixth in terms of the size of its capital subscription to the AIIB.