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Investment Preferences of ASEAN-Based Infrastructure Investors – April 2015

by Jaren Loke

  • 28 Apr 2015
  • INF

Considering that the Association of Southeast Asian Nations’ (ASEAN) top four trade partners – Japan, China, the Eurozone and the US – are facing divergent economic growth rates, it is possible that ASEAN could face challenges in sustaining economic growth. Against this backdrop, there has been an increased focus on infrastructure spending as a means to boost development in the region; countries such as Malaysia, Indonesia, Thailand and the Philippines have prioritized infrastructure spending in recent budgets. Myanmar has increasingly opened up to foreign direct infrastructure investments, while Vietnam and the Philippines are targeting more public-private partnership investments. Infrastructure in general has also been the subject of global attention, with the successful establishment and deployment of transnational institutions such as China-ASEAN Investment Cooperation Fund and more recently, Asian Infrastructure Investment Bank. 

Preqin’s Infrastructure Online service tracks 68 ASEAN-based investors, holding an average $32bn in assets under management, that are active in infrastructure or are considering infrastructure investments. ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. 

The majority (61%) of these ASEAN-based investors have a preference for direct infrastructure investments, while only 56% are interested in private fund investments. Contrastingly, unlisted vehicles are the most common route to market of non-ASEAN-based investors: 87% prefer unlisted investments and 30% prefer direct investments. This is unsurprising given that the ASEAN unlisted infrastructure fund market is less developed than regions such as Europe, North America and Australasia.

ASEAN-based investors tend to look outside their domestic region for investment opportunities more than non-ASEAN-based institutions. Despite recent efforts by ASEAN countries to target more private sector involvement in infrastructure spending, the proportion of ASEAN-based investors interested in investing in infrastructure in the home region has not increased by much in the last two years: 51% indicated an interest in domestic investments in April 2015 and 49% in April 2013. In contrast, 75% of North America-based investors and 69% of Europe-based investors will target their domestic markets for infrastructure investments going forward.

Banks constitute a noteworthy proportion (18%) of ASEAN-based institutional investors in infrastructure. Interestingly, ASEAN banks seem to employ a lower degree of risk with their infrastructure investments compared to non-ASEAN banks; 50% of ASEAN-based banks target primary strategies, while 78% of their non-ASEAN-based counterparts utilize primary strategies.

It was suggested at the World Economic Forum 2014 that ASEAN’s infrastructure funding gap will be $8tn by 2020. Regardless of how this gap is funded, the private sector looks set to play a bigger role in shaping the ASEAN infrastructure landscape going forward.

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