In a step toward its goal of regional economic integration by 2015, ASEAN set up a $500 million fund to finance major infrastructure projects across the region, at a meeting between finance ministers of the grouping on Saturday.
On the sidelines of annual World Bank and IMF meetings in Washington, the states planned to improve infrastructure such as roads and railways, which are currently only a fraction, on a per capita basis, of those found in developed OECD (Organisation for Economic Cooperation and Development) countries, as well as grow electricity and clean water coverage.
Malaysia will be the biggest ASEAN contributor to the fund, ($150 million) followed by Indonesia ($120 million). The Asian Development Bank, will contribute $150 million, and administer the fund to ensure that safeguards and due diligence are a part of the design of financed projects.
"Our community is now being built with speed. This is a milestone," ASEAN Secretary-General Mr Surin Pitsuwan said after ministers signed the pact in Washington on the sidelines of annual World Bank and IMF meetings.
"The time for donations, the time for just gifts, is over. We have to be very innovative, we have to be very collaborative in our approach."
Report: Southeast Asia sets up fund in integration step (AFP, 26 September 2011)
The ASEAN Infrastructure Fund will start with $485.2 million and aims to finance six projects a year.
By 2020, ASEAN hopes the fund will offer $4 billion in loans and that its total leverage will be worth more than $13 billion.
Myanmar will participate in the fund from next year and planned to contribute US$100,000 to the fund, Second Finance Minister of Malaysia, Mr Ahmad Husni said.
Thailand will not take part immediately as it must go through domestic procedures but is expected to join, said ASEAN chief Surin Pitsuwan, who is Thai.
Separately, Mr Pitsuwan also said there needs to be more cross-border investments between ASEAN countries.
"We need to increase investments among ourselves. Currently, the biggest foreign direct investments into ASEAN are from the European Union, followed by Japan and the United States. ASEAN (countries) are struggling to invest in each other," he said.
"Currently, total ASEAN trade is valued at US$1.7 trillion per year, and only 25 per cent of that is among ourselves," he said.
Report: Asean infrastructure fund set to pave way for infrastructure boom (Bernama, 26 September 2011)
Report: ASEAN launches new infrastructure fund (TODAY, 26 September 2011)