“JICA’s support to ASEAN centres on connectivity to provide inclusive opportunities throughout the region”
Irigaki Hidetoshi, Director General, Southeast Asia and Pacific Department, Japan International Cooperation Agency (JICA), offers his views on the role of infrastructure in the economic growth of the region, JICA’s role, issues and challenges, as well as the future investments and strategies needed to accelerate the pace of infrastructure development…
What is the role of infrastructure in the overall development of Southeast Asia?
Infrastructure is critical for inclusive and dynamic development in Southeast Asia, by directly providing services to the population and by providing much-needed services to promote investments that can create massive job opportunities especially for the young and women. Resilience and adapting to climate change risks have increasingly become integral to infrastructure development. Last but not least, by providing intra-country and cross-border connectivity throughout Southeast Asia, infrastructure creates opportunities to geographically lagging areas and thus helps Southeast Asia become an area with inclusive prosperity
Southeast Asia’s annual funding requirements for infrastructure development are estimated to be in the range of $60 billion–$100 billion. Do you think that the current policy and institutional arrangements can help meet this target?
Private participation in infrastructure development will hold the key to catering to this level of funding requirement. However, private participants, including their financiers, are sensitive to risks. Proper risk allocation between the public and private sectors, continuous risk management efforts from the public side, and a stable regulatory framework are all essential components of successful public–private partnerhip (PPP) in infrastructure. To this end, JICA’s efforts are threefold: first, we assist both governments and the private sector from the beginning, including master planning, to feasibility studies, to create a set of reliable information upon which proper decisions on risk allocation and financing can be made. Second, we invest in capacity and institutional development of the public side to support coherence in policy and technical aspects of decision-making. Last, both our sovereign lending window and private lending window are ready to participate in case financial enhancement from a development partner becomes necessary.
How has JICA helped in promoting infrastructure development in Southeast Asia?
Traditionally, JICA’s modality has centred on the sovereign project model, which is to assist the government from master planning, feasibility studies, sometimes detail designing, up to sovereign lending with concessional yen loans. However, with the advent of private sector participation in infrastructure development, we are increasing our efforts in PPP-type infrastructure development including capacity/institutional building as well as project preparation and lending to the private sector. We would also wish to bring creative ideas to solve infrastructure-related public policy problems. We are initiating efforts to match policy initiatives from the partner country and creative ideas from Japanese private sector/local governments. This effort has led to exciting exchanges such as modernisation of rural public markets through IT in the Philippines.
As ASEAN prepares for economic integration, what role will JICA play to promote inclusive growth and improve connectivity in the ASEAN region?
JICA’s support to ASEAN centres on connectivity to provide inclusive opportunities throughout the region. Physical (terrestrial, sea, and air), institutional, and people to people connectivity are integral components of connectivity that unite the diverse areas within ASEAN. We aim to provide best solutions for this purpose ranging from project study/preparation, finance, capacity/ institutional building to research.
What has been the experience with regard to private participation in infrastructure development in the region? How is JICA helping to create an enabling environment for greater private sector participation?
In addition to what was mentioned earlier, in Indonesia we have formulated a bilateral framework in which we follow up the development of the Indonesian government’s flagship PPP projects identified under the Jakarta Metropolitan Priority Area Strategic Plan. JICA supported the development of the plan, provided technical assistance, and supported monitoring/debottlenecking activities to implement key projects in the plan, including project preparation for PPP projects. In the Philippines, in collaboration with the ADB-led Project Development and Monitoring Fund (PDMF), we are mobilising technical assistance for project formulation and capacity development. In parallel, we have assisted the government in framing a road map for infrastructure development for Metro Manila and its surrounding regions. These two efforts combined are expected to create a good stream of PPP projects.
What are the common challenges associated with the planning, designing, and financing of infrastructure projects on a large scale? How can ASEAN member countries address these challenges?
Risk allocation in PPP projects has always been the central issue. Risk sensitivity of the private sector including financiers varies widely. Sometimes, there are trade-offs between attracting risk-taking private sector and ensuring sustainability, which means constant provision of quality service in the long run. Second, right of way, involuntary resettlement, and multiple government permits are bottlenecks commonly mentioned, which constitute part of the risk that the private sector is not willing to take. Stability in the regulatory framework is the third area of challenge that requires continuous efforts from the public side. ASEAN members may learn from each other to move forward to establish a proper risk allocation mechanism and regulatory frameworks.
What are your views on the economic outlook for Southeast Asia over the next two to three years?
I expect relatively stable growth depending on the global effects of quantitative easing, among others. For some countries, state-owned enterprise reforms and subsidy management may become a major challenge.
What are JICA’s priorities and expectations for the region for the next two to three years?
Our priorities continue to centre on infrastructure development for inclusive and dynamic development, and deepening bilateral and regional cooperation covering both the public and private sectors. With 2015 as an important milestone for integration efforts in the region, we will also continue working on intra-country and cross-border connectivity.
How can ASEAN and Japan work together to overcome infrastructural challenges in the region?
In addition to connectivity, managing rapidly urbanising megacities is becoming a major challenge in the region. We wish to pursue partnerships that could provide solutions to surmounting this challenge – a good example could be managing traffic by sharing our own experiences on long-term urban planning, introduction of mass transit, developing transit-oriented solutions, along with provision of affordable housing for the masses.
