An Institutional Framework For Seamless Asian Connectivity

Regional financial institutions should take responsibility and provide resources for region-specific public goods such as regional infrastructure (Kanbur 2002). Therefore, regional institutions should be most suitable for regional infrastructure development. The major roles of an effective institutional framework for Asian connectivity are:

1. Facilitation of the preparation of pan-Asian infrastructure strategies for energy, transport, and telecommunications networks;
2. Identification, prioritization, and preparation of priority bankable regional programs and projects;
3. Facilitation of financing the investment requirements;
4. Coordination of various stakeholders responsible for the implementation of projects at national, subregional, and regional levels;
5. Coordination and integration of bilateral and subregional initiatives concerning pan-Asian connectivity;
6. Creation and putting in place of harmonized and common standards, regulatory policies, and legal frameworks;
7. Strengthening capacity of various national, subregional, and regional authorities and implementing agencies;
8. Addressing adverse social and environmental impacts and ensuring symmetric distributions of cost and benefits for participating countries;
9. Ensuring good governance in the implementation of the projects including accountability and transparency; and
10. Encouraging private sector participation.

As explained above, Asia has many overlapping subregional and regional institutions involved in regional infrastructure development. However, these institutions tend to have a multitude of tasks and goals, and they often are informal, weak, and ineffective. Asia should not set up more new institutions, which would be costly and time-consuming. What is needed is an effective and supportive institutional framework for integrating, strengthening, and improving such existing institutions and mechanisms, helping them to work together with a common vision. Such a framework needs to be formal, equipped with explicit, treaty-based, legally-binding rules and regulations, and a standing body or secretariat to monitor compliance with those rules.

A pan-Asia institutional framework consisting of coordinating and financing regional mechanisms or entities is proposed in Figure 2. The proposed Pan-Asian Infrastructure Forum (PAIF) would be a major coordinating mechanism at the pan-Asia level, the goal of which would be to help coordinate and integrate existing subregional infrastructure institutes toward regional infrastructure development for a seamless Asia. An entity such as PAIF would have representatives from all of the existing subregional infrastructure institutions and would have a governing secretariat, in which regional institutions like ADB and UNESCAP could take a leading role.

A dedicated regional financing mechanism or entity, such as an Asian Infrastructure Fund (AIF), could also be established to funnel regional and international savings and investments toward Asian regional infrastructure development projects. The main goal of AIF would be to mobilize regional and international funds (public and private) and help prioritize, prepare, and finance “bankable” regional infrastructure projects (ADB/ADBI 2009). AIF could be established as a trust fund under ADB, the latter having adequate experience and expertise in this area and has already initiated a process to establish its Asian Infrastructure Financing Initiative. At the request of ASEAN countries; ADB has also started developing a framework for an ASEAN infrastructure fund.

Figure 2 [ PDF 33.6KB | 1 page ] presents a new framework for achieving Asian connectivity. As can be seen here, both the public and private sectors would play integral roles in mobilizing capital and technology for, and contributing knowledge and guidance to, the Asian Infrastructure Fund, which would in turn contribute in various ways to both the Pan-Asian Infrastructure Forum and subregional programs and institutions. Such forums and institutions at the regional, subregional, and national levels would be supported and facilitated by coordination and partnership arrangements and agreements.

A recommended framework for PAIF and AIF and the process of interaction to support infrastructure projects is presented in Figure 3 [ PDF 15.4KB | 1 page ]. The PAIF Summit would bring together senior Asian policymakers, heads of major private corporations, representatives of subregional infrastructure programs, international development institutions, and heads of national infrastructure financing institutions, and would be given the task of developing sector-wide, pan-Asian infrastructure strategies and policies. The heads of national technical institutions who concentrate on infrastructure-related issues would also assist in the development of these sector-wide strategies and policies, which would include the Asian energy, transportation, and telecommunications networks. AIF would contribute to the process of identifying, prioritizing, and selecting infrastructure projects; preparing or designing the agreed list of priority regional projects; and monitoring and implementing projects.

Figure 4 [ PDF 24.5KB | 1 page ] illustrates the proposed organizational structure of the PAIF Secretariat. The Secretariat would be assisted by a Technical Expert Committee, which would prepare a pan-Asian plan and sectoral strategies and policies for regional infrastructure projects. The secretariat would support: (i) policy, legal, and regulation sub-forums for the formulation, standardization, and harmonization of legal and regulatory policies and for discussion of other key policy challenges; (ii) key thematic and sectoral sub-forums such as energy, transport, ICT, and telecommunications, private sector and public private partnerships, financing, and logistics and trade facilitation; (iii) gathering common or harmonized infrastructure statistics and information, and database management; and (iv) capacity building and training, and other activities. Lastly, Figure 5 [ PDF 19.7KB | 1 page ] presents the envisioned organizational structure and the role of AIF in financing regional and subregional infrastructure projects. The sources of funds could include multilateral development banks, bilateral and development agencies, national development banks, sovereign wealth funds, Islamic funds, pension funds, private companies and private investors. These entities could source the funds from their ordinary capital resources, through grants and concessionary funds, or through their portfolio funds. These funds could then be pooled to form AIF, which would be divided into a fund mobilization and financing facility, a project preparation facility, and a risk guarantee facility.

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Comment(s)

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1. Sritanu Chatterjee
   (posted 29 June 2010 / 12:13:47 PM)
   
   Dear Sir,
   
   I much appreciate the effort to write this well thought-out paper. It is true that most of the Asian integration has been market driven with a bottom up approach unlike that of NAFTA or EU. But it would have been better as to think about how market driven approach can transform the thinking of national governments to implement the soft infrastructure. Some of the top-down projects that have faced eternal delays are mostly due to changes in market condition. One of the examples is the India-Pakistan-Iran gas pipe line project. The project seemed very attractive and feasible till crude was trading 140 USD and projected to reach 200 USD. But now the whole project is lying in shambles. So I think it is very important to have the soft infrastructure in place and that will expedite the process of regional integration.
   
   The institutional framework presented in the paper is quite elaborate. Some timelines or for the formation of each the teams could have been provided.
   
   Is there any forum still now where the premiers of Asian countries can meet? What I think missing in the papers is the process of initiation of talks for the formation of PAIF Summit Steering Committee.
   
   As crisis helps in creating successful institutions that can change the destiny of nations, I hope that the Asian Connectivity program of ADBI would help in changing the future of 60% of the world population.
   
   Thanks & Regards,
   Sritanu