By Tian Yuan
Major players in Indonesia’s finance sector who have been active in the world economy over recent years include Sri Mulyani, a former World Bank managing director and incumbent Indonesian Finance Minister, Luky Eko, former vice minister of the Coordinating Ministry for Economic Affairs of Indonesia and incumbent vice president of the Asian Infrastructure Investment Bank (AIIB), and Bambang Susantono, vice president of the Asian Development Bank (ADB).
Susantono served as vice minister of Indonesia’s Ministry of Transportation and has extensive experience in both academia and providing policy advice for the government, private sector organizations and international institutions. He holds a PhD in infrastructure planning and master’s degrees in civil engineering and city and regional planning from the University of California, Berkeley.
Susantono has been responsible for managing the ADB’s Sustainable Development and Climate Change Department, Economic Research and Regional Cooperation Department and the Department of External Relations since he became the vice president of the bank in 2015.
China Report ASEAN sat down for an exclusive interview with Susantono, who is in charge of the ADB’s knowledge management and sustainable development. The interview mainly concerned infrastructure development in the Asia-Pacific region, particularly in terms of cooperation between the ADB and the AIIB.
China Report ASEAN: What do you think of current infrastructure development in Asia-Pacific?
Susantono: There’s still a big gap between infrastructure development and the demands of economic growth in the Asia-Pacific region. The Philippines and Thailand are good examples, as the two countries’ infrastructure expenditures still account for less than 3-5 percent of their respective GDPs, which is below average. Meanwhile, Indonesia and Malaysia barely meet this standard. As we know, in 2012, 60 million people in Southeast Asia suffered from power shortages, 166 million people were living in urban slums in 2014 and 174 million people did not have access to restrooms complying with hygienic standards in 2015. Meanwhile, the lack of transport infrastructure has caused a huge waste of resources. For instance, Manila suffers a daily economic loss of US$52 million due to traffic jams. Therefore, determining how to accelerate infrastructure development to support the region’s sustainable development and shared prosperity has become an urgent matter.
China Report ASEAN: What do you think is the main bottleneck of the region’s infrastructure development?
Susantono: Financing gaps are the biggest problem. In 2009, the ADB released a report on Asia-Pacific’s infrastructure development. The report points out that water, transportation, energy and communication are the four sectors that need urgent development, and that the total amount of financing that will be needed for such development by 2019 is around US$8 trillion. However, according to more current estimates, the real amount of financing needed is around US$12-13 trillion. More than 60 percent of such global financing will be concentrated in the Asia-Pacific region, and public expenditure is still the “backbone” and main source of financing for the region. Therefore, determining how to best use public expenditure is extremely important. As private sector funding has decreased from US$22 billion before the Asian financial crisis to US$16 billion now, making private spending play a more prominent role in education,
public health and other areas to alleviate burdens on public expenditure is also something to work on.
China Report ASEAN: How will you analyze the current situation and trend of Asia-Pacific’s infrastructure development?
Susantono: The region’s infrastructure development has entered a “new normal”. In fact, current infrastructure development covers a lot of areas besides financing. What’s more important is to maximize the funding efficiency and achieve sustainable, inclusive and shared development.
Therefore, the core issue of this “new normal” is how to speed up infrastructure development to break through the bottleneck of economic growth while also ensuring that it is in line with the goal of global sustainable development. The strengthening interconnection of ASEAN member states is a good example. There are many bottlenecks evident in terms of hardware development, but there are still many shortcomings in software development, too, including infrastructure development efficiency and capacity building for regional cooperation.
Specifically, the energy and transport sectors are faced with urgent demand in supporting economic growth, while also facing the severe test of climate change. Thus, from now on, we must attach great importance to achieving balanced infrastructure development in Southeast Asia.
China Report ASEAN: How will the ADB and the AIIB conduct cooperation on infrastructure development?
Susantono: The ADB, which is headquartered in Manila, the Philippines, is committed to helping Asia-Pacific alleviate poverty through inclusive economic growth, environmental sustainability and regional integration. Founded in 1966, the bank now has 67 members, 48 of which are from the region. The funding it provided in 2014 totaled US$22.9 billion, of which US$9.2 billion came from co-financing.
For this reason, the ADB would like to join hands with the AIIB to provide support for Asia’s infrastructure development and interconnectivity through co-financing, joint investment and other methods.
The projects run by the ADB this year total around US$27 billion. It’s expected that the figure will double by 2025, and infrastructure development financing will grow even faster. However, in the Asia-Pacific region, particularly in Southeast Asian countries, there is great potential for infrastructure development and strong demand for financing. The region’s financing gap can never be filled by the ADB alone. It needs a concerted effort from multilateral financial institutions and multilateral banks including the World Bank and the Islamic Development Bank.
For this reason, the ADB would like to join hands with the AIIB to provide support for Asia’s infrastructure development and interconnectivity through co-financing, joint investment and other methods. It’s worth mentioning that the two banks have carried out cooperation in financing for Pakistani projects, and some cooperative projects in South and Southeast Asia are developing smoothly.
China Report ASEAN: On what projects or in what areas are the two banks strengthening cooperation most?
Susantono: The two sides are promoting both public sector financing and private sector financing. We are enhancing the comprehensive application of financing from both areas, and strengthening research on return on investment, public spending power, capital availability, project management structure, information acquisition channels and other core indicators on co-financing decision-making and efficiency. In addition, we are working on knowledge sharing to strengthen software building in areas such as human resources. Three months ago, the vice president of the AIIB paid a visit to the ADB headquarters in Manila with his team. We reached an agreement in sharing infrastructure development knowledge and experience, and studied failure cases in infrastructure development financing in the Asia-Pacific region. The ADB’s rich experience can provide a reference for the AIIB as it carries out its work at the next stage, and our cooperation will play a significant role in boosting the region’s infrastructure development.