IE Insights - (IE) Singapore

INTERNATIONAL ENTERPRISE SINGAPORE

IE Insights Vol. 18_Oct 2014

Making Inroads: Capturing Infrastructure Opportunities in Asia With high levels of economic growth and urbanisation, Asia faces soaring infrastructure demand. IE Singapore examines the delivery models that are being rolled out to address this demand and how companies can better assess opportunities to capture a slice of this market.

By Khairul Anwar, NG Kai Scene

Project Development Division and Environment & Infrastructure Solutions Group [email protected]

Contents

03

16

Summary

Market trends: Which countries, sectors and developments to look out for

04 Infrastructure in Asia • What infrastructure means

06 Drivers of infrastructure demand • Economic growth and job creation • Rapidly urbanising population • Continued underinvestment and poor coverage

09 New delivery models: From public procurement to PPPs and B-to-B projects • The rise of public-private partnerships in infrastructure • Balancing opportunities and risks associated with PPP projects • Private sector projects as an emerging model

19 The infrastructure value chain

21 Singapore’s competitive advantage

22 Strengthening the infrastructure ecosystem in Singapore

24 Strategies for companies to capture infrastructure opportunities in Asia • Tips to get started

Disclaimer While every effort is made to ensure that the information in this document is accurate, the information is provided by IE Singapore to you without any representation or warranty. Any reliance on the information in this document is at your own risk. IE Singapore does not accept any liability for any errors, omissions or misleading information. IE Singapore and its employees shall not be held responsible for any consequence arising from your reliance on any information provided by us. You are advised to consult your own professional advisors.

Summary // Demand for infrastructure rises with economic growth and urbanisation. This is especially pronounced in Asia; the region continues to lead the world in economic growth and will add 1.4 billion new urban residents by 2050. Coupled with underinvestment in the past, Asia faces a large and growing investment need in infrastructure of up to US$1 trillion a year, only a fraction of which is being met. // The trend amongst governments and development agencies is to enable new models of growth financing to attract more private investment into infrastructure. This presents enormous business opportunities for Singapore firms in different infrastructure sectors including energy, communications, transport, water and sanitation, and social infrastructure. // Today, the public sector accounts for the majority of infrastructure spending. However, governments are finding it increasingly attractive to build infrastructure via the public-private partnership (PPP) model as it offers them access to private capital and expertise. PPP projects offer Singapore companies opportunities to gain recurrent income streams, own assets and apply their innovative solutions and capabilities. Beyond PPPs, a new segment of private sector projects is also emerging. // Singapore is well positioned to play a part in the regional infrastructure space. This is in part due to the experience accumulated in meeting our own infrastructure needs. Through this, we have built our engineering capabilities, regulatory framework, and the financing ecosystem to support such projects. Singapore companies can look at capturing various opportunities across the infrastructure value chain depending on their capabilities and risk appetite. // The work continues to enhance the Singapore ecosystem to keep attracting projects to be structured and financed here, including attracting development agencies to base their infrastructure practices here and the creation of platforms to discuss infrastructure best practices and projects. The government is also working to strengthen the infrastructure talent pool in Singapore at the undergraduate and postgraduate level. // Singapore companies can look to playing a significant role in the regional infrastructure market. Companies will need to build infrastructure development capabilities and project track record. They should establish strong partnerships in markets that they are interested in and identify projects that can serve as an entry point for them.

3

Infrastructure in Asia Asia faces a large and growing investment need in infrastructure of up to US$1 trillion a year, only a fraction of which is being met. Public budgets alone are unable to plug this gap. Hence, governments and development agencies are enabling new models of growth financing to attract more private investment into infrastructure. This presents enormous business opportunities for Singapore companies. Demand for infrastructure rises with economic growth and urbanisation. This is especially pronounced in Asia; the region continues to lead the world in economic growth and will add 1.4 billion new urban residents by 2050.1 Both forces increase demand for energy and public utilities, transport and communication networks, and social infrastructure to support urban and commercial life.

1 World Bank estimates developing East Asia to grow at 7.1% in 2014, the fastest in the world. Furthermore, the degree of urbanisation in Asia is relatively low at 50% of the population (compared to 80% in Latin America), leaving much room to grow.

4

Infrastructure in Asia

This report looks at what is driving infrastructure demand in Asia, and introduces the public-private partnership (PPP) model that many governments are adopting to finance infrastructure investments. It presents regions and sectors companies should be considering, and also considers how value is captured by various stakeholders in a project. Along the way, some rules of thumb are presented for assessing a good project and the report concludes with suggested strategies that firms can pursue to capture a piece of this large market.

What infrastructure means In Asia, the term often refers to public infrastructure that governments are expected to provide to their populations and economies. These include: 1. Energy Electricity generation from both conventional and renewable energy sources, electricity transmission and distribution, including both conventional and renewable energy sources 2. Communications Cellular network services, telecommunication towers and fixed line services such as fibre optic and cable networks 3. Transport Railways, roads and bridges, ports, airports, urban public transport (metro, bus and taxis) and supporting infrastructure (payment networks, security and surveillance, etc.) 4. Water and sanitation Water supply pipelines, water treatment plants, desalination plants, sewage projects (sewage collection, treatment and disposal systems, water recycling plants), solid waste management and storm water drainage systems 5. Social infrastructure Hospitals, schools and public housing

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Drivers of infrastructure demand Infrastructure demand in Asia is driven by economic growth needs, rapid urbanisation and a history of underinvestment. Economic growth and job creation Good infrastructure generates and supports economic growth and job creation. As Asian economies seek to grow their manufacturing sectors and plug them into global value chains, infrastructure is a key factor in investors’ decisions of where to locate production and from which countries to source inputs. Effective infrastructure increases the reliability of running a business in a country, and by reducing transport costs, increases competitiveness in attracting investment and trade flows. For example, improving the physical infrastructure in ASEAN economies to the level of Malaysia could boost national exports by 5-30%.2 Likewise, looking to spur the Indian economy and generate job opportunities for a young population, Narendra Modi’s new government in India has made infrastructure investment one of its top priorities.3

2 Portugal-Perez, A. and Wilson, J. S. (2010), Export performance and trade facilitation reform, World Bank Policy Research Working Paper No 5261, April 2010. 3 “India President Sets Priorities for Modi Government” Wall Street Journal, 9 June 2014 http://online.wsj.com/articles/ india-president-sets-priorities-for-modi-government-1402297244

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Drivers of infrastructure demand

Rapidly urbanising population Asia’s economic growth is mainly driven by cities, and these economic opportunities will drive large-scale urban immigration. Asian cities are expected to add 1.4 billion new residents by 2050 (approximately China’s entire population today) to reach a total urban population of 3.3 billion. The bulk of these future urban residents will be concentrated in large cities with more than 1 million people and megacities of more than 10 million inhabitants.

Figure 1: Growth in Asia’s urban population Asia - Urban Population (in billions) 3.5

Forecast

3.0

CAGR (2010 – 2050) 1.65%

2.5 2.0 1.5

CAGR (1950 – 2010) 3.45%

1.0 Source: United Nations, 2010, World Urbanisation Prospects: The 2009 Revision Population Database

0.5 0 1950

1970

1990

2010

2030

2050

This rapid rise in city dwellers places immense strain on the infrastructure of existing cities. Coupled with rising incomes are increasing expectations by these new residents for a basic quality of life, increasing the need for new infrastructure investment in these cities.

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Drivers of infrastructure demand

Continued underinvestment and poor coverage Meeting rising infrastructure demand is made harder by Asian economies’ history of underinvestment in infrastructure. Average private investment in infrastructure has been less than 3% of GDP between 2000 and 2012, far below the estimated investment need of approximately 8%.4 The result of this is that economies in Asia, despite their higher growth rates, continue to trail countries in the OECD and Latin America in their infrastructure coverage.

Table 1: Asia lags behind OECD and Latin American economies in infrastructure coverage Country

Roads (km)

ASEAN

10.5

Rail (km)

Phone (number)

Electrification

3.5

71.7

Per 1,000 people Source: Economic Research Institute of ASEAN and East Asia (ERIA) (2010) Note: Table based on most recent data

0.27

Percentage 86.4

Asia

12.8

0.53

3.5

77.7

87.7

OECD

211.7

5.21

13.9

99.8

99.6

Latin America

14.3

2.48

6.1

92.7

91.4

Africa

n.a.

0.95

1.4

28.5

58.4

4 World Bank and PPIAF, PPI project database; IMF World Economic Outlook.

8

Clean Water

New delivery models: From public procurement to PPPs and B-to-B projects In light of growing demand and continued underinvestment, governments and development agencies are exploring various ways to increase infrastructure spending. Chief among this is the drive to attract more long-term capital through delivery models that offer a bigger role for the private sector. Most public infrastructure projects in Asia are financed, owned, and managed by the public sector since they involve public goods and services. Today, the public sector still accounts for the bulk of infrastructure spending. Hence, companies should continue to monitor and pursue public procurement exercises for major infrastructure works. These include projects financed through development agencies like the World Bank and Asian Development Bank, which are tendered out through government agencies. Publicly-financed infrastructure projects are the most familiar and least risky option for most companies in this sector. However, in large parts of developing Asia, such projects may be constrained by limited government budgets, inefficient operations and the tendency for large cost and schedule overruns.

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New delivery models: From public procurement to PPPs and B-to-B projects

The rise of public-private partnerships in infrastructure One solution that is becoming more common is to build infrastructure through public-private partnerships (PPPs). A PPP project is a contract between a government and a private entity for the latter to provide a public service for a fee. For example, a private water company may be contracted to build, finance and operate a water treatment plant in a city, generating its returns through user tariffs and government subsidies over 20 years. Governments are attracted to PPPs because they offer access to private capital, helping governments to avoid short-term budgetary constraints by spreading the up-front costs of infrastructure investment over the lifetime of the project. In many emerging markets, PPPs are also a way to tap private sector expertise to deliver and operate complex greenfield projects. In the decade to 2020, the Asian Development Bank (ADB) expects that up to US$400 billion of infrastructure investment can be met through PPPs each year.5 68% of this will be for new capacity, and 32 percent for maintaining and replacing existing infrastructure. There is no standard definition of a PPP model and in Asia, it is not uncommon for PPP to refer to a wide spectrum of models to describe private sector participation in public services delivery.

Figure 2: Spectrum of procurement models used by governments for infrastructure. The higher the degree of private sector involvement, the higher the degree of risk transferred to the private sector. Public Service Delivery Design and Build Operate & Maintain (O&M) Increasing private sector involvement and risk

Design-Build-Operate (DBO) Design-Build-Finance-Operate (DBFO) Build-Own-Operate-Transfer (BOOT) Build-Own-Operate

Source: IE Analysis

Divestiture / Privatisation

5 “Infrastructure for a Seamless Asia” ADB, 2010.

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PPPs


Despite the diversity of PPP models, these projects share some common characteristics: Long-term contract

Long term contractual relationship between the public and private partners. The entire project concession can range from 20-30 years, although some concessions are as short as 5 years. The private sector recoups its investment during this period in the form of direct user fees, availability payments from the government, public subsidies or a combination of the above.

Financed through long-term project financing

PPP projects are typically financed using the project financing structure, with limited recourse to the project sponsors. The assets are typically returned to the public sector at the end of the concession.

Emphasises lifetime costs

The private sector is responsible for maintaining the asset through its useful life and is therefore incentivised to build an asset that optimises periodic maintenance costs.

Output-driven

PPP structures emphasise the output specification and delivery of services (as opposed to an input specification in traditional procurement). Payments are contingent on the operator meeting the performance standards in the concession agreement.

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Infrastructure PPP projects are often implemented through a special-purpose vehicle (SPV), whose shareholders may include the developer, EPC contractors and other financial investors.

Figure 3: Illustration of a simplified typical structure of a PPP

Financial, legal and technical advisors

Public Sector

provides services and returns asset at the end of contract

PPP contract

debt finance (typically 70-90%)

project equity (typically 10-30%)

Special Purpose Vehicle (SPV)

Lenders debt servicing

Project Sponsors / Shareholders returns

Operator

Contractor

Insurance Source: IE Analysis

12

Construction Contractor

Operations Contractor

Financial Investor


Balancing opportunities and risks associated with PPP projects PPP projects are more complex than publicly-financed ones as they involve long-project tenors and careful delineation of risks and returns between the public and private sector. Detailed feasibility studies are required at the onset, through which the commercial viability of the project can be determined and risks properly apportioned. This is what is required to make PPP projects attractive to private sector bidders, but this process takes a lot of time and money. Project development can take as long as 3 years (often longer for greenfield projects) before finance is secured and ground-breaking can commence, and cost up to 5-10% of the project value. Despite these challenges, infrastructure PPPs present additional business opportunities for Singapore companies when compared to publicly-financed projects. These include: // Recurrent income streams over long-term concessions // Asset ownership as governments spin off brownfield assets // Opportunity to introduce innovative solutions and capabilities that have been honed successfully in Singapore into other Asian markets

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To capture these opportunities, companies should understand the many factors that interact to make a PPP project commercially viable given that public sector capabilities, PPP frameworks and economic prospects vary widely across Asia. Here, we present a brief guide that companies can use to identify projects with a higher likelihood of success: Assessing the likelihood of success for PPP projects Enabling Environment 1) Strong political will and a clear champion within the public sector Project development is complex and time-consuming, and will likely fail without strong political support to implement the project. Changes in political administration often stall or delay such projects. 2) Robust legal, institutional and dispute resolution framework for PPPs PPP projects are based on a long-term contract between the government and private concessionaire. Countries with clear PPP guidelines for the sector and a robust legal system (or alternative dispute resolution channels) protect the integrity of this contract, and provide means to fairly resolve disagreements between parties. 3) Effective PPP programme and ongoing management of existing PPP contracts A public agency that is experienced in assessing the suitability of projects for PPP is likely to have more success with new projects. Many Asian governments have set up national PPP centres to coordinate such efforts. Project Structure / Choice 4) Underlying project economics are accurate, attractive, and politically realistic Governments should have completed detailed feasibility studies of the project by high-quality advisors. The proposed revenue model (e.g. water tariffs) should not seem unrealistic given the current and future state of the population and economy. 5) Project is well-structured with proper risk allocation between government and private company Each party should be assigned risks that it can reasonably control and influence, e.g. construction and operations risk to companies, permits and land acquisition risk to the government. 6) Potential interest in financing by international and domestic lenders Major infrastructure projects may be funded by up to 90% debt. If lenders show little interest, the project is probably not viable and unlikely to proceed. 7) Access to government subsidies and guarantees Many infrastructure projects in developing Asia may not be commercially viable on their own, or have risk profiles that increase the costs of financing them, e.g. uncertain demand, low public credit worthiness. Asian governments and development agencies may provide viability gap funding (VGF) and credit guarantees to support the economics of major projects.

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Project Implementation 8) Private sector sponsor with the skills and experience to deliver the project over the entire concession period Singapore companies bringing in technical and operational experience should partner local firms with the experience of executing large infrastructure projects and dealing with the government. This is especially important given the long concession periods involved. For such projects, it is often unwise to proceed without a local partner. 9) Government takes the lead in securing all licenses and approvals This is the government’s major responsibility and reluctance to provide this should be a major concern for bidders. 10) Land ownership and acquisition process is without controversy Land acquisition is a politically sensitive topic and can delay large projects for years if there is opposition from local residents. Companies should assess how the government plans to assemble unencumbered land for the project.

Private sector projects as an emerging model In addition to PPPs, a new segment of private sector projects is also emerging. This trend is driven by the popularity of decentralised utilities, and is most pronounced in the energy sector with the adoption of renewable energy and on-site generation. Decentralisation also avoids the inefficiencies related to transmission. What this means is that many small-scale projects will emerge and project owners may engage directly with consumers. Infrastructure companies are monitoring this trend closely as it will require new business models to stay competitive and also open the market to disruption from new companies with innovative business models. Solar leasing as a new business model Solar leasing is the underwriting of solar energy production by a solar company who then sells the solar energy to customers. This allows customers to tap on solar as a cleaner energy source without intensive upfront payment on the solar PV systems. One early mover for solar leasing in Singapore is Sunseap Leasing. Earlier in the year, the company announced their scale-up with the completion of a S$50 million facility with Goldman Sachs to fund solar photovoltaic (PV) projects with a total generation capacity of more than 30 megawatts.

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Market trends: Which countries, sectors and developments to look out for Only a small portion of total infrastructure demand will be commercially attractive enough for private investment. Asian governments are beginning to invest in the right institutional frameworks to identify and structure such projects. Even then, some sectors will attract more investment than others. As mentioned, infrastructure demand in Asia is estimated at US$10 trillion over this decade, or US$1 trillion a year. Only a small portion of this will be bankable, that is to say commercially attractive enough to attract private investment if structured as a PPP. Based on internal analysis, about 5-10% (US$50-100 billion a year) of this demand is currently bankable, with a further 30-45% of demand being marginally bankable. Such projects can potentially be made bankable if structured well by experienced financial, legal and technical advisors, and may depend on governments and development agencies supporting the viability of such projects through providing a portion of the capital expenditure (i.e. viability gap funding) or a partial guarantee.

Figure 4: Infrastructure demand in Asia from 2010-2020 (US$ trillions) 4.5 4.0 3.5 3.0 Non-Bankable (US$)

2.5 2.0

Marginally Bankable (US$)

1.5

Bankable (US$)

1.0 0.5

Source: ADB (2010), IE Analysis

0.0 Energy

16

Telecom

Transport

Water & Sanitation

Social

Market trends: Which countries, sectors and developments to look out for

Recognising this, companies should note that multiple initiatives are underway by governments and development agencies to catalyse more commercially-viable projects by ensuring that project pipelines are properly assessed, projects are structured by professional advisors, and sufficient funds are available to fund these projects. These efforts should bring more bankable projects to market in the next few years. // Several Asian governments have set up PPP units to facilitate government agencies in the project identification, selection, tender and implementation process (see Table 2). // IE and ADB jointly set up the Asia Infrastructure Centre of Excellence (AICOE) in 2014, with the funds and skills to structure more bankable projects with Asian governments. // The World Bank Group is exploring setting up the Global Infrastructure Facility (GIF), which will direct the Bank’s efforts and funds in the areas of project structuring and addressing policy bottlenecks holding back viable infrastructure projects. // China’s proposal to set up an Asian Infrastructure Investment Bank (AIIB). The AIIB will provide an additional funding source on commercial terms for projects in Asia, and will start with US$50 billion in capital from member countries.

Table 2: Existence of dedicated PPP units in selected markets in Asia

Source: World Bank PPP Information Resource Centre

Country

PPP Unit

Cambodia

No

Bangladesh

Yes

India

Yes

Indonesia

Yes

Lao PDR

No

Malaysia

Yes

Myanmar

No

Philippines

Yes

Singapore

No

Thailand

Yes

Vietnam

No

Mirroring the trend from 2000-2009, the energy sector will likely yield the most projects and is considered the most-developed PPP sector in most Asian economies (with a strong track record of PPP projects in operation). Conversely, the water and sanitation sector is the least-developed across Asia, being hampered by current high subsidies and the political sensitivity of raising tariffs to anything close to cost recovery levels. These broad generalisations may hold true across the region but companies should assess each project on its own merits as there will be exceptions. For example, water treatment projects serving industrial clients or backed by a government payment guarantee may prove attractive.

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The Infrastructure Value Chain The complexity of developing infrastructure projects, especially those that seek private investment, means that there are many roles that companies can play in bringing a project from drawing board to realisation. Singapore companies can consider many different roles along the value chain depending on their area of expertise, business model and risk appetite. There would be direct economic activities related to the development, engineering, procurement, construction, and operation and management of these infrastructure assets. There would also be economic activities generated in the structuring, investment and financing of these assets as illustrated in the figure below.

Figure 5: The value chain for infrastructure development

Development and Engineering Services Sector Project Management Feasibility studies Project selection by government

Project structuring

Professional Services Firms

Engineering

Procurement

Construction

Operation

Equipment & Building Materials Firms

Financial Sector Source: IE Analysis

18

Due Diligence

Deal Structuring

Investment & Lending (Project Finance)

Capital Recycling

The Infrastructure Value Chain

Figure 6: Revenues from a typical power project over 20 years, showing how revenue accrues to different parts of the value chain

4% Advisory & Consulting 6% Others

25% EPC

26% Banks Source: IE Analysis

39% Developers

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Singapore’s Competitive Advantage Singapore has developed an ecosystem of companies that can meet many of the region’s infrastructure needs. This is in part due to the expertise and experience accumulated in building up Singapore’s own urban infrastructure. 1. Engineering Capabilities Through the years of nation building, Singapore has accumulated capabilities in planning, executing and operating complex infrastructure assets. Singapore companies have developed capabilities in various parts of the infrastructure value chain including masterplanning, engineering design, proprietary technology and equipment, procurement, construction and operations. We have such capabilities in a wide range of sectors including ports, airports, land transport systems, power generation, water and waste management, public housing and industrial park development, areas in high demand in the region. Today, the local workforce has the capability to plan, engineer and operate complex infrastructure projects with great efficiency. 2. Financial Ecosystem Singapore is recognised as a major financial centre for the Asia Pacific region, home to well-established instruments in both equity and debt financing. The capital intensive nature of infrastructure projects makes it crucial for project developers to have access to project equity and long-term project financing.6 Many foreign banks have set up their project finance offices in Singapore, including the likes of SMBC, Standard Chartered and Crédit Agricole. Singapore banks are looking to gain a share of the pie by growing their project finance teams. Singapore is increasingly the location of choice for infrastructure funds, e.g. Armstrong Southeast Asia Clean Energy Fund. The Singapore Stock Exchange is a useful means of capital recycling via business trusts, supported by an advanced policy framework for business trusts. Example of infrastructure business trusts listed on Singapore Stock Exchange includes Keppel Infrastructure Trust and CitySpring Infrastructure Trust.

6 Definition from International Project Finance Association on Project Finance: The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project.

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Singapore’s Competitive Advantage

3. Policy Framework Singapore has proven that it is far sighted in planning, strong in system integration and efficient in implementing and operating complex infrastructure. This is complemented by our ability to formulate appropriate policy frameworks to enable the implementation of such infrastructure. We understand the need to correctly price infrastructure to ensure a suitable return for the investment of infrastructure assets. We have done well in a number of areas including electricity supply, water, waste to energy and public transport. These areas of policy development can be tweaked and adjusted to suit the situation in different countries. Our financial, legal and technical consultants have also built up good track record in these fields.

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Enhancing the infrastructure ecosystem in Singapore IE Singapore continues to work with other government agencies to enhance Singapore’s infrastructure ecosystem to meet Asia’s growing needs, ensuring that our companies are plugged into and remain relevant to the opportunities emerging in the region. Some of our ongoing initiatives include: // Reinforcing Singapore’s position as a hub for infrastructure solutions in Asia, thereby attracting more projects to be developed, structured and financed here Asia needs more bankable projects and experienced financial, legal and technical advisors with a track record of similar deals are key to structuring these. Such expertise is increasing in the region but still trails markets such as Australia and the UK especially for larger and more complex projects. Singapore has begun to address this by building a critical mass of companies, institutions and platforms here to strengthen our proposition as one of the best places to design, develop and finance infrastructure projects in Asia. Development agencies are key players in project bankability and both the World Bank and ADB have set up offices in Singapore focused on this. The World Bank has based part of its PPP Group in Singapore, and last year, the ADB and IE Singapore jointly launched the Asia Infrastructure Centre of Excellence (AICOE). Both institutions strengthen Singapore’s role as a hub for project structuring for Asia. We have also developed platforms that raise awareness of Singapore’s strengths in this space, and connect companies to project owners from the region. IE’s regular Asia-Singapore Infrastructure Roundtable series provide an opportunity for project sponsors to bring their projects to Singapore for discussion with industry, garnering ideas and partnerships to move the projects forward. IE Singapore also partnered with Project Finance International (PFI) to launch the first PFI Asia Best Practice citations on 3 June 2014. The citations and accompanying report recognised 7 winners for advancing best practice in infrastructure PPPs in the region, drawing the best government procurers and project sponsors from Asia to the launch event.

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Enhancing the infrastructure ecosystem in Singapore

// Growing the infrastructure talent pool in Singapore For Singapore to better serve the region’s needs, we need to grow our talent pool in infrastructure development. Many of the practitioners in Singapore today honed their skills working on projects in more developed markets such as Europe and Australia, and there remains a gap in programmes that train professionals to develop infrastructure within an emerging market environment such as Asia. Much work is already being done to remedy this. In 2014, IE launched a summer internship programme for senior undergraduate and postgraduate students to expose more of them to the breadth of careers in the infrastructure sector. Students were offered stints with firms across the value chain, from transaction advisory and engineering design, to project financing and private equity. In addition, the Singapore Management University in collaboration with the Lee Kuan Yew School of Public Policy will also launch the Asia Leaders Programme in Infrastructure Excellence (ALPINE) this October. The programme brings together midcareer public and private sector candidates from Singapore and the region for an executive programme that focuses on South and Southeast Asia.

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Strategies for companies to capture infrastructure opportunities in Asia Singapore-based companies should capitalise on Singapore’s competitive advantage to capture projects in Asia. Many have already done so, and serve as guides for others. The conventional view of the infrastructure sector is that it requires deep pockets and years of experience. However, increasingly, non-traditional infrastructure companies are entering the sector. Some examples include companies like Tee, CNA, Annaik and ISDN. New entrants also bring with them new technologies and business models, such as the likes of Medad Technologies and Sunseap Leasing. For both existing players and new entrants alike, companies can consider the strategies below to grow their infrastructure business in Asia. // Build internal capabilities Basic familiarity with the infrastructure development process is necessary no matter what role your company plays in the value chain. This includes knowing what constitutes a bankable project, project financing, project development and management skills and contracts management. Building internal capabilities also applies to technology and solutions; this is particularly important for systems integrators and engineering firms. Holding proprietary solutions and building track record with these solutions is one way of having an edge over competitors. // Build partnerships Rarely are infrastructure projects tackled by one single company. A project developer will need services from consultants to assist in project structuring, legal firms for due diligence and engineering firms for the technical analysis of a green field project. Partners can bring with them access to lower cost financing (for example, through EXIM banks), track record and access to the local market. Building up strong relationships is thus necessary and companies need to make sure they stay connected to the industry. // Start small For companies embarking on their first foray into the infrastructure sector, they should focus on sectors with clear rules for private sector involvement and enter the market via bite-sized projects. In the energy sector, for example, companies look at renewable energy projects such as solar farms or mini hydro plants as an area that is easier to enter. Capital costs tend to be lower, allowing companies an entry point to start building their infrastructure asset portfolio.

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Strategies for companies to capture infrastructure opportunities in Asia

Tips to get started 1) Determine what role that you want to play in the market Companies need to ascertain which role suits them best given their risk appetite for the market and project. For example, a developer may choose to be an EPC contractor to a local developer in a higher risk project, especially if they are unfamiliar with the market. 2) Scan markets and monitor upcoming projects Familiarise yourself with which cities and regions have the demand and conditions to support projects in your sector. Start monitoring upcoming projects from sources such as government announcements and tender websites, news articles, World Bank and ADB project databases and also by talking to contacts on the ground. 3) Understand local procurement rules and sector regulations Seek advice from experienced financial, legal and technical advisors who understand the market conditions and regulations well. Some companies regard this extra cost as unnecessary but navigating the tender process of large infrastructure projects on your own has its own costs. For example, companies have had their bids disqualified for failing to properly understand details in local procurement rules or local content requirement. 4) Get connected to the market Get in touch with the local client or government agencies and advisors that are preparing the project. Develop as complete an understanding of the project timeline, key decision-makers, potential competitors and project politics as possible. For example, it may be controversial for you to bid for certain signature projects/assets (think of Dubai World Ports attempting to purchase US port operator P&O). Next, identify local partners, financiers or sponsors that you can work with. 5) Enter the market with eyes wide open Having done the necessary groundwork, companies can determine the best mode of entry for a market and establish themselves. This may mean innovating on their business model to create a differentiating factor. It is also important for companies to ensure that market and project risks are properly mitigated. For example, they may seek insurance cover against natural disasters and political risk such as expropriation.

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International Enterprise Singapore International Enterprise (IE) Singapore is the government agency driving Singapore’s external economy. It spearheads the overseas growth of Singapore-based companies and promotes international trade. Its vision is a thriving business hub in Singapore with Globally Competitive Companies (GCCs) and leading international traders. Trade has always been the backbone of Singapore’s economy. In addition to promoting export of goods and services, IE Singapore also attracts global commodities traders to establish their global or Asian home base in Singapore. Today, Singapore is a thriving trading hub with a complete ecosystem for the energy, agri-commodities and metals & minerals trading clusters. GCCs are a critical growth engine for the next phase of Singapore’s development. GCCs compete on the global stage against the very best in their industries. They contribute to Singapore’s economic resilience, develop Singaporeans into global business leaders and strengthen the Singapore brand. Through its Global Company Partnership and Market Readiness Assistance, IE Singapore works with Singapore-based companies in their various stages of growth towards being globally competitive. IE Singapore’s global network of overseas centres in over 35 locations provides the necessary connections in many developed and emerging markets. Visit www.iesingapore.com for more information.

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