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Tuesday, July 5, 2016, 00:24

HK eyes US$8t infrastructure funds pool

By Oswald Chan
HK eyes US$8t infrastructure funds pool

Exchange Square in Hong Kong’s Central business district. The Hong Kong Monetary Authority launched the Infrastructure Financing Facilitation Office on July 4, to help arrange fundraising projects for investors linked to the Belt and Road strategy. (Edmond Tang / China Daily)

Hong Kong has made further moves to make itself more competitive and deal with the growing economic threat posed by other major financial powerhouses in the region, with the launch of a special unit to boost the city’s bid to be a key infrastructure financing hub in Asia.

The creation of the Hong Kong Monetary Authority’s (HKMA) Infrastructure Financing Facilitation Office (IFFO) comes on the heels of intense efforts by the SAR and the Chinese mainland to highlight Asian infrastructure development in line with the strategic China-led Belt and Road Initiative set up to promote investments and economic and trade ties among the more than 60 countries and regions linked to the massive project.

The IFFO’s main work is to provide a platform for information exchange and experience sharing; build capacity and knowledge on infrastructure investments and financing; promote market and product development; and facilitate infrastructure investments and financing flows.

“With its unparalleled connections with the mainland and other markets worldwide, as well as its wide-ranging prowess as the regional international financial center, Hong Kong is well placed to serve as the center for fundraising, project financing and asset management for infrastructure projects in the region,” Financial Secretary John Tsang Chun-wah said at the IFFO’s launch on Monday.

Both the stock and bond markets, as well as banking facilities in Hong Kong, could handle these fundraising needs, he said.

To coincide with the launch, HKMA Chief Executive Norman Chan Tak-lam signed memorandums of understanding on Monday with Vice-President Philippe Le Houerou of International Finance Corporation, a member of the World Bank Group, and Chief Executive Chris Heathcote of Global Infrastructure Hub, a non-profit organization established by the Australian government.

Both agreements are set to strengthen cooperation in using the IFFO platform to facilitate infrastructure investments.

The IFFO is an integral part of the HKMA, with senior executives from the banking regulator to lead the new office.

“As Asia’s premier international financial center and the global hub for offshore renminbi business, Hong Kong is uniquely well positioned to play a crucial role in facilitating the implementation of the Belt and Road Initiative,” Chan said.

As of June 27, the IFFO had a cluster of 41 stakeholders, including multilateral development banks and agencies, public-sector investors, project developers and operators, commercial banks, asset managers, as well as professional services firms from the Chinese mainland, Hong Kong and overseas.

The HKMA will invite more stakeholders to join the IFFO in due course.

“The IFFO is neither an infrastructure investor nor an infrastructure investment deal-making matcher. The platform only facilitates information exchanges to enable infrastructure investors to find suitable investments,” HKMA’s Deputy Chief Executive Eddie Yue Wai-man said.

The IFFO will launch its first workshop for stakeholders in the fourth quarter of this year on enhancing information flow regarding infrastructure investments.

“For example, we can study whether Hong Kong can develop the business of issuing infrastructure project bonds. IFFO stakeholders can study how to enhance the credit quality of these bond issuers to ensure cash flows of the infrastructure projects can be securitized,” Yue said.

According to Asian Development Bank estimates, funding needs for infrastructure investment in Asia would be around US$8 trillion between 2010 and 2020. However, there’s a funding gap that needs to be addressed as infrastructure investments entail various investment risks, including political, regulatory, institutional, currency, interest rate, refinancing and operational.

The financial secretary asked the HKMA to set up the IFFO in his 2016-17 Budget speech in February, saying it would be a platform to facilitate infrastructure project financing under the Belt and Road Initiative.

Victor Fung Kwok-king, Li & Fung Group’s chairman, and John Rice, US conglomerate General Electric’s vice-chairman, are IFFO advisers.

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