Project bonds in Asia: still challenging

Author: Ashley Lee | Published: 7 Nov 2014

Project bonds have been touted as the future of Asian infrastructure financing. But a lack of appropriate projects and shallow domestic capital markets have hindered their usefulness.

Infrastructure spending in the Asia-Pacific is expected to approach $5.36 trillion annually by 2025, according to a study by PricewaterhouseCoopers. Governments will be unable to fund that level of investment, while regulations like Basel III make it more difficult for banks to hold long-tenor project loans on their books – even when backed by export-credit agencies.

Project bonds are thought to be the answer. But while they’ve been successful in Latin America and Europe, local market conditions have limited their development in the Asia Pacific.

Part of that is a lack of acceptable projects in jurisdictions with developed legal and bankruptcy regimes.

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