The ASEAN Infrastructure Fund, the largest pooling of financial resources among Southeast Asia’s 10-member bloc, held its first board meeting in Manila last week, but the extent to which Cambodia will borrow from the non-concessional fund has yet to be determined, experts said.

ASEAN countries and the Asian Development Bank have provided initial equity of US$485 million for the AIF that will finance regional road, power and water projects, according to a statement from the ADB.

Infrastructure in the region needed an estimated $60 billion a year, the statement said.

But the fund will lend at rates higher than the concessional loans Cambodian law allows the country to take.

For ASEAN’s less-developed countries such as Cambodia, Laos and Myanmar, scrutiny must be used when drawing financing from the AIF, ADB deputy country head Peter Brimble said yesterday.

“I think for [less developed countries] to borrow great sums of money at less concessional rates, they would need to look very carefully at that,” Brimble said.

“At the moment, the terms are going to be higher than what Cambodia usually borrows from ADB on concessional loans,” he said. “So there are questions about whether Cambodia will immediately want to borrow.”

Cambodia’s Budget Law allows the Kingdom to borrow only at concessional rates, Chea Kimsong, an economist at the NGO Forum for Cambodia, said yesterday.

Although concessional rates in 2011 ranged between 0.01 per cent on some loans from Japan to 2 per cent on some Chinese loans, Chea Kimsong said he was unaware of commercial borrowing done by Cambodia.

ADB rates for Cambodia averaged 1.32 per cent and its lending accounted for 42 per cent of loans taken by the country as of October 2011, according to data compiled by the NGO Forum.

ADB lends about $150 million to Cambodia annually, Brimble said.

A concessional window, however, could open for less developed countries looking for cheaper infrastructure funding.

There have been talks of lower-rate AIF financing, Brimble said, but he was unaware of the progress of those talks.

There was also a possibility of AFI lending to private projects, he added.

AIF lending was anticipated to be $4 billion through 2020, and with ADB co-financing could be as much as $13 billion, according to the ADB statement.

The fund would finance six projects a year, with a spending cap of $75 million per project.

ASEAN countries hold more than $700 billion in reserves, which the ADB statement said could be “recycled” into the region’s growing infrastructure needed through the new infrastructure fund.

To contact the reporter on this story: Don Weinland at [email protected]