The SAARC Development Fund (SDF) is in advanced-level talks with the Asian Infrastructure Investment Bank (AIIB) for co-financing four cross-border infrastructure projects across the region, a move set to lay the ground for the body becoming a regional development bank in the near future.
In its recent push to engage major international lenders, the SDF has tapped infra financing major AIIB for projects on renewable energy, urban development, climate change, and intra-regional trade, SDF Chief Executive Officer Sunil Motiwal told Business Standard on the sidelines of the SDF Partnership Conclave 2018.
The two-day meet, which started on Monday, is an attempt by the Thimphu-based secretariat to revive the fund, which has suffered from chronic lack of funding and has been burdened by oversight issues by member nations, who often do not see eye to eye on policy issues.
The multilateral development financing body was set up by SAARC member nations back in 2010 and has implemented 12 developmental projects so far, mostly in the social space. But now the body plans to ramp up the financing of infra projects.
With India getting ample attention from the China-led AIIB, which has sanctioned projects worth more than $1.2 billion till now, the SDF is hopeful of tapping the bank for co-financing opportunities in the infra space, with projects related to energy, power, transportation, telecommunications, and tourism, among others, a person in the know said. AIIB signalled the final approval of a further $1.9 billion during its board of governors meet in Mumbai last week.
“We are already working with multilateral agencies such as the International Finance Corporation (IFC) and the Asian Development Bank (ADB). In-principle approval has already been accorded to a waste-to-energy project in Sri Lanka in partnership with the IFC. We are also doing a hydropower project in Nepal with the participation of Bangladesh and India and funding provided by the ADB and the IFC.
The total loan commitment would be $30 million,” Motiwal added.
“SDF is focused on this particular model of project financing and is working on building a consortium of financing agencies that may bankroll specific projects. We already have agreements with the ADB, the World Bank and other multilateral bodies,” said Sayeed Zeeshan Ali, assistant director at the SDF, and in-charge of the economic and infrastructure window.
Despite plans to focus on infra projects, budgetary constraints and lack of attention from sovereign and private sector financiers have historically slowed progress, a senior visiting delegate said.
Big plans ahead
“We will hold a regional level meet focusing on fund mobilisation by December and are aiming to become a regional development bank for South Asia within the next two years,” Motiwal said.
The government had earlier shot down a plan to transform SDF into a regional bank. “There was a move in this direction three years back as well but finally the proposal was not found to be feasible since India was concentrating its efforts on the New Development Bank founded by the BRICS grouping,” a senior finance ministry official said. Given that the SDF is set to gain a number of projects as co-lender, the proposal is now being given a look, he added.
The SDF has a total corpus of $1.5 billion with the total capital base currently at $497 million. Of this, more than 100 million has been committed. The fund is aiming to tie up with 40 banks from various SAARC member
| SDF footprint in SAARC | |
| Top 5 projects undertaken by SDF | Project budget ($ million) |
| Strengthening livelihood initiative for home-based workers in SAARC region | 15.95 |
| Strengthening maternal and child health, including immunisation | 15.03 |
| Empowering rural communities | 7.93 |
| Strengthening of water, sanitation and hygiene services in selected areas of SAARC countries | 6.29 |
| Post-harvest management and value addition of fruit in production catchments in SAARC countries | 4.97 |
| Source : SAARC Development Fund website | |