Potential infrastructure projects could be left unfunded as a result, although the China-backed multilateral lender was prepared to ‘scale up’ in the face of tougher conditions, Joachim von Amsberg told Reuters.
The AIIB earlier this month set up a $500 million fund for corporate bonds in a bid to boost the flow of private capital into infrastructure investments.
And on Tuesday, it published a report highlighting opportunities and challenges in the sector.
The initiative comes at a time of rising borrowing costs, growing geopolitical uncertainty and slowing economies, underpinning what the AIIB said was a likely decline in the value of market transactions for infrastructure last year after a fall in 2017 in eight countries it looked at.
Potential investors may harbor a range of concerns, from worries that slowing economies will lead to governments failing to meet contractual obligations, to concerns that trade frictions will erode the potential of infrastructure projects such as ports, von Amsberg said.
“I think we are worried that the stagnant or slightly declining trend in project finance may continue because of the more challenging conditions, and that would just from our perspective be a huge lost opportunity,” he said in an interview.
“We think that even in a slowing global economy, even with rising interest rates, many projects are still worthwhile, and yet I think it will be harder to finance them.”
Asia faces an estimated $460 billion investment gap for infrastructure, according to estimates from the Asian Development Bank. Analysts say some governments have struggled to prepare infrastructure deals in a way that is ‘bankable’ and attracts private sector investment.
Von Amsberg said the AIIB expected a possible ‘flight to quality’, leaving some of the more marginal projects unfinanced.
The AIIB wanted to send a signal that infrastructure was an asset class ripe for investment and that the bank itself was “willing to do our share to scale up, actually, in this situation.”
“But of course we cannot mitigate, we cannot offset the overall direction of the markets, which has become more challenging and could become more challenging this year,” he added.