Money for Asia: No big deal

The word "sustainability" has long been a trope. Now it's even being uttered at the Asian Development Bank. The financier for the developing world wants to be greener, more social - in short: more sustainable.

Germany is hosting the ADB's annual meeting for the first time, as the institution turns 50, and it's using the opportunity to present itself as an expert in sustainability. Stands made of lighty-colored wood line an entire hall on Frankfurt's trade fair grounds. Sitting areas and green trees, similarly wooden, occupy the space between them.

Here, German ministries, municipalities, research institutes and companies show off their solutions for environmentally friendly public transport systems, recycling and saving energy. Even German Chancellor Angela Merkel visited the hall to convey the message: If you want to be more sustainable, you need German know-how.

What to do with all that money?

Of course, it's not all about sustainability in Frankfurt. Money's a big issue, too. In that respect, Germany is an appropriate host. The country is the largest ADB stakeholder in Europe. What's more: In Germany, there is a lot of money out there waiting for a good investment opportunities. And they're a rarity, at least in Europe, the United States and other industrialized countries where the economy is hardly growing. Interest rates are so low they're almost negative - in some instances, they're so low they are negative - and they look likely to stay that way for the foreseeable future.

The president of the European Central Bank, Mario Draghi, reiterated this point once again at the ADB's annual meeting.

"This is why structural reforms are so important today. They are key to enhance productivity growth and hence make investment more attractive," Draghi said.

That's why for investors, looking to Asia could pay off.

"Sixty-six percent of global fixed-income yields less than 2 percent, and 50 percent of global fixed-income yields less than 1 percent," says Marios Maratheftis, the chief economist at Standard Charter Bank. "Investors will ultimately demand some return, and I think you can only find that return away from developed markets, in more emerging markets in Asia."

Reluctant investors

Many Asian countries aren't only logging strong economic growth, they're also eager for capital to develop and expand their infrastructure.

"Asia is in need of a lot of capital, estimates are in the range of a trillion dollars a year. On the other hand, there are huge pools of capital across the world," says Diwakar Gupta, a vice president of the Asian Development Bank.

The pension funds of OECD countries alone are sitting on close to $30 trillion, according to Gupta. "But the flow to infrastructure from these funds has been just about one percent. So a very miniscule amount from the pools of capital is going to the areas where it is required."

Investors are simply afraid they'll never see their money again, Gupta believes. "These projects are in geographies which have problems with governance, problems with set-up, problems about certainty of laws and regulation, and even about stability and corruption. Those are the issues which deter investors from putting money here."

A question of execution

It's one of the tasks of the Asian Development Bank to remain active despite these circumstances. But the real problem isn't funding - it's that funded projects aren't carried out.

"Indonesia had funding for infrastructure projects in the budget, so did the Philippines," says Maratheftis from Standard Chartered Bank. "But those projects were simply not executed."

That's a shame because well planned and realized projects are like advertising for developing countries - and more ads attract more investors, says Christiane Leibach from the German Investment and Development Corporation (DEG). On top of that, there's also the fact that investors are now increasingly paying attention to the sustainability of projects.

Same same, but different

The appeal to Asian countries, therefore, is much like the appeal from ECB President Draghi: structural reforms, structural reforms, structural reforms. That's all well and good, says Sri Lanka's Finance Minister Ravi Karunanayake, but the problem is that reforms often encounter resistance and only begin to have an effect in the long term. But for politicians, there's always the matter of the next election.

"There is no point in electing a government to have policies which will kick the government out. These are the realistic situations we as finance ministers have to face," Karunanayake says. Many politicians in the crisis countries of the eurozone would likely agree.